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ANALYSISKOREA


Chance Yim, assistant manager of the


KAM 1 team in Hanjin’s heavy cargo transportation sales department, said the heavy cargo and project sector is depressed “like the market all over the world”. The situation at many heavy industry companies is worse than expected. One example is Doosan Heavy Industry, where although Doosan VINA has been awarded the Yanbu 3 project in Saudi Arabia (a power and water project on the Red Sea coast) which will start at the end of this year, there are no plans to construct any other facilities. “Other heavy industry companies’ situations are not much different, although many ship manufacturing companies are changing their strategy to offshore projects. For these reasons, we are also having a pretty hard time now to find appropriate cargoes.” The market generally is worried by the trials and tribulations at STX Pan Ocean, which has just filed for bankruptcy protection and court restructuring after listing defaults on seven South Korean bonds worth about KRW1.1 trillion (USD968 million). STX Pan Ocean has suffered huge losses due to its heavy exposure in dry bulk shipping. Conjecture has been that court protection has been sought to protect several lucrative long-term charter contracts, such as a 25-year contract with Fibria Celulose of Brazil, a pulp manufacturer, to transport pulp from Brazil to Europe and Asia.


Currency issues


Earlier this year, Korea Development Bank decided not to acquire STX Pan Ocean after due diligence, due to higher-than-expected debts and, elsewhere, one forwarder told HLPFI that currency issues are another headache in the Korean marketplace. Daelim Corporation’s project logistics team states that the market has experienced sharp falls since March 2013. Part of the problem is that Japanese manufacturers have become more price-competitive because of the decline in the value of the yen. A Daelim spokesman noted: “A weak yen situation can be expected to increase project cargo [being sourced] from Japan.” Despite the current gloom, the mood is upbeat about the future. The feeling is that better times may be just around the corner and that as global economic conditions improve, so will the project market. In addition, there are some specific large projects that will kick-start the Korean project sector’s fortunes. The question is – where to look for new work?


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KS Kim of Daewon Logipia, said that an July/August 2013


Global P&L loading a diesel power plant, destined for Iraq, on behalf of STX Heavy Industries.


oil refinery project in Abu Dhabi could produce new work but believes the EU market is the key to resolving the downturn. Over the next year or so, he also feels that Myanmar and South America will lead the market, as well as traditional sources of work in the Middle East. “Next year, some big contracts like housing projects in Iraq, Hanhwa E and C, as well as POSCO E and C in Brazil, will lead the market with regular shipments,” he said. Pantos Logistics is also expecting better conditions for the EPC market in Korea. Pantos is therefore aligning itself with top tier companies for EPC projects globally, particularly in North America and the Middle East markets.


Jazan Refinery


Daelim expects to see cargo volumes increase from July, prompted by projects such as construction and procurement contracts for the Jazan Refinery and Terminal. The Jazan Refinery contracts were awarded by Saudi Aramco to major international construction and procurement


EPC companies in Korea ... are looking forward to and expecting a better market situation due to many projects starting. – Chance Yim, Hanjin


companies including Al-Ajmi Group, Petrofac Saudi Arabia, Hyundai Saudi Arabia, Hanwa Engineering & Construction Corporation, JGC Corporation, Hitachi Plant Technologies, SK Engineering & Construction and Technicas Reunidas. The whole project is targeted for completion in late 2016.


Hanjin also feels the market will be better


next year, sensing that major projects are about to fire-up demand.


Major overeseas projects


Chance Yim of Hanjin said some big projects such as SARB ZADCO in the Middle East (oilfield developments in the United Arab Emirates), other projects in Asia and the Ichthys gas project in Australia will be open to tenders for cargo movements, and many Korean companies are connected to those. “EPC companies in Korea like Samsung Heavy Industries, Hyundai Heavy Industries, DSME and others are looking forward to and expecting a better market situation due to many projects starting,” Yim observed.


Moreover, he said the Korean government is now emphasising the importance domestically of “New Regeneration Energy” industries, particularly wind farm energy projects both onshore and offshore. The government is currently supporting a 2.5 GW offshore wind farm complex being built off the


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