Korean Shipping Corp. takes appropriate measures for void vessel acqui

Since the Asian currency crisis, Korean Shipping Companies have sold off a lot of vessels to gain liquidity, without ordering new vessels leaving a new vessel acquisition vacuum. If this situation continued, it would drive ocean-going shipping industries into a corner and they would need vessel appropriation measures on a governmental basis.

Responding to these re-quests, the Ministry of Mari-time Affairs and Fisheries (MOMAF) seems to be seeking a way to finance vessels for Korean Shipping companies and secure vessels under favorable circumstances.

An official at MOMAF said that the final vessel development plans are building on a frame based on basic practical business practices.

The shipping industry is a capital-intensive industry, spending an enormous amount on securing vessels, with vessel-financing policies playing a strategic role in determining the success or failure of the industry.

Worldwide, leading shipping countries possess their own supply systems for their domestic ship owners to secure vessels. Private vessel financing systems are also developed through reduction and exemption.

Domestic ocean-going shipping companies froze new vessel orders after financial difficulties invaded South Korea. Instead they sold a total of 6 vessels abroad, equivalent to 2.97 million GT, to gain liquidity.

After the recovery of the domestic economy last year, debt to equity matters and financial conditions worsened due to international credibility decreases keeping shipping companies from buying vessels, according to MOMAF analyses. Also, interest rates rose to LIBOR plus 3% from LIBOR plus between 0.5 to 1.5%.

If this situation continued, without acquiring new vessels many anticipated problems would require calling for government-based policies to maintain the ocean going shipping industry.

MOMAF gathered opinions from the shipping industry, shipbuilders, financial institutions, and relevant government bodies to prepare a plan for vessel financing.

Domestic financing for vessels was divided into commercial finance, planned shipbuilding, and bareboat charter (BBC) finance. Commercial financing withdrew drastically due to the 1980's long term maritime depression, and in the 1990's, ship owner's responsibility for ocean pollution. Intended shipbuilding was avoided because financial conditions were not good and abolished in 1998.

BBC finance was applied to vessels under long-term transportation contracts. This system was rarely helpful though as international interest rates rose sharply after the currency crisis.