WORLDSHIPBUILDINGTRENDS AND KOREASHIPBUILDINGINDUSTRY

Presented by Dr.DongShikShin Chairman KoreaMaritimeConsultantsCo.,Ltd. KoreaMaritimeConsultantsCo.,Ltd.

APRIL29~30,ShipTek2008,COCHIN,INDIA

CONTENTS
1. 2. 3. 4. 5. WorldShipbuildingTrends ShipPriceTrend DeliveriesbyVesselType ShiftofMarketShare Orderbook&DeliverybyCountry in2007 6. 7. ChinaShipbuildingIndustry IndiaShipbuildingOrderbook Projection 8. KoreaShipbuildingIndustry Growth 9. BackgroundofKoreas ShipbuildingIndustryGrowth 10.SpecialMaritimeAdministration Committee v MajorMilestoneActivities

11. ShipbuildingIndustryCluster 12. SevenKoreaMegaShipyards 13. WorldMarineEngineMarketShare 14. KOMACsRole: InDevelopmentofKorean ShipbuildingIndustry 15. AreaofCooperationBetween KoreaandEmergingCountries 16. Recommendation

1.WorldShipbuildingTrends
q In2007(Jan.~Dec.),newshipbuildingorderworldwidereached79.2 millionCGT,orderbookworldwidestoodat178.2millionCGTand 33.6millionCGTweredelivered. q Worldshipbuildingcapacityasof2007wasabout47.8millionCGT andthecompletiontonnageatthesameperiodwascloseto34 millionCGT. q FutureTrendofcurrentshipbuildingboom?

2.ShipPriceTrend
q Shippricefornewbuildingshavedoubledlastfiveyears.
NEWSHIPPRICE ShipType
VLCC Tanker Suezmax Aframax Capesize Bulker Panamax Handymax Container(6,200TEU) Container(3,500TEU) LNG(147KCBM)
(Unit:MillionUSD)

2002
63.3 43.5 34.5 36.3 21.3 19.3 60.0 33.0 150.0

2003
77.0 51.5 41.5 48.0 27.0 24.0 71.0 42.5 155.0

2004
110.0 71.0 59.0 64.0 36.0 30.0 91.0 51.0 185.0

2005
120.0 71.0 58.5 59.0 36.0 30.5 89.0 52.5 205.0

2006
129.0 80.5 65.5 68.0 40.0 36.5 101.0 57.0 220.0

2007
146.0 90.0 72.5 97.0 55.0 48.0 106.5 63.0 220.0

3.DeliveriesbyVesselType
(Unit:MillionGT)

50 45 40

Trends

30 25 20 15 10 5 0 2004 2005 2006 2007 2008 2009 2010

Tanker BulkCarier LNG/LPG Container

Source:ClarksonResearchService

4.ShiftofMarketShare
q Increasingdemandforlargersize,fasterinspeed,andhigh Increasingdemandforlargersize,fasterinspeed,andhightechoriented vessels.
3M.BarrelULCC/15,000TEUContainer/380KDWTVLOC/200KCBMLNG

q 88%WorldshipbuildingactivitieshasshiftedtoAsia,mainlyKorea,Japan andChina.
ShiftinMarketSharesoftheWorldsMajorShipbuildingNations
1950
EUROPE

1970
JAPAN

1990
KOREA

2000
CHINA

2008~
Emerging Players
INDIA,VIETNAM

Koreaheld 1.6%MKT.share

LowerWage RisingProductivity StrongPolitical Intension

WorldMarketShare2007 Korea35.7% Japan20.5% China34.6%

5.Orderbook&DeliverybyCountryin 5.Orderbook&DeliverybyCountryin2007

ORDERBOOKBYCOUNTRY(DWT)

DELIVERIESBYCOUNTRY(DWT)

4.2%
(21.2)

5.0%
(24.8)

7.4%
(5.8)

3.2%
(2.5)

20.5%
(103.00)

19.3%
(15.1)

34.4%
(26.9)

34.6%
(173.67)

35.7%
(178.82)

35.7%
(27.9)

JapanKoreaChinaEuropeOthers
Source:ClarksonResearchService

6.ChinaShipbuildingIndustry
q Chinahasemergedasamajorhubforshipbuildingandaimsto becometheworldsbiggestshipbuildingnationby2015.
ChinaisnowthethirdlargestshipbuilderintheWorld largestshipbuilderintheWorld Currentlyfocusingonthebulkcarriermarketandotherlowvalue carriermarketandotherlowvalueadd orders,butwillbeabletomoveupandbecomeathreatinthehighvalue addmarketin5~7yearstime GovernmentPolicyspecifiesthefollowinggoalstobehitby2015 Increaseannualoutputto17MDWT Liftengineproductioncapacityto1,100unitsperannum Productmorethan60%ofshipmachinery&equipmentlocally Lifttechnologicalsophisticationofshipstointernationallevel
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7.IndiaShipbuildingOrderbookProjection 7.IndiaShipbuildingOrderbookProjection
Orderbook(Mil.DWT) WorldShare(%) AnnualTurnoverBil.$ GROWTHSCENARIO(Mil.DWT)

