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ANALYSISKOREA


to Saudi Arabia for Hyundai Heavy Industry, while WorldEx has moved a large engine from Finland to South Korea and reduction gear from Germany to South Korea. KS Kim, president and chief executive of Daewon Logipia, which was PCN’s first member in South Korea, described the market as being in recession. “The main project cargo shipping port of Masan is quiet compared with last year. CSP, a mill project in Fortaleza, Brazil, has some small regular shipments as the project is going slowly,” he said.


The port of Masan serves as the gateway for the neighbouring Changwon National Industries complex and has annual cargo volumes of over 10 million tonnes, Kim explained. It is also the port of call for regular liner services between Korea and Japan, and Southeast Asia and Northeast Asia. Oh Dae Hyun, project team manager for


South Korean forwarder Pantos Logistics, confirmed this view. “The Korean market at present is not overwhelming as most Korean EPC companies have seen revenue drop consecutively for two years. The Middle East and other regions’ construction projects are also in a [depressed] situation.” Oh said Korean EPC companies foresee this “black market” continuing as Korean domestic real estate and property demand is sluggish, and overseas projects are also slow. The difficult conditions do not appear to be the result of any infrastructure or government regulations impacting on carriers or the forwarding industry, but purely a downturn in markets. However one Korean forwarder said domestic projects such as proposed power lines and radioactive waste management centres in Korea are being stymied by ‘Nimby’ (Not In My Back Yard) environmental challenges that are causing significant delays.


Chaebul power


Further impact is resulting from a few major conglomerates (called chaebuls in Korea) setting up internal forwarding companies or subsidiaries that control their logistics demand.


“The gigantic financial power and massive procurement capabilities of a few chaebuls means small and medium companies are deprived of the chance to compete,” another forwarder noted. However the Korean government is moving to encourage open public tender systems, limiting the parent company’s involvement in marine logistics so that small and medium-sized professional marine


www.heavyliftpfi.com


Daewon Logipia loading heavy lift cargo at Masan, South Korea, for discharge in Poti, Georgia.


logistics companies can gain access to more work opportunities.


Another trend that may assist the market involves Korean EPCs, which previously put out a tender per shipment, now inviting forwarders to tender for the total service from the bidding to the completion stage.


Insoo Kim of Global P&L Co said the current domestic market for heavy lift and project work in Korea is much smaller than the overseas market and a few decent-sized companies armed with their own terminals, warehouses and equipment are occupying major positions in the market. This has caused Korean project forwarders to target


overseas project cargoes. He commented: “At present Korean EPCs are quite active all round the Middle East, Asia, South America, Africa and so on taking orders for floating production, storage and offloading (FPSO) vessels, platforms, tension leg platforms (TLPs), refinery and power plants including combined cycle power plants, and nuclear power plants. “Eastern Europe is a rising star that is beginning to attract Korean EPCs. Those markets can be segmented into oil and gas, mining, power projects and so on.”


Overseas contracts


An EPC malaise would not have seemed likely a couple of years ago when Korea’s Hanwha Engineering and Construction Corporation secured the largest overseas construction project to be won by a Korean construction firm, announcing a USD7.25 billion EPC contract with Iraq’s National Investment Commission. The contract was to build a planned town at a location 25 km east of central Baghdad, over an area of 1,830 hectares and containing 100,000 new homes.


“This project is the first case of exporting


Eastern Europe is a rising star that is beginning to attract Korean EPCs. – Insoo Kim, Global P&L Co


Korea’s know-how in building planned cities and it will provide an opportunity for gaining recognition from Africa and the Middle East in the field,” Hanwha said, confirming its drive to become one of the world’s 100 largest construction companies. While forwarders lick their wounds, for the heavy lift carriers too the international downturn in project work is being felt.


July/August 2013 125


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