President Lee Meets Shipbuilding Industry: "With Volatile Market Cycles, Should Public Orders Be Delayed Until Downturns?"

Buffer Measures for Business Cycle Proposed at K-Shipbuilding Forum
On RG Shortages: "Researching Government Risk-Sharing with Public Finances"
On AI Safety Management: "Need Labor-Management Agreements on Prohibiting Disciplinary Use, Immediate Deletion of Footage"
Employment Issues Always Ongoing: "Government Role and Effort Also Crucial"

On May 13, President Lee Jaemyung ordered a review of measures to mitigate the sharp business cycle fluctuations in the shipbuilding industry, including adjusting the timing of public ship orders such as naval vessels to coincide with periods of downturn. Regarding the difficulties faced by small and medium-sized shipbuilders in securing refund guarantees (RG) for advance payments, he instructed the government to study ways to partially shoulder the risk with public finances. Addressing labor-management conflict over the introduction of artificial intelligence (AI) video analysis at shipbuilding worksites, he proposed labor-management agreements that would take into account both the use of technology for safety management and concerns over worker surveillance.

Yonhap News

President Lee made these remarks after visiting the shipbuilding site at HD Hyundai Heavy Industries in Ulsan in the afternoon, and subsequently presiding over the “K-Shipbuilding Future Vision Forum” at Hotel Hyundai by Lahan Ulsan. The forum was organized to assess both opportunity factors, such as the growing demand for high-value-added ships like eco-friendly vessels and the expansion of international cooperation in shipbuilding, as well as crisis factors, including the vulnerability of the small and medium-sized shipbuilding and equipment ecosystem and a shortage of skilled workers. The event was attended by representatives from large, medium, and small shipbuilders, internal and external partners, equipment manufacturers, financial institutions, and shipyard labor representatives, covering the entire shipbuilding industry ecosystem.

During the discussion, President Lee said, “Shipbuilders are concerned about the extreme volatility of the business cycle. What if we delayed regular public ship orders until downturns?” He explained that shipbuilding companies face production capacity constraints during booms due to surging orders, but experience job shortages and employment instability during slumps, so government orders could serve as a kind of buffer. He continued, “The government allocates periodic naval vessel orders without considering the fluctuations of the shipbuilding industry. Although it may not be possible to match everything, can’t we at least adjust for the biggest items, such as military ships?”

When Hanwha Ocean CEO Kim Heecheol requested stable orders to maintain skilled workers for special vessels such as submarines, President Lee responded, “Opinions are conflicting on this matter. Please discuss it with the Ministry of National Defense.” When Minister of Trade, Industry and Energy Kim Jeonggwan remarked, “Frankly, the industry has not dared to discuss this with the Ministry of National Defense,” President Lee joked, “Minister Ahn Kyubaek is a kind person. Don’t be afraid,” eliciting laughter.

Regarding AI safety management: “Labor surveillance concerns must also be addressed”

The introduction of AI video analysis at shipbuilding sites was another major topic of discussion. The management believes that using AI can reduce the risk of safety accidents, such as falls and entrapment, while labor representatives are concerned that work behavior could be constantly monitored and used as grounds for discipline or repression. President Lee stated, “Management believes that AI can significantly reduce the risk of safety accidents, but workers may feel they are being surveilled and that the footage could be used for disciplinary purposes.” He then suggested, “I hope labor and management can discuss ways to compromise—for example, agreeing that collected footage cannot be used as grounds for punishment or that it will be deleted immediately.”

President Lee pointed out that the difficulty in reaching such agreements stems from distrust between labor and management, adding, “A dialogue system among workers, employers, and partner companies is necessary in every field.” In response, Minister of Employment and Labor Kim Younghoon said, “We will establish a social dialogue body for shipbuilding labor as soon as possible.”

On RG shortages: “Government to bear some risk with public finances”

The issue of insufficient refund guarantees (RG) at small and medium-sized shipbuilders was also a major point of discussion. RG is a system in which a financial institution guarantees to refund the advance payment to the shipowner if the shipbuilder fails to deliver the vessel on time or goes bankrupt, and is an essential condition for ship orders. Small shipbuilders have recently reported increased order opportunities but face difficulties in securing RGs in a timely manner, hampering contract execution.

President Lee said, “It doesn’t seem like the problem can be resolved simply by pressuring financial institutions,” and added, “Perhaps the government can shoulder some of the risk with public finances.” He continued, “There may be various methods, such as providing secondary guarantees or underwriting insurance, so please study them.” He also explained, “Winning an order for just one ship can boost the regional economy and increase business for equipment suppliers. The effect could be greater than that of direct fiscal support.”

However, President Lee also urged, “In return, it would be good if the shipbuilding industry also cooperates, as much as possible, in ways that help revitalize local economies.”

Financial and tax incentives to increase the adoption of domestically produced equipment were also discussed. The equipment industry requested that shipyards adopting domestic equipment should be granted tax or financial incentives. Deputy Prime Minister for Economy and Minister of Strategy and Finance Koo Yooncheol explained that, regarding the domestic production promotion tax system, “If a company is not profitable, tax reduction has no effect,” and said that the government is also considering providing subsidies at the initial stage in cooperation with the Ministry of Planning and Budget. President Lee said, “That is a reasonable point,” and added, “Other countries have sometimes destroyed industrial bases through dumping, leaving us defenseless, so we must devise long-term countermeasures.”

