As Eco Prime Marine Pacific, the largest shareholder of HJ Shipbuilding & Construction, moves to acquire HD Hyundai Heavy Industries' Gunsan shipyard, expectations are that the Busan Yeongdo shipyard (HJ Shipbuilding & Construction) and the Gunsan shipyard (J Ocean Heavy Industries) will split roles between building medium-sized and large ships, respectively. HJ Shipbuilding & Construction has built five to six merchant ships a year at the Busan Yeongdo shipyard, but it has not been able to win orders for more profitable large vessels because of constraints on site and dock size (a shipbuilding workspace designed to be filled and drained with water).
Given that the Gunsan shipyard has the nation's largest shipyard infrastructure, it is expected to serve as a production base for large merchant ships such as very large crude carriers (VLCCs). As HJ Shipbuilding & Construction has begun the U.S. Navy ship MRO (maintenance, repair and overhaul) business, there is also discussion that the Gunsan shipyard could be used as a hub for U.S. Navy ship MRO.
According to the shipbuilding industry on the 2nd, J Ocean Heavy Industries signed a definitive agreement on the 26th to acquire the asset of HD Hyundai Heavy Industries' Gunsan shipyard and is proceeding with the acquisition process. J Ocean Heavy Industries is a newly established entity set up by Eco Prime Marine Pacific, the largest shareholder of HJ Shipbuilding & Construction, to operate the Gunsan shipyard. J Ocean Heavy Industries plans to complete the acquisition process by the end of the year and begin shipbuilding work early next year after facility maintenance and equipment upgrades.
The Gunsan shipyard is a large shipyard newly built by HD Hyundai Heavy Industries in 2010 in the Gunsan National Industrial Complex. As the shipbuilding industry entered a downturn, it stopped building completed ships after delivering a vessel in 2017 and has since produced only some blocks, which are ship structures.
An industry source said, "The current shipbuilding market is so strong that even if the Gunsan shipyard is restarted, it would more than cover fixed costs, but because it is a cyclical industry and the market will eventually turn, HD Hyundai Heavy Industries appears to have chosen to sell the Gunsan shipyard to focus on new core areas."
Right after announcing the Gunsan shipyard acquisition, J Ocean Heavy Industries said it signed a letter of intent (LOI) with a shipowner in the Oceania region to build four 114,000-ton crude and product tankers. While an LOI is not legally binding, it is generally signed after the shipowner and shipyard have largely agreed on the ship type, specifications and price range, so it typically proceeds to a formal contract unless a major variable arises. J Ocean Heavy Industries is targeting delivery of the first newbuilding in 2028.
This ship is a model developed by HJ Shipbuilding & Construction. After Eco Prime Marine Pacific, the largest shareholder of HJ Shipbuilding & Construction, signed a memorandum of understanding in March to acquire the asset of the Gunsan shipyard, the shipowner is said to have inquired with HJ Shipbuilding & Construction about reserving a Gunsan shipyard slot (building space). Considering that the Gunsan shipyard has not built a new ship in the past nine years, the analysis is that the shipowner conveyed an intention to place orders based on HJ Shipbuilding & Construction's capabilities.
By acquiring the Gunsan shipyard, HJ Shipbuilding & Construction can resolve production facility constraints at the Busan Yeongdo shipyard and expect order synergies. The Yeongdo shipyard's site is only 260,000 square meters (㎡) with a dock length of 300 meters, limiting large ship construction. The Yeongdo shipyard has mainly built mid-sized merchant ships centered on container ships, as well as special-purpose ships for the Navy and the Korea Coast Guard. Of these, annual merchant shipbuilding capacity is six to seven vessels. After delivering four merchant ships last year, it is expected to deliver five this year and seven next year.
In contrast, the Gunsan shipyard is a large facility with a site area of 1.8 million ㎡ and a dock length reaching 700 meters. It is also equipped with the nation's largest 1,650-ton (t) Goliath crane and a 1.4-kilometer quay. A representative of HJ Shipbuilding & Construction said, "It is large enough to build two ultra-large VLCCs, each approximately 300 meters long and over 200,000 deadweight tons (DWT), at the same time."
However, because the Gunsan shipyard has not built new ships for the past nine years, it lacks skilled personnel and the latest equipment, so there are also assessments that, for the time being, it will have limits in building vessels with high technical difficulty. Bae Gi-yeon, an analyst at Meritz Securities, said, "The Gunsan shipyard was built on such a large scale that it is suitable for constructing large ships," adding, "But because it has been idle for a long time, for now it is more likely to focus on large tankers or container ships rather than liquefied natural gas (LNG) carriers, which have higher technical difficulty."
There is also a possibility that the Gunsan shipyard will be used as a base for future U.S. Navy projects. Earlier, in Jan., HJ Shipbuilding & Construction signed a Master Ship Repair Agreement (MSRA) with the U.S. Navy, winning U.S. Navy MRO work. The MSRA signing is the third among domestic shipyards, following HD Hyundai Heavy Industries and Hanwha Ocean. As HJ Shipbuilding & Construction is aiming in the long term to build U.S. naval vessels, there is speculation that the Gunsan shipyard could also take on some defense roles.
A representative of HJ Shipbuilding & Construction said, "Currently, the Gunsan shipyard workforce is only at the level needed to operate the block shop, so more personnel are required to build completed ships," adding, "However, we will only be able to determine the necessary workforce size and utilization plans once the acquisition process is fully completed around the end of the year."