As the government moved to raise the national-flag carrier lift rate (the share of domestic cargo owners entrusting cargo to domestic carriers) when importing crude oil and liquefied natural gas (LNG; Liquefied Natural Gas), the Democratic Party of Korea is pushing, as its party line, to expand the range of cargo types. It said it would support legislation so government policy can be established smoothly and raise the share of using national-flag carriers for container cargo imports and exports.
According to the shipping industry and the political sphere on the 7th, the Democratic Party of Korea has set support for the domestic shipping industry as its party line and is reviewing measures to raise the national-flag carrier lift rate to 70%. The goal is to realize President Lee Jae-myung's campaign pledge to achieve a 70% lift rate by national-flag carriers for bulk cargo (crude oil, iron ore, LNG, coal) and to support the shipping industry from a national security perspective.
The government plans to conduct a research project within the year to draw up a plan to provide incentives when importing crude oil and LNG via national-flag carriers. The industry believes options could include amending the Shipping Act to allocate transport shares to national-flag carriers or to subsidize freight expense.
According to the Ministry of Oceans and Fisheries, last year's national-flag carrier lift rate for LNG was 34.5%, down 3.7 percentage points (P) from a year earlier, and for crude oil it was 48.5%, down 1.6 P. Domestic shippers' average annual LNG transport volume is about 43.2 million tons. That is about 93% of last year's total domestic import volume of 46.33 million tons. Shipping companies' average annual crude oil transport volume is 144 million tons, or about 94% of last year's total crude oil imports of 153.3 million tons. Domestic carriers have sufficient transport capacity, but utilization is low due to the form of import contracts or expense issues.
Last year's national-flag carrier lift rate for iron ore was 67.2%, up 0.5 percentage point from a year earlier, and for coal it was 92.6%, down 0.4 percentage point. Last year's national-flag carrier lift rate for container cargo was 44.9%.
To raise the national-flag carrier lift rate for container cargo, the government is working to improve the excellent shipper certification program. The excellent shipper certification program allows domestic cargo owners to deduct part of their expense from corporate income tax if they use national-flag carriers for import and export activities, but last year's deduction totaled only 700 million won. The government is pushing to revise the tax code, reflecting criticism that the deduction criteria are too strict.
If the national-flag carrier lift rate rises, carriers transporting LNG will benefit. LNG is transported by Pan Ocean, SK Shipping, Korea Line Corporation LNG, and Hyundai LNG Shipping, among others. If the lift rate increases for other cargo types as well, HMM and Heung-A Shipping, whose main business is container transport, will also benefit.
A shipping industry official said, "Foreign-flag vessels may not be available for use in emergencies under International Labour Organization rules or the laws of various countries," and noted, "It is also desirable for security to support national-flag carriers that the government can compulsorily mobilize in emergencies."