Securing skilled labor was also a key topic. Both industry and labor representatives requested improvements to local living conditions and the use of the military service special exemption system to secure skilled workers. Regarding the proposal to introduce the military service special exemption, President Lee expressed caution, saying, “It will be extremely difficult, as there is already a shortage of military manpower and we are in a position where even sentry duties may need to be replaced by robots.” However, he added, “Our government’s core task is to alleviate the concentration in the capital area by making the regions more attractive, and I will do my best.”

“Shipbuilding is not a single product, but ecosystem competition”

In his opening remarks, President Lee also defined shipbuilding as “ecosystem competition.” He stated, “Recently, as I have met with leaders and chief executives from other countries, I have learned that most countries with access to the sea expect cooperation from Korea in shipbuilding. Thanks to the efforts of everyone present here, Korea’s shipbuilding industry has become one of the nation’s leading industries.”

President Lee particularly emphasized, “Today, international competition is not about single products; it is ultimately about ecosystem competition. The strength of your own ecosystem determines your national and international competitiveness.”

He also noted, “The characteristic of the shipbuilding industry is that it is extremely exposed to market cycles. Booms and busts alternate like a large graph, so employment issues are always a current concern.” He added, “This is not anyone’s fault—it is the nature of this industry. Shipbuilding is a very important industry, and because it is exposed to such risks, the government’s role and efforts are crucial.” He stressed, “Leaving everything to the field for self-regulation will not solve the problem, so the government must pay attention to maintaining employment and the ongoing development of the shipbuilding industry ecosystem.”

MASGA, AI shipyards, and investment in seven key ship types

President Lee also mentioned Korea-U.S. shipbuilding cooperation. He stated, “Recently, international interest in the shipbuilding industry has increased, and so-called MASGA (Make American Shipbuilding Great Again) has made shipbuilding a core item in the United States’ large-scale investment projects. Shipbuilding has become the most important area of investment cooperation between Korea and the United States.”

The Ministry of Trade, Industry and Energy announced the “K-Shipbuilding Future Vision” on this day, presenting three major strategies: strengthening the core, expanding the market, and building a mutually beneficial ecosystem. The government plans to invest about 1 trillion won jointly with the private sector by 2030 to implement the world’s first AI-powered autonomous 24-hour shipyard project, and to invest up to 525 billion won over five years to secure technologies for seven key ship types, including LNG carriers, ammonia-fueled ships, hydrogen carriers, and liquefied CO2 carriers.

In addition, by 2030, 15,000 specialized and skilled shipbuilding workers will be trained, and support will be provided for the issuance of RGs to small shipyards. The three major shipbuilding companies and commercial banks will cooperate to offer 1 trillion won in preferential “K-Shipbuilding Win-Win Finance” loans. The government will supply a total of 16 trillion won in mutually beneficial trade finance, including 1 trillion won in supply chain guarantees, and is also promoting a plan to increase direct-hire personnel at the three major shipyards by 20%.

Site visit to HD Hyundai shipyard... “Half-Ship Project” introduced

Before the forum, President Lee visited the HD Hyundai Heavy Industries yard to inspect the shipbuilding site. Established in 1972, HD Hyundai Heavy Industries is Korea’s first large-scale shipyard and the world’s largest, operating 14 docks and building ultra-large container ships, LNG carriers, LPG carriers, ammonia carriers, and more.

President Lee arrived on site at around 3:10 p.m., greeted stakeholders with a handshake, and began his tour after donning a safety helmet. He then boarded a 174,000-cubic-meter LNG carrier ordered by Norway’s Knutsen Group to receive a briefing on the status of Korean LNG cargo containment system technology development. This vessel is the last in a series of ten and is scheduled to be deployed for LNG transportation to Qatar after delivery.

At the site, Jo Yangsam, Executive Director of HD Hyundai Heavy Industries, explained that the core technology for LNG cargo containment is maintaining an ultra-low temperature of minus 163 degrees Celsius to prevent the stored LNG from vaporizing. He also said that applying overseas technology would incur royalties of about USD 10 million per ship. The Korea Economic Daily reported that the French engineering firm GTT holds the design rights for LNG cargo containment systems on LNG carriers, and that localizing LNG cargo containment technology has emerged as a key challenge for enhancing the competitiveness of high-value-added vessels.

At the site, the “Half-Ship Project,” which HD Hyundai is pursuing in collaboration with small shipyards, was also introduced. Jung Gisun, Chairman of HD Hyundai, explained that the project involves building the bow and stern of a ship at different shipyards and then joining them together, thereby increasing construction flexibility and fostering a win-win growth model for both large and small shipyards. President Lee asked about the time required to complete a ship, recent order performances, and global market trends as he moved between docks by car.

After completing his tour, President Lee took commemorative photos with on-site workers and encouraged them, saying, “The world-class competitiveness of K-Shipbuilding is above all thanks to the skilled techniques and dedication of the workers on site.”

This content was produced with the assistance of AI translation services.