Chinese shipyards snag business from South Korea with CMA CGM deal

South Korea’s largest shipbuilder, Hyundai Heavy Industries, has asked that 5,000 workers take unpaid leave in the wake of CMA CGM signing a letter of intent with two Chinese shipyards to collectively build nine, 22,000-TEU containerships.    French ocean carrier CMA CGM inked a letter of intent with two Chinese shipyards – Shanghai Waigaoqiao Shipbuilding Co. and Hudong Zhonghua Shipbuilding (Group) Co. – to collectively build nine, 22,000-TEU containerships, Shanghai Waigaoqiao Shipbuilding confirmed on Tuesday, according to a report from China Daily.
   The final order still requires board approval from both sides.
   As of now, CMA CGM’s 22,000-TEU containerships would be the largest on the seas, surpassing the order Hong Kong-based Orient Overseas Container Line (OOCL) placed in April 2015 with South Korean shipbuilder Samsung Heavy Industries for six, 21,000-TEU class ships. OOCL took delivery of the first 21,413-TEU containership, the OOCL Hong Kong, in May, followed by the OOCL Germany on Tuesday.
   During the first half of 2017, shipbuilders in China received orders for new vessels with a collective capacity of 8.14 million dead weight metric tons, accounting for 31.4 percent of the global market, while South Korea’s shipbuilding industry held a 30.6 percent share, according to data from the China Association of the National Shipbuilding Industry, China Daily said.
   Dong Liwan, a shipbuilding industry researcher at Shanghai Maritime University, said it is the first time that Chinese shipyards have surpassed their South Korean counterparts in the high-value-added mega-containership sector, and the shipbuilding industry as a whole, according to China Daily.
   While South Korea’s largest shipbuilder, Hyundai Heavy Industries (HHI), offered to build CMA CGM’s 22,000-TEU containerships for $175 million each, the Chinese shipbuilders came in cheaper with an offer of $160 million each, according to the Korea Times.
   HHI is now asking 5,000 of its 17,000 workers to take unpaid leave beginning in September because it does not have enough ships to build until June 2018. HHI said it cannot force employees to take leave, but if the number does not reach 5,000, management plans to suspend some production lines and subject workers to training, the Korea Times reported.
   As of June, HHI’s backlog of orders stood at 85, down from 110 a year prior. HHI has about 30 ships to work on in the second half of 2017, a company official said, but normally, it works on over 40 ships over the six-month period, according to the Korea Times.