Layoffs loom in South Korea's shipping industry

Mr Park, a shipyard electrician, has been protesting against the shipping crisis in front of South Korea's Parliament House since June 26. His sign calls for responsibility towards shipbuilding union members.
Mr Park, a shipyard electrician, has been protesting against the shipping crisis in front of South Korea's Parliament House since June 26. His sign calls for responsibility towards shipbuilding union members.PHOTO: KIM JINHA

Thousands of jobs at risk as companies undergo restructuring after heavy losses

Shipyard electrician Park Hee Chan, 40, slept under a makeshift blue tent pitched in front of South Korea's Parliament House for several nights.

He travelled last month from his home in the southern port city of Busan to Seoul to stage daily protests as part of his labour union's efforts to fight for shipyard workers fearful of losing their jobs as the country's shipbuilders embark on massive restructuring to cope with a crippling shipping crisis.

Mr Park was fired by his company Hanjin Heavy Industries in 2009 during bad times but was rehired in 2011 after two years of persistent protests, along with 94 others who were also laid off. He fears history may repeat itself and hopes to do his part to exert pressure on shipbuilders to think twice before axing their staff.

On June 28, he was joined by 120 workers from Samsung's shipbuilding arm, who had travelled from their base in south-western Geoje island to Seoul for the protest. It has been staged daily since June 8.

"Many of us in our 40s and 50s are very worried. We cannot afford to lose our jobs because our lives depend on them. We feel it's unfair that we have to suffer, that's why we are fighting for our rights," the father of two told The Straits Times.

But layoffs are in the works as, reeling from unprecedented losses - with three of the biggest shipbuilding companies in the world, Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering, chalking up a combined operating loss of 8.5 trillion won (S$9.9 billion) last year - South Korea's shipbuilding and shipping conglomerates are set to downsize.

They are poised to cut a combined 6,000 jobs this year alone, on top of selling non-core assets and shutting down failing business units.

Two of South Korea's biggest container shipping lines - Hanjin Shipping and Hyundai Merchant Marine (HMM) - are also restructuring and negotiating with shipowners to lower charter rates, amid talks of a merger to streamline and compete more effectively against global rivals.

Experts say the shipping sector is the backbone of international trade which export-driven South Korea relies on heavily. If both Hanjin and HMM were to fold, more than 5,000 jobs will be lost and the economy will suffer damages of US$19.13 billion (S$25.8 billion), according to projections by the Korea Shipowners' Association.

Shipbuilding, which accounts for 6.5 per cent of gross domestic product and hires some 200,000 workers, has also been a key pillar of South Korea's US$1.38 trillion economy since the country underwent rapid industrialisation after the 1950-53 Korean War.

Both industries will remain under pressure most of this year, until global conditions improve late next year, said Moody's Analytics' assistant director economist Emily Dabbs.

But there are some "bright spots", she said, adding that the government is supporting restructuring efforts and pushing for companies to focus on areas where they maintain a competitive advantage.

"Korea's role in the industry remains an important one. The high-end LNG (liquefied natural gas) shipbuilding industry is one where Korean businesses have expertise that their competitors lack. By focusing on new technology, Korean shipbuilders will remain important players in the global industry."

Korea University's Professor Kim Byung Ki said the industry is facing "extreme challenge", but he believes South Koreans will unite and rise above the challenge, especially when their survival is threatened.

However, shipbuilding labour unions are calling for a nationwide protest on July 22 and July 23 and hoping to mobilise 100,000 members, not just from the shipbuilding but also the automobile sector. Auto workers' unions are fighting for a wage hike and more bonuses.

Mr Kim Tae Jeong, executive director of policy at the Korean Metal Workers' Union who oversees the shipbuilding sector, said: "We absolutely oppose layoffs and will fight for our members to keep their jobs."

Some workers, however, have resigned voluntarily and switched careers, instead of waiting for the expected chop.

Mr Mike Kim, who is in his mid-30s, quit his administrative job at a shipyard in the south-eastern port city of Ulsan to move back to his home town Seoul in May. He has found a job in the finance industry.

When asked how his ex-colleagues are coping, he said: "Some of them believe that they will be fine, because the situation will improve. When the global economy gets better, the industry will regain its competitiveness."

A version of this article appeared in the print edition of The Straits Times on July 09, 2016, with the headline 'Layoffs loom in South Korea's shipping industry'. Print Edition | Subscribe