Korean Register: Class societies must diversify

Korean Register: Class societies must diversify

Busan: Class societies face a tough year and had best diversify their revenue base, suggests Chon Young-kee, the head of the Korean Register of Shipping (KR) in Monday’s Maritime CEO.
“The market for traditional classification service is limited,” Chon says, adding: “To secure financial stability, we will continue to diversify and aim to increase our non-marine business to account for around half of our total revenue.”
KR’s medium-term strategy will follow two routes: to maximize its classification services and, at the same time, develop and become a total engineering service provider.
Chon reckons this year is unlikely to be a bright one for the shipping and shipbuilding industries. “Maintaining the status quo is likely to be as good as it gets,” he warns. Many classification societies will be seeking to diversify into other sectors to mitigate the risks of being too exposed to shipping, the KR boss says.
“Economies of scale are also being exploited throughout the industry, both in terms of larger ships and also through collaborations such as P3,” he says, adding: “We need to position ourselves to take advantage of these changes.”
Despite there being a raft of high value vessels ordered of late, Chon is skeptical that there is a genuine turnaround across the board in the shipping industry. He says the recent ordering frenzy has been led by investors looking to capitalize on low prices.
“What we need is a sustainable, long-term revival. We certainly do not want to see another cycle of boom and bust,” he says.
Finally, Maritime CEO quizzes Chon on one of the biggest subjects affecting class of late, namely the coming together of Germany’s Germanisher Lloyd and Norway’s Det Norske Veritas to make a powerhouse of a class society. Chon is not convinced in how simple this integration will be.
“A merger between classification societies is not easy as they tend to maintain strong ties to owners, operators, shipbuilders and regulators of the nation or region where they are primarily resident,” he says.
KR, founded in 1960, has grown in leaps in bounds in the past decade and now classes 64m gt. [17/02/14]

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