Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Earlier this year, Bloomberg reporter way Loon soon visited Hanwa Ocean,
Speaker 2: one of the biggest shipyards in South Korea. They build
Speaker 2: everything from oil tankers to container ships that carry goods
Speaker 2: all around the world. Waylon for people like me who've
Speaker 2: never been to a shipyard, and what does it look like.
Speaker 1: So it's really actually a factory town. You arrive at
Speaker 1: the top of the hill and then you slowly drive
Speaker 1: down and from there you can really see this huge
Speaker 1: crans called goliath queens. They're really tall, almost like a building.
Speaker 1: You see them rising up in front of your eyes.
Speaker 1: And then beyond that you see a lot of workers
Speaker 1: on bicycles and their coveralls and their goggles and their
Speaker 1: helmets going around doing their daily work. And then when
Speaker 1: you cast your eyes across a shipyard, you see huge
Speaker 1: blocks of metal sitting around on the ground. They look
Speaker 1: like huge lego pieces.
Speaker 2: These lego pieces will be assembled together over the next
Speaker 2: few weeks, months, or even years to become gigantic ships.
Speaker 1: The largest ones can be as tall as the Empire
Speaker 1: State Building. Just imagine the entire building tilted sideways horizontally.
Speaker 1: You put them on the water, and then off they go.
Speaker 2: This shipyard, Hanwa Ocean and others like it across Korea
Speaker 2: are busier than they've been in years.
Speaker 1: Korean shipyards are fully booked till twenty twenty eight. Workers
Speaker 1: are hiring all around. The place is really buzzing with activity.
Speaker 1: Every single dock space is filled.
Speaker 2: Korean shipyards are busy these days. As Soul and Washington
Speaker 2: land a new trade deal, it includes a huge pledge
Speaker 2: from Korea to invest one hundred and fifty billion dollars
Speaker 2: in America's shipbuilding industry to boost US maritime power. Here's
Speaker 2: Trump talking about the alliance at a meeting with South
Speaker 2: Korean President Lee J Mung earlier this week.
Speaker 3: You know, we really sort of need each other. We
Speaker 3: love what they do, we love their product, we love
Speaker 3: their ships, we love at.
Speaker 2: This newfound love affair between the two countries is driven
Speaker 2: by the US's goal to curb the dominance of the
Speaker 2: world's biggest shipbuilder, China, and boosting the South Korean shipbuilding
Speaker 2: sector is a key part of that plan.
Speaker 3: We're going to be buying ships from South Korea, but
Speaker 3: we're also going to have them make ships here with
Speaker 3: our people. Using our people, and we're going to go
Speaker 3: back into the shipbuilding business again.
Speaker 1: Now you have Donald Trump trying to remake the global
Speaker 1: trade order through the use of tariffs. And for Korea,
Speaker 1: you also have this country that used to be a
Speaker 1: huge shipbuilding power but lost its crown to China. Having
Speaker 1: American interests in their shipbuilders. It's also a good way
Speaker 1: for them to find new growth engines for them to
Speaker 1: expect and beyond Korea, to have that transfer of knowledge
Speaker 1: and then maybe to even start building ships in the US.
Speaker 2: This is the Big Take Asia from Bloomberg News. I'm Wanha.
Speaker 2: Every week we take you inside some of the world's
Speaker 2: biggest and most powerful economies and the markets, tycoons and
Speaker 2: businesses that drive this ever shifting region. Today in the show,
Speaker 2: Trump has a shipbuilding dream in Korea. Make it come true.
Speaker 1: MASCA project, Pasca, Masca project.
Speaker 2: We're going to do that.
Speaker 3: I think we're going to do that very very strongly.
Speaker 2: This week's meeting between Trump and South Korean President Lee
Speaker 2: J Mung at the White House was the first time
Speaker 2: the two met since Lee took office in June, and
Speaker 2: they discussed the details of a trade agreement reached last month.
Speaker 2: The deal set of fifteen percent teriff freight on Korean
Speaker 2: goods imported to the US. It also included a pledge
Speaker 2: by Korea to invest three hundred and fifty billion dollars
Speaker 2: in the US, nearly half of that dedicated to shipbuilding.
