A 『Strategy to Become a Global Shipping Leader』 is established jointly by relevant government ministries.

The strategy’s goals are to reach ▲shipping revenues of more than 70 trillion won, ▲ocean container shipping capacity of over 1.5 million TEU, and ▲controlled fleet capacity of more than 140 million deadweight tonnages in 2030.

On Tuesday 29 June, the Ministry of Oceans and Fisheries (MOF; Minister MOON, Seong-Hyeok) presented a strategy to make the country a global leader in the shipping industry at a sail away ceremony for a 16,000 TEU-class containership HMM Hanul held in the Busan New Port, a national hub for import and export logistics.

As part of efforts to restore the status of its shipping industry struggling from the bankruptcy of the country’s once leading container carrier Hanjin Shipping in 2017, the Korean government has provided full and swift support to the sector, including the creation of a five-year plan to rebuild the shipping industry and the establishment of the Korea Ocean Business Corporation (KOBC) in April and July 2018, respectively. Backed by such policy supports and the recent market boom, the sector’s 2021 key performance indicators, including shipping revenues and container shipping capacity, are expected to return back to the level where they were before the collapse of Hanjin Shipping.  

* Shipping Revenues (Unit: won): 39tn (2015) → 29tn (2016) → 36tn (2020) → 40tn (2021’s Target)

** Container Shipping Capacity (Unit: TEU): 1.05mn (Aug. 2016) → 460,000 (Dec. 2016) → 780,000 (Dec. 2020) → 1.05mn (2021, including orders of newbuilds)

In particular, the deployment of 20 ultra-large containerships (ordered in September 2018, 3.1tn won) helped the country’s flagship ocean carrier HMM turn a profit for the first time after a decade slump and transform its structure with low-cost and high-efficient vessels in 2020. Small and mid-sized liner operators also have become financially stable on the basis of the KOBC’s financial support*, including sales and leaseback (S&LB) transactions.

* Since its inception, KOBC has injected around 5.8trillion won to a total of 83 shipping companies.

In line with enhanced shipping capacity and global competitiveness of local shipping companies, the shipping industry’s support to keep exports and imports flowing smoothly has been further strengthened. Specifically, since the second half of 2020, national liners have played a crucial role in underpinning the recent export boom and alleviating tight ocean shipping space by actively deploying extra-loaders and allocating dedicated slots for small and mid-sized shippers.

* Since August 2020, 40 extra-loaders have been deployed to major routes, carrying around 110,000 TEU cargoes. Certain cargo space is currently designated exclusively for SMEs: 380 TEU, 50 TEU, and 50 TEU for Korea-US West Coast, Korea-US East Coast, and Korea-EU routes, respectively.

However, COVID-19 induced market changes, such as a surge in cargo volumes and upward market trends, have propelled major global shipping lines to scramble to increase newbuilding orders, making the competition much fiercer. Moreover, there is an increasing call for meeting new global environmental regulations and expediting technological innovation in areas of port automation, autonomous vessels, and logistics digitalization in which the country is falling behind advanced countries.

In this context, the Government set up a government-wide joint task force in April this year to map out a comprehensive plan to step up the achievements of the five-year shipping rebuilding plan and prepare for future changes.

With the vision of becoming a global leader in the shipping industry in 2030, the strategy focuses on ① developing and complementing the five-year plan through the addition of newbuilds with high efficiency, the acquisition of stable cargo volumes, and the provision of financial support to SMEs, and ② cultivating new growth engines through the acceleration of green transition, the introduction of smart shipping logistics systems, and the creation of associated infrastructure. Through this strategy, the Government aims to reach shipping revenues of more than 70 trillion won, container shipping capacity of over 1.5 million TEU, and controlled fleet capacity of more than 140 million deadweight tonnage (DWT) by 2030.

(1) Addition of New Vessels with High Efficiency

In a bid to secure vessels in a timely manner to be in a competitive position and forge a low cost structure which is not influenced by market fluctuations, ① a newbiulds policy financing support program will be developed jointly by the Korea Development Bank, Export-Import Bank of Korea, Korea Asset Management Corporation, and KOBC. Initially, about US$1.5 billion of ship financing will be provided, and another US$1.5 billion will be injected if necessary after taking into account the demand for newbuilds in the future. Furthermore, ② application of tax benefits under the New Deal Infrastructure Fund (tax rate on dividends to be reduced from current 14% to 9%) to private investment in public equity funds related to energy efficient and eco-friendly vessels will be reviewed.    

In an attempt to solidify a virtuous circle of shipping and shipbuilding industries with increased newbuilds orders from shipping companies and the provision of cost-effective and high-quality vessels from shipbuilders, ① additional newbuilding orders will be placed, including a dozen 130,000 TEU-class containerships ordered by HMM in June this year and ② technological and manpower support will be provided to shipbuilders and shipbuilding equipment companies to help develop automation technologies.

(2) Acquisition of Stable Cargo Volumes

Win-win cooperation between carriers and shippers will be fostered to overcome the recent shipping logistics challenges and to lay a foundation for stable cargo transport on the basis of long-term service contracts. ①Long-term service contracts* will be pursued to enable small and mid-sized shippers to ship their goods with affordable freight rates, and ‚② mutually beneficial ocean shipping contracts for shippers, carriers, and service providers will be introduced to promote long-term service contracts and prevent unfair business practices.

