HARD FACTS TELL
EUROPEAN DEMANDS INCONSISTENT WITH MARKET REALITIES AND KOREAN SHIPYARDS' EFFICIENCY
The government of the Republic of Korea has held talks with the European Commission to resolve their differences over shipbuilding. The Korean side has entered into these negotiations in good faith, and regrets that an amicable resolution to the dispute has not so far been found.
The European Commission is seeking to impose unrealistic and unreasonable demands on Korean shipbuilders. Arguing that Korea is the world market leader, the Commission is asking Korean shipbuilders to raise the price of ships to a considerably higher level than current international market prices. However, in today s world no single shipbuilding county is able to set price trends. In addition, in these times of global economic uncertainty market pressures, not alleged unfair competition from Korea, are driving world prices down. Such a move would create serious market distortion, damaging competitiveness and threatening the wellbeing of the shipbuilding industry worldwide.
Far from prompting an increase in orders for European shipyards, it would drive customers to Japan and emerging producer countries such as China
The Commission's allegation that Korean shipbuilders have received new building orders at prices below cost level has no ground in reality considering that Korean shipyards have covered all costs including debt servicing and have made good profits year by year since the EC launched its TBR investigation in 2000. Korean yards are simply more efficient. Korean shipbuilders are not benefiting from subsidies, but from sustained investment in modernization and productivity. And OECD data has consistently and unequivocally shown Korean shipyards to have higher productivity rates than their European counterparts.
The Korea Shipbuilders' Association anticipates that the EU and the Korean government will remain open to further discussions to settle the issue amicably through a pricing mechanism that is reasonably compatible with market realities. Should the matter be referred to international dispute settlement, the European Union's subsidy schemes to its shipbuilding industry would also be examined.
Seoul, October 1, 2002
For more information please contact;
The Korea Shipbuilders' Association
Attachment: Background Hard Facts
Korea has not been the world market leader since 2001.
|NEW ORDERS FOR 2001 AND 2002. 1 - 6
|Source: World Shipbuilding Statistics, Lloyd's Register
Korean shipyards are profitable. Since the 1997 Asia Crisis, Korean shipbuilders have implemented internationally accepted accounting principle s to ensure the transparency and credibility of their accounts. Using these principles, Korean yards' accounts show them making good profits.
|Japan: 7 major shipbuilders (Mitsubishi, IHI, Hitachi, Mitsui, Kawasaki, NKK, Sumitomo)
|Korea: 7 major shipbuilders (Hyundai, Daewoo, Samsung, Samho, Hanjin, Mipo, STX)
Korean shipbuilders cover the interest payment on their debts
||Interest Coverage over operating
income (seven major shipbuilders)
|Units: million Korean Won
|Source: Financial Supervisory Service
Shipbuilding is a single global market, as the Commission says in its own Trade Barrier Regulation Report. Korean and European shipbuilders cannot control prices on their own. Contrary to some European reports, Japanese production is not principally taken up by local buyers. As the Japanese domestic market shrinks, figures from the Japanese Exporters' Association and the Japanese Ministry of Land and Transportation show the percentage of Japanese vessels being exported has risen from 40% in 1995-1998 to 60% in 1999-2001.
|REAL EXPORT SHIP OF JAPAN
||Real Export Ship (JSEA)
||New Orders Total (MLIT)
||Japan Shipbuilders' Association (JSEA)
||Ministry of Land, Infrastructure & Transportation (MLIT)