200620122017

Projection OrderBook(Mil.DWT) GlobalMarketShare Turnover(Bil.$) TotalEmployment

2006~7 1.3 1.0% 0.65 12,000

2007~12 5.0 2.2% 2.50 78,000

2012~17 18.0 7.8% 9.00 252,000

Withsubsidy,highergrowth rateasshowninredcanbe achievedandsustainedat around30%provided suitableenvironmentis created

Thiswouldbringusin2017 whereChinaistoday..Thisis clearlynotgoodenough

8.KoreaShipbuildingIndustryGrowth
DELIVERIESBYGROSSTONNAGE
Unit:ThousandGT

18,000,000GT

1960s:Preparationstage formodernization 1970s:Takeoffstage 1980s:Highspeedgrowth 1990s:Maturitystage 2000s:Became No.One shipbuildingnation

GT
18000 16000 14000 12000 10000 8000 6000 4000 2000 0

50,000GT

Year72

77

82

87

92

97

02

07

Source:KOSHIPA(KoreaShipbuildingAssociation)

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9.BackgroundofKoreasShipbuildingIndustryGrowth

Early1960sKoreanGovernmentindentifiedanddesignated shipbuildingindustryasstrategictoppriorityindustryforthe enhancementofnationaleconomy Toachievethisgoal,thelatepresidentParkChungHeeand governmentestablishedSpecialMaritimeAdministration Committeetorenderunbendinganduncompromisingfullsupport forthedevelopmentofshipbuildingindustry.

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10.SpecialMaritimeAdministrationCommittee
President
Secretariat SpecialMaritime Admin.Committee PrimeMinister
National Security Affairs Economy Affairs Political Affairs DeputyPrimeMinister EconomicPlanningBoard

Advisors

Specialist

Ministryof Energy& Industry

(Shipbuilding)

Ministryof Science& Technology

(R&D)

Ministryof Education
(Training)

Ministryof Finance
(Funding, Tax,Customs)

Ministryof MaritimeAffairs &Fishery

(Shipping& Fishery)

Ministryof Construction
(Port,SEZ)

Ministryof Defense
(Naval& Coastguard)

Ministryof Labor
(Manpower)

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MajorMilestoneActivities

Thiscommitteehassuccessfullyperformedfollowing:
1. Formulatedshortterm,midterm&longtermcomprehensivemasterplan forthedevelopmentofshipbuildingindustry(1963~1965). 2. Establishedandformulatedcarefullycraftedandintegratedshipbuilding industrypromotionpolicyandactionplantobeexecuted. 3. Committeehasfullyempoweredexclusiveauthoritytoprofessionally monitor,guideandsupporttheindustryandalsoactasasinglewindow clearancepointforallaspectofactivitiesrelatedtothedevelopmentof emergingKoreanshipbuildingindustry.

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4. Establishmentandenforcementofvariousshipbuildingindustry promotionlawsShipbuildingPromotionLaw(1958),Shipbuilding ShipbuildingPromotionLaw(1958),Shipbuilding IndustryEncouragementLaw(1967),ShipbuildingIndustryPromotion Plan(1975),IndustrialDevelopmentLaw(1985),ShipbuildingIndustry RationalizationMeasurement(1989). 5. Encouragedmajorlargeprivatecooperationandentrepreneursto activelyparticipateandinvestinshipbuildingindustry. 6. Furnishedattractiveincentivesystemsandprogramsfortheinducement ofadvancedtechnologyandinvestmentfromoverseasbycreating friendlyenvironmentforJVs,tieupsandcollaborations. upsandcollaborations. 7. UnsparinginvestmentfortechnicaltrainingandR&Dfacilitiesand supportiveinfrastructure.

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8. Boldinvestmenttoconstructlargemegasizeshipyardwithadvanced facilitiesandequipment. 9. Madeboldinvestmenttoestablishshipbuildingindustryclusterthat providesshipbuildingrelatedmaterials&service. Beside,wehave Advantageousgeographicallocation. Abundantskilledlaborer&technician. Highspiritandsheerwillpowerofcreative,passionate businessleadershipandhardworkingdedicatedmanpower Now,Koreabecamenumber1shipbuildingnationand demonstratingtotheworld,oursuperhighproductivityofquality shipwithhighstandardofqualitydesign&HighTechoriented shipwithhighstandardofqualitydesign&High productionfacilities&ITmanagementsystems
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 WewereabletoachieveourgoalwhichoncewethoughtImpossibledream throughpassionatesheerwillpoweranddeterminationofdedicatedpeople suchastechnocrat,entrepreneurengineerswithbusinessphilosophyof