Speaker 2: Bloomberg's Way. Looon Soon says the initiative even has a
Speaker 2: name that's likely to get the thumbs up from Trump
Speaker 2: Masco make American Shipbuilding great Again for.
Speaker 1: Soul in Washington. Both do realize that shipbuilding is a
Speaker 1: big overlapping theme that they can at least see ito
Speaker 1: ion way. Before Trump came into office, the Biden administration
Speaker 1: was already looking at concerns over shipbuilding and having seen
Speaker 1: ships as a strategic national asset.
Speaker 2: Korea builds hundreds of ships every year. When completed, they
Speaker 2: join a global fleet that carries eighty percent of the
Speaker 2: world's trade. And building these massive ships is a li
Speaker 2: labor intensive process. Hundreds of workers assemble the metal blocks together,
Speaker 2: then there's all the electronic and mechanical equipment that has
Speaker 2: to be installed before the ships are finally painted. The
Speaker 2: whole process can take up to two years from start
Speaker 2: to launch.
Speaker 1: They have a little ceremony to see off the ship,
Speaker 1: and I remember distinctly one of the people that we
Speaker 1: and a few he did say that each time he
Speaker 1: sends off a ship, it's like seeing off your son
Speaker 1: or your daughter off at a wedding, because it took
Speaker 1: so long to put them together, and it's a proper
Speaker 1: moment for them.
Speaker 2: Korea's modern shipbuilding industry really took off in the nineteen seventies.
Speaker 2: The government developed the sector by pouring subsidies into it
Speaker 2: and importing foreign tech. The sector got a boost from
Speaker 2: a surge in global trade and demand for affordable ships.
Speaker 2: By two thousand, Korea had become the world's biggest shipbuilder.
Speaker 1: They had the workforce, and crucially, they were economies that
Speaker 1: would turning outwards. They were looking to export a lot
Speaker 1: of their manufactured goods to the rest of the world
Speaker 1: as the economies of scale war of as labor costs
Speaker 1: went up, Korea stepped up to become the world's top
Speaker 1: shipbuilder in the late nineties. It's also partly driven by
Speaker 1: its own need for national security, because you have this
Speaker 1: persistent threat from the North itself, so both military and
Speaker 1: commercial shipping. The needs in those two aspectually drove career
Speaker 1: to become a bigger shipbuilder.
Speaker 2: But the tide started to turn after China joined the
Speaker 2: World Trade Organization in two thousand and one.
Speaker 1: If we were to take the year two thousand as
Speaker 1: a baseline, during that year, Korea commanded a twenty nine
Speaker 1: percent share of the global order book for ships. Japan
Speaker 1: was not far off. It was around twenty eight point
Speaker 1: five and China was under nine percent. And if we
Speaker 1: fast forward by just a few years, you can tell
Speaker 1: that in the year two thousand and eight on nine
Speaker 1: China overtook Korea and Japan in just a short span
Speaker 1: of eight on nine years.
Speaker 2: Then in two thousand and eight, the financial crisis brought
Speaker 2: global trade to a halt. New ship orders collapsed. Korean
Speaker 2: shipbuilders were now struggling to compete with Chinese rivals who
Speaker 2: began flooding the market with cheap vessels. One by one,
Speaker 2: they were forced to close, workers lost their jobs, and
Speaker 2: some of the biggest shipbuilding companies reported record losses. Today,
Speaker 2: China is by far the biggest shipbuilding country in the world.
Speaker 2: They're building sixty percent of all the ships under construction.
Speaker 1: Now, that's why you see the US being concerned about
Speaker 1: China's dominance because let's say in a time of crisis,
Speaker 1: what would happen to all these strategic resources that they
Speaker 1: might need to rely on to get goods and commodities
Speaker 1: flowing to US shaws And that's where a lot of
Speaker 1: the content comes from.
