7 ships delayed delivery! Shipbuilding giant doubles orders, ships delivery exhausted

Although the amount of orders received in the first half of this year has nearly tripled compared to the whole of last year, Hanwha Marine has suffered from a chronic disease of "difficult ship delivery" due to labor shortages. In the first half of the year alone, Hanwha Marine has postponed the delivery schedule of seven ships.

The announcement previously released by HMM, the largest shipping company in South Korea, also confirmed this news. HMM stated that the final delivery time for the six 13000 TEU container ships ordered by the company from Hanwha Marine in 2021 will be postponed to November 25th of this year.

On June 29, 2021, HMM signed a construction contract with HD Hyundai Heavy Industries and Hanwha Marine for a total of 12 13000 TEU New Panama type ultra large container ships, with a contract amount of approximately 1777.6 billion Korean won (approximately 1.575 billion US dollars at the time). Among them, HD Hyundai Heavy Industries and Hanwha Marine each received 6 new ship orders. According to the contract, all 12 new ships are scheduled to be delivered by the end of June 2024.

HMM's order for a new Panamax container ship this time is to enhance the competitiveness of South Korean export companies in the Americas, which are facing difficulties due to insufficient space. After the completion of the Panama Canal lock expansion project in 2016, the 13000 TEU container ship with a total length of 366 meters, a width of 49 meters, and a draft of 15.2 meters is the largest container ship that can pass through the Panama Canal and smoothly sail to ports on the east coast of the Americas to load a large number of containers.

However, three years later, the answers submitted by the two shipping companies were completely different. As of the end of June this year, HD Hyundai Heavy Industries has delivered 5 ships according to the contract, and the remaining one, although delayed, will be delivered within July; However, Hanhua Ocean only delivered 2 ships on schedule, with the first ship completed on June 19th this year, about 5 months later than the first ship of the same type built by HD Hyundai Heavy Industries. The delivery time of the remaining 4 ships has been delayed, and the latest one will be delayed until the end of November.

Although the operation of shipyards varies among different shipping companies, considering that the delivery interval for ships of the same order series is usually around one month, the schedule is somewhat tight.

For the shipowner HMM, the delayed delivery of these large container ships is regrettable due to insufficient transportation capacity and the current favorable market conditions for container shipping. HMM insiders said, "Now is a good time to make money. The more container ships the company can operate, the better the revenue will be. Although the company has already formulated a ship operation plan in advance, in order to further expand its capacity, we hope that ship deliveries can be carried out in a timely manner
Since the beginning of this year, the global shipping industry has shown a prosperous scene. Data shows that in the first quarter of last year, the Shanghai Export Container Freight Index (SCFI) averaged 969 points, rising to 2010 points in the first quarter of this year. In the second quarter of this year, it increased by 147% year-on-year and 21% month on month. HMM stated that with the increase in container shipping costs, the company has been looking forward to receiving these container ships earlier, but Hanhua Ocean not only did not advance, but also delayed the delivery time.

For Hanhua Ocean, the delayed delivery of ships has brought a series of problems such as tight dock berthing, rising maintenance costs for new ships, capital occupation, and cash shortages.

As of now, Hanhua Ocean has received a total of 27 orders worth 5.33 billion US dollars this year, nearly three times the total of 10 orders worth 1.9 billion US dollars for the whole of last year. Although the orders were full, the company's focus since last year has mainly been on major issues such as acquisition and restructuring, turning losses into profits, and insufficient attention to production and delivery, resulting in serious delays in the delivery of new ships.

A relevant person from Hanwha Marine stated that the main reason for the delay in ship delivery is labor shortage. He said, "As far as I know, Hanwha Marine is suffering greatly in terms of delivery due to a shortage of ship welders. At least in Hanwha Marine, there seems to be no sign of resolving the labor shortage problem that has been going on for some time
This is indeed the case. At the end of 2014, the total number of employees in the company was about 13000, but by the end of last year it had decreased to 8300, with a reduction of over 5000 employees. This not only exacerbated the loss of design personnel, but also resulted in a significant loss of frontline workers.

Professor Kim Se won from the Department of Intelligent Mechanical and Electrical Engineering at Sejong University in South Korea said, "The shortage of labor in the South Korean shipbuilding industry is no longer a matter of days. Now, with a large number of necessary laborers such as welders being lost to semiconductor factories with higher incomes and better working environments, the labor supply difficulties in the shipbuilding industry are continuing
In recent years, the speed of supplementing the company's labor force has not kept up with the increase in workload, and it is in a very difficult situation. The company is continuing to make efforts to supplement foreign labor. We will do our best to ensure that the ships delivered at the end of the year can be delivered on time
But some in the South Korean industry believe that even if HMM agrees to the request to delay the delivery of the 13000 TEU container ship by the end of this year, it will be difficult for Hanwha Marine to complete it as scheduled. According to relevant sources, "Each shipyard has its own unique situation, so it is difficult to accurately determine whether delivery can be made before November 25th. However, from the perspective that the main problem of Hanhua Ocean is labor shortage, it may not be easy. Hanhua Ocean should have arranged the delivery schedule considering the many variables that exist in the project progress process, but I believe this was a failure. Because it has already been delayed once, in order not to pay huge delay compensation, Hanhua Ocean should have planned well
In recent years, due to severe labor shortages in the shipbuilding industry, it has dealt a great blow to shipyards and cooperative enterprises, and has also had a negative impact on shipbuilding. In difficult circumstances, the company is continuing to negotiate with shipowners and will maximize compliance with the delivery deadline by the end of this year