South Korean Shipbuilding Giant Shifts Out of China

Radha Patel
International Business Section Editor

Samsung Heavy Industries (SHI), a shipbuilding giant based in South Korea, has announced the closure of its Ningbo plant in eastern China. SHI was believed to have agreed to hand over the land of the Ningbo plant to the local Chinese government for industrial renewal.

The local Chinese government is in the process of changing its policies to promote the chemical industry. Therefore, chemical companies are interested in purchasing the 200 acre-Ningbo shipyard, located in a chemical industry zone. According to a statement by the local government, the Ningbo government and SHI signed an agreement for the government to take back the shipyard land. In August of this year, the government said it was taking over the land as part of a cleaning plan for the Qingzhi Chemical Industrial Park. Certain nonchemical enterprises in the industrial park do not abide by current national industrial policies.

SHI’s decision was returned with protest from workers who demanded better severance pay as they were laid-off. Thousands of workers gathered at the Ningbo site to voice their demands. SHI stated that the COVID-19 pandemic caused difficulty for the company, but they will be providing complete compensation to the laid-off workers. According to sources, SHI would pay one month of salary for every full year of employment, in addition to one month of salary and reemployment aid, which add up to two months’ salary. This formula is known as “N+3” compensation.

Pictured above is a ship manufactured by a Korean shipbuilding industry (Photo courtesy of Yonhap News Agency)

Since 2019, the South Korean government has been proposing new plans to restore the country’s shipbuilding industry. More specifically, the South Korean government merged Hyundai Heavy Industries and Daewoo Shipbuilding to create the world’s largest shipbuilder.  The shipbuilding company plans to focus on the operations at its second Rongcheng unit after closing the Ningbo plant, both located in China. SHI plans on raising funds through selling new shares and an apartment complex that was previously used by their workers in Seoul to support the development of eco-friendly shipbuilding methods.

In February, SHI won an order for five 15,000 twenty-foot equivalent liquefied natural gas (LNG)-powered container ships from a client from Asia. The container ships are supposed to be delivered in sequence, beginning in July of 2023. The total contract value was approximately $708 million. The ships will use LNG as their prime fuel source to comply with harmful gas regulations, such as sulfur oxides and carbon dioxide.


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