Speaker 2: After the break, as Korea and US joined forces to
Speaker 2: revive American shipbuilding, could that topple China's maritime dominance. After
Speaker 2: Trump took office earlier this year, the US took aim
Speaker 2: at China's grip on the shipbuilding industry. It announced that
Speaker 2: ships owned, operated, or built by Chinese companies would have
Speaker 2: to pay additional fees to the US government to dock
Speaker 2: at American ports. Ship owners were looking at paying millions
Speaker 2: of dollars more for each port visit.
Speaker 1: When it first came out Alio this year, it cost
Speaker 1: a lot of confusion and chaos in the global shipbank
Speaker 1: industry because so many shipowners have bought Chinese ships.
Speaker 2: Korean shipbuilders, including Hanua Ocean, were suddenly they back in demand.
Speaker 1: They got phone calls from some of the larger container
Speaker 1: liners saying that they are willing to pay upwards off
Speaker 1: ten percent or more and premiums just to secure an
Speaker 1: earlier slot at their shipyards which are already booked to
Speaker 1: twenty twenty eight.
Speaker 2: If I may add, no, imagine that's probably millions of dollars.
Speaker 1: No, exactly, a container ship can cost up to tens
Speaker 1: of even hundreds of millions and a ten percent premium.
Speaker 1: It's a really staggering amount for just one ship.
Speaker 2: In the first half of this year, twenty five percent
Speaker 2: of the world's global ship orders went to Korea. That's
Speaker 2: up from seventeen percent last year, and the US did
Speaker 2: eventually lower the levees on Chinese ships. The short term
Speaker 2: chaos faded and Korean shipbuilders got fewer calls, but Waylon
Speaker 2: says the US's message to the global ship and community
Speaker 2: was received loud and clear.
Speaker 1: It's using that leverage that it has an economic power
Speaker 1: to tell the rest of the world that wants a
Speaker 1: treyer with the that hey, you shouldn't really too much
Speaker 1: on Chinese ships because we are concerned that China could
Speaker 1: be a competitor to us. We are also concerned that
Speaker 1: China is subsidizing a lot of these excess capacity in
Speaker 1: building ships that is at the detriment of not only
Speaker 1: your own economies, but also the US economy. So what
Speaker 1: is forcing the rest of the shipping wall is to
Speaker 1: make a choice that either you're traded with US without
Speaker 1: Chinese ships, or you can continue buying cheaper Chinese ships
Speaker 1: but just don't trade with US. And that's a message
Speaker 1: that're trying to put across to the rest of the world.
Speaker 2: By targeting China's shipbuilding dominance, the US is making it
Speaker 2: clear that reliable maritime supply chains are critical to national security.
Speaker 2: And here's an important stat Right now, the US builds
Speaker 2: less than one percent of the commercial shipping fleet. Korea's
Speaker 2: one hundred and fifty billion dollar investment is aimed at
Speaker 2: helping the US increase that market share, and Wayland says
Speaker 2: it could help Korea too.
Speaker 1: For these Korean shipbuilders, it actually gives them a way
Speaker 1: to secure more contracts and deals for the services that
Speaker 1: they can potentially provide for the US. And already we
Speaker 1: see that happening, like some of them are inking contract
Speaker 1: deals with the US Navy for maintenance and repair and overhaul.
Speaker 1: Some of them have even bought over shipyards in the
Speaker 1: US to establish a base for shipbuilding in the US.
Speaker 1: And further down the line, we can actually think of
Speaker 1: ways that the Koreans can forge more ways of collaboration
Speaker 1: with the shipbuilders in America, and I think ultimately when
Speaker 1: you see the US shipbuilding sector growing, the Korean yards
Speaker 1: will be very good partners for them.
Speaker 2: But for the moment, the make American Shipbuilding Great Again
Speaker 2: plan is just a handshake agreement.
Speaker 1: Details are still scanned at this moment, but we do
Speaker 1: know that these will go into various segments of the
Speaker 1: shipbuilding sector. It's not just about building dogs or like
Speaker 1: parts in the US, but it's also involved doing maintenance projects,
Speaker 1: building ships and also training some of the workers in
Speaker 1: the US so that overall, not only do you see
Speaker 1: ships being built in the US, you also have the
Speaker 1: technical know how an expertise being transferred from Korea to
Speaker 1: the US so that the US can start really think
Speaker 1: about having domestic ships being built.
