Shipyards and shipowners face serious delays to deliveries in 2023, due to a skills gap in South Korea and Beijing’s zero-Covid policy in China, that could put newbuilding contracts in jeopardy. South Korean shipbuilding sources this week told TradeWinds that yards are facing their most serious labour shortfall since reopening in the wake of the pandemic in mid-2021 and that they are now struggling to produce the number of hull blocks required to meet their delivery schedules. In China, sources said some yards are declaring force majeure on newbuilding contracts as a precaution against further lockdown delays that continue due to Beijing’s strict zero-Covid policy.

The number of vessels involved is not known but 2023 is being billed as a big year in boxship deliveries. Clarksons’ monthly container ship report stated that fleet growth is expected to accelerate to over 7% in 2023 to 27.5m teu from 2022’s 25.6m teu as deliveries are set to reach new highs. But brokers said the market conditions for the container ship sector are expected to soften further in 2023 and 2024 due to the global recession and the easing of port congestion. And with the pressure of excess boxship tonnage supply, brokers and shipyards fear charterers and shipowners may try to walk out of expensive newbuilding contracts that they inked under the pretext that shipbuilders fail to deliver the vessels on schedule.

South Korea’s labour woes worsened this week when 1,100 Vietnamese welders were denied entry due to forged work permits and visa issues. A prolonged strike at Daewoo Shipbuilding & Marine Engineering has added to the logjam, while there is also talk of possible industrial action at Korea Shipbuilding & Offshore Engineering (KSOE), which controls the Hyundai group of shipyards. The manpower shortfall comes as most yards have built up orderbooks stretching to the end of 2025 and into 2026 and are overloaded with work.

South Korean yards had reduced the number of shipyard workers by more than half, from about 203,000 in 2014 to 92,000 today, in response to the post-2008 market collapse. The Korea Offshore & Shipbuilding Association estimates that the labor-intensive industry is currently facing a shortage of 9,500 workers, representing about 10% of the current workforce. The shortage has caused friction between yards competing in a tight labour market. In August, four South Korean shipbuilders — Samsung Heavy Industries, DSME, K Shipbuilding and Daehan Shipbuilding — accused KSOE of poaching their workers. The yards filed a complaint with competition regulator the Korea Fair Trade Commission, claiming the Hyundai shipbuilding group had offered attractive salaries to lure their employees.

The shortage of ship hull bock sections is so severe that Hyundai Heavy Industries has brought forward the reopening of its Hyundai Gunsan yard by two months to try to catch up with shipbuilding production. Hyundai Gunsan was shut five years ago during the shipbuilding market downturn but is set to reopen to fabricate hull blocks. Hyundai Gunsan will employ 750 workers and produce 100,000 tonnes of blocks annually for HHI, Hyundai Mipo Dockyard and Hyundai Samho Heavy Industries. Meanwhile, in China, Beijing has given no sign that it will be lifting the pandemic restrictions despite mounting concerns that its zero-Covid policy is hurting the economy. Shipyards continue to be subjected to unplanned lockdowns as Covid-19 infections break out and some have taken to declaring force majeure newbuilding deals early to protect themselves. Lockdowns effectively mean lock-ins for the yards, making access for foreign nationals to oversee for sea trials, for example, impossible. Force majeure releases both parties in a contract from liability if there is an unforeseen event such as war or interference from governments. Sources said Chinese shipyards have “learned” from the previous Covid lockdowns and are declaring force majeure as a precautionary measure, with it only coming into effect if deliveries are delayed. One broker said: “Some shipbuilding companies in China that we know of are writing to shipowners and declaring force majeure as shipyards’ gates are closed and it is impossible to arrange for outside engineers to participate in the sea trails of the newbuildings. “There is a rising fear that should shipyards fail to meet the delivery schedule under the contract terms, and if the shipping market deteriorates further, shipowners may try to get out of the deals. This is especially so for the container ship sector.”