German yards support Japan’s WTO threat to Korean builders

German shipbuilders have come out in support of Japan’s attack on South Korea’s decision to subsidise its shipyards.

Japan is readying to take rival South Korea to the World Trade Organization (WTO) over the billions of Korean won it has handed to its struggling yards in recent years. The European Union did something similar 14 years ago.

Dr Reinhard Lüken, general manager of Germany’s shipyard association (VSM), said yesterday: “The VSM supports the decision of the Japanese government. Korea has massively contributed to market distortions and overcapacity with state aid to Korean yards of billions. Recently, shipping companies have been provided with $5bn of fresh capital to buy additional container vessels from domestic shipyards, although freight rates are still insufficient due to the oversupply of cargo space.”

The VSM went on to allege that Korean yards have in recent years consistently accepted orders below production costs to keep yards busy. VSM, like Japan, singled out Daewoo Shipbuilding & Marine Engineering (DSME), one of Korea’s big three yards, for particular criticism. A severe accounting fraud combined with a drop in orders brought DSME to its knees, but Seoul has provided $11bn in financial aid to the yard.

South Korean officials yesterday dismissed the criticism from Japan and now the matter looks destined for the WTO.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.


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