Sunday, 1 August 2010

The life and death of a greenfields Shipyard

This posting comes after a long layup from my blogging. No excuses for the lack of activity - will try harder...

Orient panorama

The post is on the short life of a Korean 'greenfields' shipyard. A greenfield is defined as a start-up shipyard, and while normally Chinese, there are several Korean yards which have suffered a similar fate post-GFC. Our interest in Orient Shipyard came about through the time-charter of two Capesize bulk carrier from their Head Owners which were in turn contracted and financed against the charter

Orient drydock

The plan was ambitious - to simultaneously build a shipyard and two Capesize bulk carriers at the peak of the dry bulk boom in 2008. The Yards' plan was to built a floating dock and the first Capesize on a land-based building pad. The dock would be launched and the five by 5,000 tonne ship sections of the Cape rolled on to the dock for joining. It was explained to me that the South Korean Gov't discourages the development of graving docks, and that floating dock launching is a well proven technology in the industry.


My company became concerned at the vague assurances from the Head Owners on delivery, and I was dispatched to Gwangyang to visit the Yard and sight progress on the vessels. The Yard itself was in a sorry state, with steel plate and sub-assemblies lying among mud and gravel on a partially-paved site. There were no covered workshops, and pre-cut and formed steel was being brought in from outside contractors for welding and assembly. A single keel block had been completed (which lead to a contractual stage payment) and sat forlornly in the middle of the Yard, festooned with tattered bunting from the keel laying ceremony six months earlier.

Orient Cape panorama

The delivery date duly came and passed with no prospect of delivery, legal notices were issued and the prospect of the first vessel being delivered into charter became more and more unlikely. The last inspection in April of this year revealed the first vessel well advanced in terms of the 5,000 tonne blocks and the floating dock launched. The Head Owners were desperate to delivery one of the two vessels contracted and were unwilling to see the charter (and their structured financing) collapse.

Orient bow

July 28th 2010, and Lloyds List reported that Orient Shipyard had filed for bankruptcy protection. The Busan Yard had succeeded in delivering Handysize bulkers, but the delays in the Capes from the Gwangyang hard had apparently brought the company down. I have not been able to find out whether the first Cape was successfully transferred on to the floating dock for assembly and float out. The wreckage of Orient Shipyard will no doubt be picked over for salvageable assets. Given the parlous state of the Capesize charter market it would seem that the last thing needed is two more speculatively financed 180,000 DWT bulk carriers.

Acknowledgement to Paul R. for additional photos of the near-completed super-blocks, April 2010.

The Antipodean Mariner
8th August 2010