Hyundai to Build 10th Dock in Ulsan

Hyundai Heavy Industries (HHI) is planning to construct a 10th dock in the Ulsan Hyundai shipyard. Construction is expected to begin in November this year and to end in early 2009.

The decision comes in an attempt to increase shipbuilding capacity, which is currently at its peak. It is confirmed that detailed plans to build the dock are now underway. HHI’s Shipbuilding Division in Ulsan will lead the dock-building project.

The investment decision is worth examining as it was made at a time when local shipbuilders are going abroad to places such as China to secure new facility sites.

The decision is considered a traditional strategy for HHI to enhance its current capacity, which cannot afford to receive additional orders right now.

Docks, which assemble blocks made on the ground to form a ship’s body, are the key to the shipbuilding process. However, they require a large land and investment commitment.

HHI has barely managed to deal with an increasing number of orders through alternative methods, such as building a ship on the ground and more efficient building processes. The alternatives also have reached to their limit, inevitably leading to the decision to build another dock.

In the meantime, Samsung Heavy Industries, Daewoo Shipbuilding and Marine Engineering, and STX Shipbuilding have turned to China to expand their facilities, increasing the possibility of technology leakage. HHI’s investment decision stands out given that it seeks capacity improvement within Korea.

An official from the HHI said, “We considered buying construction sites both at home and abroad. To prevent the possibility of knowledge leaks, we decided to invest locally.”

The additional dock is expected to increase HHI’s capacity substantially. The dock will be capable of constructing a vessel that can carry one million deadweight tons (DWT). The dock’s scale is comparable to HHI’s third dock, which is the company’s largest as of today.

HHI is planning to shorten the construction period as much as possible to make the most of a bullish market globally.

It usually takes about three years to complete a dock. However, this time, building an additional dock on the site already acquired will enable HHI to start the project as soon as possible, and completion just one year after starting to build is the goal.

Local competitors like Samsung and Daewoo analyze that HHI’s investment is a sign that it wants to enter the ocean shipping business in earnest, in which it has been considered comparatively weak.

HHI has tasked Hyundai Samho Heavy Industries, a subsidiary, with building bottom parts to make large-scale ocean vessels, such as Floating Production Storage and Offloading (FPSO) components, and an oil tanker.

An executive from a domestic shipbuilder said, “Orders for FPSO will increase. With a new dock only for building ocean vessels, HHI will enhance its capacity considerably.”

changkim@donga.com