Speaker 2: So best case, this deal is a rising tide that
Speaker 2: lives shipbuilding in both countries. And even if it does
Speaker 2: pay off, Korean shipbuilders will still face serious headwinds. Wages
Speaker 2: are rising in Korea and the country is dealing with
Speaker 2: the labor shortage, one that's made worse by the lowest
Speaker 2: birth rate in the world.
Speaker 1: If you think about shipbuilding, not only it requires a
Speaker 1: large pull of labor of workers upstream, you also need
Speaker 1: a strong supply of steel. At the same time, they're
Speaker 1: stuck in a country that's quite small.
Speaker 2: And China has the edge in almost all those areas.
Speaker 1: China had a good pool of labor, they had cheap steel,
Speaker 1: and of course you have the really strong Beijing government
Speaker 1: and I think in one of the five year plans
Speaker 1: they did say explicitly during this period of time that
Speaker 1: they want to build up shipbuilding and parts are important
Speaker 1: into China's vision of a global economy.
Speaker 2: So Wayluan China is at the moment dominating the shipbuilding market.
Speaker 2: What edge then does Korea have to compete with China.
Speaker 1: From our conversations with the shipbuilders in Korea, it came
Speaker 1: to realize that they're way past the stage of competing
Speaker 1: the China on the cost of building ships. In today's shipbuilding,
Speaker 1: it's really the need for more advanced ships and also
Speaker 1: newer forms of energy. If we talk about cleaner fuewel.
Speaker 1: You have at the global level the International Maritime Organization
Speaker 1: trying to push for a vision to decognize the maritime sector,
Speaker 1: and with that you need to burn different kinds of fuel.
Speaker 1: It's not just fossil fuels, but you're talking about methanol ammonia.
Speaker 1: These are fuels that are quite new to the industry
Speaker 1: and you need to find a way to burn them
Speaker 1: efficiently but safely. And so this is where Korea is
Speaker 1: trying to innovate on and designing engines and also the
Speaker 1: entire ship structure.
Speaker 2: Now, way loon, since we're talking about shipbuilding in the sea,
Speaker 2: I'm going to try to use as many sea puns
Speaker 2: as I can think of. Sure, Okay, Now, with this
Speaker 2: new US push this year the shipbuilding industry in a
Speaker 2: new direction. Will this be smooth sailing for South Korea?
Speaker 2: Or could it put shipbuilders in a tricky spot where
Speaker 2: they're having to just tread water.
Speaker 1: I think it's going to be choppy waters for the
Speaker 1: current shipbuilders in the weeks and months to come, because
Speaker 1: we do see that President Donald Trump can be quite
Speaker 1: unpredictable at times in bilateral negotiations. We already see the
Speaker 1: commitment that Korean ship builders have with regard to finding
Speaker 1: ways to collaborate with the Americans. But the question is
Speaker 1: how willing are the Americans and seeing this in the
Speaker 1: long term, because ultimately building a ship, as we've discussed earlier.
Speaker 1: It's beyond just two five years. It takes a long
Speaker 1: time for the entire industry to be built. You are
Speaker 1: taking something that takes decades to build and you're trying
Speaker 1: to crunch it down into a four yer US presidency rate.
Speaker 1: You have the US President trying to push shipbuilding to
Speaker 1: the top of his agenda. But at the same time,
Speaker 1: one are steps needed to turn this vision into a
Speaker 1: sustainable one beyond this term in office, and that's where
Speaker 1: a lot of the details need to be ironed out.
Speaker 1: These are partnerships that can potentially bring a lot of
Speaker 1: benefits to both economies, and it can create a lot
Speaker 1: of jobs and also bring a lot of revenue. But
Speaker 1: the question is how do we get there in ten
Speaker 1: years time? And that's a big question for all the
Speaker 1: shipbuilders and the experts that we've been talking to.
Speaker 2: This is The Big Take Asia from Bloomberg News. I'm
Speaker 2: wanha to get more from The Big Take and unlimited
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