HSG Sungdong Shipbuilding Co., which shows a cross section of the shipbuilding industry's rise and fall, is firing a signal flare for its revival by returning to the whole-ship construction business after eight years. With Samsung Heavy Industries selecting HSG Sungdong Shipbuilding Co. as its final domestic partner for the first commissioned construction of medium-sized tankers, the newbuild line at the Tongyeong yard, which once rose to eighth in the world, will resume operations. There is an assessment that HSG Sungdong Shipbuilding Co., which plunged due to the global financial crisis and a slump in shipbuilding market conditions, has found an opportunity to restore its core business.
Samsung Heavy Industries will sign a final contract on the 14th to commission HSG Sungdong Shipbuilding Co. to build two Suezmax-class tankers ordered by a Greek shipping company. The Suezmax-class tanker, the largest size that can pass through the Suez Canal, is a representative ship type in which HSG Sungdong Shipbuilding Co. showed strength in the past.
The two companies plan to carry out detailed design, equipment orders, and process simulations for about a year, then begin the first process, steel cutting (plate cutting), at the Tongyeong yard in December next year. Dozens of Samsung Heavy Industries personnel in charge of quality and processes are already stationed at the Tongyeong shipyard and collaborating.
The industry expects that, following these two ships, HSG Sungdong Shipbuilding Co. will also take on two more tankers ordered by another Greek shipping company. Accordingly, there is a view that HSG Sungdong Shipbuilding Co.'s return to the newbuild business will not end as a one-off but will lead to a substantive restart.
◇ From "world No. 8" to revival… limits remain in securing its own ship orders
The predecessor of HSG Sungdong Shipbuilding Co. is "Sungdong Shipbuilding & Marine Engineering," launched in 2003. Starting as a shipyard specializing in blocks (large structures that divide and build the hull), Sungdong Shipbuilding & Marine Engineering entered the commercial ship newbuild market focusing on bulk carriers and tankers in 2005 and expanded its scale, and in 2007 ranked eighth in the industry by order backlog.
The onshore construction method based on the 1.2 million-square-meter (about 360,000-pyeong) Tongyeong onshore yard and an ultra-large Goliath crane was cited as Sungdong Shipbuilding & Marine Engineering's competitiveness, as it can preassemble large blocks to reduce the number of lifts. However, as the sharp decline in orders after the 2008 financial crisis and losses from derivatives overlapped, it entered a creditor-led workout in 2010, and after filing for rehabilitation in 2018, the number of newbuilds fell to zero (0).
The push to normalize the business began two years later. HSG Heavy Industries, a Changwon-based shipbuilding and offshore plant company, acquired Sungdong Shipbuilding & Marine Engineering in 2019 and the following year changed its name to "HSG Sungdong Shipbuilding Co." to begin rebuilding. In the process, more than 500 employees who had been on unpaid leave for over two years returned, restoring the base of technical personnel, and the business was reorganized around ship blocks and part-complete ships, and offshore wind substructures.
In April, it strengthened its financial capacity by attracting a 210 billion won investment from private equity and others, but continued operating losses mean that securing new orders remains urgent. However, due to its rehabilitation history, the threshold for issuing a refund guarantee (RG), an essential requirement for newbuilds, is high, creating significant practical constraints on winning direct shipbuilding contracts from shipowners.
◇ First collaboration overcoming structural constraints… a springboard for HSG Sungdong Shipbuilding Co.'s resurgence
This project is evaluated as the first case of overcoming such structural limitations of mid-sized shipyards. With Samsung Heavy Industries signing the contract directly with the shipowner and entrusting HSG Sungdong Shipbuilding Co. with whole-ship construction, a path has opened for HSG Sungdong Shipbuilding Co. to participate in newbuild work without the RG burden.
An industry official said, "With major shipyards' docks saturated amid a shipbuilding boom, this is a precedent showing that a mid-sized shipyard with whole-ship production capacity can serve as a domestic alternative production base," adding, "It is significant in that it may not end as a one-off allocation but could lead to a long-term production partnership model between major shipbuilders and mid-sized shipyards."
The remaining "hardware competitiveness" at the Tongyeong shipyard is cited as the background for HSG Sungdong Shipbuilding Co. being chosen as Samsung Heavy Industries' partner. The large 1.2 million-square-meter onshore yard, a 4,000-ton-class Goliath crane, and equipment capable of loading large blocks at once are evaluated as top-tier infrastructure even among mid-sized shipyards.
This large-scale, onshore construction base is seen as favorable for shortening schedules and reducing quality deviations, making it suitable to meet Samsung Heavy Industries' process standards. There is also an assessment that Samsung Heavy Industries' years of assigning block and part-complete ship volumes to HSG Sungdong Shipbuilding Co., aligning process and quality procedures, influenced this selection for whole-ship commissioning.
In addition to Samsung Heavy Industries, HSG Sungdong Shipbuilding Co. is discussing outsourced processing volumes, such as ship blocks and tanks, with major domestic shipbuilders (a method in which the prime contractor provides designs and key materials, and the subcontractor performs only fabrication and assembly).
An official in the shipbuilding industry said, "If HSG Sungdong Shipbuilding Co. handles this project stably, it can establish itself as a 'second line' that disperses the dock burden of major shipbuilders," adding, "If a trend emerges of redistributing domestic shipbuilding volumes, the production role of mid-sized shipyards will naturally grow."