Warning for shipbuilding sector

The Korea Institute of Industrial Economics has warned that the rapidly expanding shipbuilding sector could face a crisis by 2011, when the available capacity with the yards will exceed the demand for new-buildings. This situation may arise due to massive capacity addition undertaken by major shipyards of Korea such as Daewoo, Samsung and Hyundai. The tendency among sub-contractors to convert their facilities into full-fledged yards and the capacity addition of the Chinese yards at a much accelerated speed may also add to the problem.

Global shipbuilding order volumes increased to 69 million gross tonnes during the first half of 2007 compared with 52 million gross tonnes during 2006 and nearly double the 35.5 million gross tonnes in 2003.

But the institute is concerned that demand for new-building dwindling over next few years, causing a down cycle for the builders, like the ones experienced in the mid-1970s and mid-1980s.