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Marine Propulsion & Auxiliary Machinery

Marine Propulsion & Auxiliary Machinery

When cheap isn’t cheerful

Wed 28 Feb 2018 by Paul Gunton

When cheap isn’t cheerful

I attended a presentation in London last week organised by the UK Government’s Department for International Trade (DIT). It has adopted a slogan that sums up its mission – Exporting is Great – and has even created a matching website address: www.great.gov.uk.

This particular gathering was aimed at UK marine industry manufacturers wanting to do business with South Korea and it was addressed by the DIT’s Seoul-based marine specialist, Jongsoo Seo – formerly an executive vice president at Samsung Heavy Industries.

He gave some valuable advice that I am sure is relevant to exporters everywhere, not just in the UK. The most useful, I think, was that, in these days when a number of environment-related regulations are coming into force, a ship’s capital expense (capex) is not as dominant a factor in shipowners’ newbuilding decisions. So if you are involved in smart shipping applications, or LNG-fuelled propulsion, or emissions control or ballast water management systems, then you are well placed to find business in South Korea, he said.

But – there’s always a ‘but’ – there is still an uphill battle: South Korean yards favour domestic equipment suppliers, apart from in offshore projects, for which about 90% of the material is imported.

I guess we knew that, but his advice to overcome that is to form partnerships with local companies. “Maybe it’s possible that a company alone could compete [by] jumping into the Korean market but it is a very hard way,” he told me.

In the roundtable discussion afterwards there were some company representatives who could vouch for the effectiveness of this approach: this is how to get onto yards’ approved supplier lists before they get a newbuilding contract, a couple of them said.

Yet there was still some scepticism around the table about how level the playing field is: 10% bonds up front when bidding makes it expensive if you’re bidding on multiple contracts said one. “Yes doesn’t mean yes,” said another. Owners might place a contract with a list of specified sub-contractors but yards “spend six months trying to take items out for the local market,” said a third participant.

Dr Seo acknowledged that there are cultural differences to understand when doing business with South Korea but he insisted that things are changing as a new generation of staff moves up and as yards are restructured.

I hope he is right. I have visited South Korea several times over more than 30 years and I have seen the sort of protective management attitudes mentioned round the table last week. But I have also met managers who take a more open stance, who understand that shipowners want quality, above all else. So if the current regulatory environment means that cheap is no longer always cheerful, then I am hopeful for the future. Let’s make exporting great again.

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