RESPONSIBILITY RESPONSIBILITY PROFESSIONALISM PROFESSIONALISM CREATIVITY TECHNICALEXCELLENCE TECHNICALEXCELLENCE

Underthewellplannedmasterplanwhichwasorchestratedbythe government.Istronglybelievethatinfantstageofdevelopmentofshipbuilding industry,governmentsupportismandatoryprerequisiteandessential

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11.ShipbuildingIndustryCluster
Commercial Zone Hospital Hotels

New New Building Building Shipyard

Offshore Fabrication Yard

GOVERNMENTSUPPORT MasterPlan SiteAllocation TaxBenefit

ShipRepair Yard

R&D Center

SubsidyProgram IncentivePlan Infrastructure Others

Sub Contractor

Residential Zone

Schools
Ancillary Industry

Technical Training Center

Technical Support Center

Utilities

Recreation Area
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12.SevenKoreaMegaShipyards
q 7MegasizeshipyardscapableofbuildingVLCC sizeshipyardscapableofbuildingVLCC :RankedinWorldTop10ShipyardsbyClarksoninJanuary2008 1. HyundaiHeavyIndustries(HHI) 2. SamsungHeavyIndustries(SHI) 3. DaewooShipbuilding& MarineEngineering(DSME) 4. HyundaiMipoDockyard(HMD) 5. HyundaiSamhoShipyard(HSHI) 6. STXShipyard(STX) 9.SungdongShipbuilding&Marine Engineering

q 8MediumsizeshipyardscapableofbuildingAFRAMAX/SUEZMAX sizeshipyardscapableofbuildingAFRAMAX/SUEZMAX q Morethan150companiesareproducingshipbuildingrelatedmaterials q 14Universitieshave4yeareducationalprogramfordepartmentofnaval architecture/marine&oceanengineeringand2collegeshave2year programsspecificallydedicatedforthetrainingofengineers. q 2LargeGovernmentsponsoredR&Dcenters q 2Governmentsponsoredengineeringandtechniciantrainingfacilities

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13.WorldMarineEngineMarketShare
q 3Koreanmarineenginebuildersshare83%ofworldmarketin2007
Others 17%

STX 23%

Doosan 25% HHI 35%

Source:KOSHIPA(KoreaShipbuildingAssociation)

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14.KOMACsRole: InDevelopmentofKoreanShipbuildingIndustry
q KOMAChasbeenamajorparticipantinKoreasrisetobecomeworldsnumber oneshipbuildingnation q KOMACwasestablishedin1969asKoreasfirstandonlyprivateorganizationof navalarchitectsandmarineengineers. q KOMAChasprovidedmorethan1,400shipdesignservices,1,700construction supervisionservices,shipyardplanningservices,andtechnicalandmanagement consultancyservicestoshipbuildersandshipownersofmorethan24countries sinceitsestablishmentin1969. q KOMAChasparticipatedinplanningofmajorshipyardprojectsinKoreaad providedfeasibilitystudiesandshipyardplanningserviceformanyoverseas shipyarddevelopmentprojects. q KOMAChasbecomeanindispensablepartnerforthedevelopmentofdomestic andinternationalmaritimeindustry
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15.AreaofCooperationBetweenKoreaandEmerging Countries
qProvideadvisestogovernmentsinestablishingacomprehensivemasterplan Provideadvisestogovernmentsinestablishingacomprehensivemasterplan forthedevelopmentofnationalshipbuildingindustry. qTechnicalsupportfortheindividualshipyardplanning Technicalsupportfortheindividualshipyardplanning qProvideTechnicalsupportforshipdesign ProvideTechnicalsupportforshipdesign qAssistshipyardsinprocuringandpackagingshipyard&shipbuildingmaterial Assistshipyardsinprocuringandpackagingshipyard&shipbuildingmaterial qAssistshipyardfortheimprovementofproductivity Assistshipyardfortheimprovementofproductivity qTechnicalmanpowertraining qIntroducingmodernshipyardmanagementsystem Introducingmodernshipyardmanagementsystem qCooperatewithcounterpartsindevelopingshipbuildingrelatedindustries Cooperatewithcounterpartsindevelopingshipbuildingrelatedindustries (ShipbuildingIndustryCluster)
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16.Recommendation
qThedevelopmentmodelofKoreanshipbuildingindustryisaproductofwell ThedevelopmentmodelofKoreanshipbuildingindustryisaproductofwell orchestratedeffortsofKoreangovernment,entrepreneursandengineers. Koreasdevelopmentmodelisregardedasthemostuniqueandbest exampleofitskindintheWorld. q NewcomersshouldbenchmarkallareasofKoreanshipbuildingindustryand utilizethebenchmarkingresultsasguidelinesforthenewshipyard development. qSelectthemostqualifiedandexperiencedinternationalconsultingcompany Selectthemostqualifiedandexperiencedinternationalconsultingcompany capableofprovidingtechnicalassistanceforshipyardprojectfromthe projectplanningstagetothedeliveryandoperationoftheshipyardwith comprehensivemasterplanandmasterprojectschedule.

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