* Shippers using long-term service contracts with domestic shipping lines will benefit from guaranteeing shipping space and receiving support for freight rates (a coupon for 20% off freight rates will be provided).

Furthermore, with an aim of securing more cargo volumes based on enhanced logistics competitive strength, the Government plans to acquire and develop logistics facilities at home and aboard, as well as open up port hinterlands to innovative solution providers. To this end, ③container terminals will be secured in global hub ports, including in the west coast of the U.S., to help reduce stevedoring charges imposed on Korean shipping lines and improve the reliability of their services. Meanwhile, ④ port authorities and the private sector will co-invest in the construction and operation of joint logistics centers in major hub ports (Port of Barcelona and Rotterdam, in the second half of 2021), and port hinterlands will bring a wide range of value-added services by attracting reshoring companies and manufacturers and constructing smart logistics centers (Incheon in 2023, Busan in 2025).

(3) Provision of Financial Support to SMEs

In order to help ease financial burdens associated with purchasing major operating assets such as vessels and shipping containers, a Korean style ship leasing project and shipping container financing will be implemented. This year, ① the KOBC will launch a pilot ship leasing project on a bareboat charter* basis. As much as 50 vessels will be purchased by 2025, including 10 vessels to be purchased this year, to lend the vessels to local shipping companies with reasonable charter rates. In addition, ② Taking into consideration market conditions such as a surge in shipping container prices, the KOBC will lease container boxes to costal container shipping companies (a budget of 100 billion won has been allocated in 2021) while the Export-Import Bank of Korea will offer shipping container financing.

* Unlike a Bareboat Charter Hire Purchase (BBCHP), a Bareboat Charter (BBC) helps ease the burdens for the possession of vessels as the ownership of a ship is not transferred to a ship operator even after its loan repayment period is completed.

Furthermore, ③ the KOBC will conduct new guarantee businesses, including credit guarantees. ④ The sunset clause (by 2021 end) on acquisition and property tax cuts for vessels registered as international ships under the Restriction of Special Local Taxation Act will be reviewed for further extension.

(1) Acceleration of Green Transition

In an effort to speed up the transition to zero emission vessels, the Government will establish a support mechanism throughout the entire life cycle from the development and demonstration of new technologies, through the expansion of bunkering infrastructure, to the distribution and dissemination of developed technologies. ① Technology development for achieving completely commercially viable zero emission vessels by 2050 in a phased approach will be supported (254bn won, 2022~2031). ② A LNG bunkering vessel (2022) and bunkering terminal (by 2024, the Port of Ulsan) will be constructed to expand bunkering infrastructure. ③ The share of eco-friendly vessels in the national fleet will be increased to 15% by replacing 528 old vessels with green ones by 2030 through customized support for vessel types, i.e. ocean-going vessels, coastal vessels, public vessels.

(2) Introduction of Smart Shipping Logistics Systems

In order to narrow the technologies gap for smart logistics with advanced countries, innovative technologies for achieving port automation, autonomous vessels, and logistics optimization will be developed. First, ① a test-bed for port automation will be established in the Port of Gwangyang (by 2026), and based on the track record, automated systems will be applied to new ports such as the Busan New Port.

‚② Technologies related to autonomous ships will be developed (160.3bn won, 2020~2025) to maximize operational efficiency, coupled with automated ports. In preparation for operation of autonomous vessels in the future, ways to implement regulatory innovation will be formulated to proactively overhaul rules and regulations. ③ Digital Logistics systems connecting vessels, ports, and inland transportation will be developed to optimize the entire logistics process.  

In response to the demand for a high-skilled technical workforce in the smart logistics sector, ④ 2,000 new talents will be trained to become experts in shipping and ICT sectors, and training programs and assessment standards for new tasks, including the operation of automated systems, will be developed. Additionally, ⑤ to cope with changes on the future employment of maritime workers due to port automation, measures on job transition will be set out, including the provision of trainings on the operation of smart port systems to existing port workers.

(3) Establishment of Infrastructure

With a view to ensuring stable support to local shipping companies, additional government funds will be injected to the KOBC. Details of the size and format will be determined through consultation with relevant ministries and in consideration of the KOBC’s financial conditions.

Oceans and Fisheries Minister, MOON, Seong-Hyeok said, “In the first half of the five-year plan period, our focus was to restore the status of our shipping industry to the level where it was prior to the collapse of Hanjin Shipping; however, in the remaining second half, our focus will be on the successful implementation of policy agendas set forth under this strategy with an aim of becoming a global shipping powerhouse,” and added, “It is expected that the strategy will give a great impetus to the advancement for green shipping technologies, the Busan New Port development project, and the construction of a test bed in the Port of Gwangyang, which is under preliminary feasibility study.”

The strategy was presented at an event held on the occasion of the sail away ceremony for HMM Hanul, the last of its kind ordered by HMM under the five-year plan, and the event was graced by the presences of Mr. MOON, Seong-Hyeok Minister of Oceans and Fisheries, Mr. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, Mr. Moon Sung Wook, Minister of Trade, Industry and Energy, Mr. Kwon Chil-Seung, Minister of SMEs and Startups and Mr. Eun Sung-soo, Chairman of Financial Services Commission.

At this ceremony, several business agreements were signed, including an agreement on a joint newbiulds policy financing support program among policy financing institutions, a 13,000 TEU-class containerships construction contract between HMM and shipbuilders, and a win-win cooperation agreement between Korea Shipowners’ Association and Korea International Trade Association.