Shifting Middle East Situation... Joseon and Shipping Industries Monitor Crisis Amid Tension

Shipping and Fuel Cost Surge Raises Concerns... Shipbuilding Industry Watches for Impact on Large Projects

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] As the situation in the Middle East becomes volatile, the shipbuilding and shipping industries are closely monitoring the developments with tension. The shipbuilding and shipping sectors, which had been hoping for a "revival" this year, are expressing concerns that a prolonged crisis could slow down the recovery of the industry.

According to major foreign media on the 8th (local time), Iran fired surface-to-surface missiles at a U.S. military base in Iraq where American troops are stationed. This was a retaliatory action in response to the assassination of Qasem Soleimani, commander of the Iranian Revolutionary Guard Corps, by the United States.

The shipping industry is the most immediately affected. As turmoil in the Middle East intensifies, oil prices are soaring. Considering that fuel costs account for about 30% of the annual expenses of domestic shipping companies, this trend could deliver a fatal blow to profitability.

Related ancillary costs may also increase. A shipping industry official said, "When a Japanese oil tanker was attacked in the Strait of Hormuz last June, insurance companies demanded a 20 to 30 times increase in premiums," adding, "If tensions escalate, the burden will become even greater."

The shipbuilding industry is also closely watching the situation. Since it typically takes 2 to 3 years from ordering a ship to its construction and delivery, immediate concerns are minimal, but future orders could be affected.

The Qatar liquefied natural gas (LNG) project is a representative example. Qatar plans to order around 40 to 100 LNG carriers in line with its LNG production increase plans. This project is considered the biggest opportunity this year for the three domestic shipbuilders, who hold unrivaled competitiveness in the LNG carrier sector.

There is considerable expectation within and outside the industry that orders may be placed as early as the first half of this year, but there are also concerns that the current U.S.-Iran conflict could impact the project in some way. A shipbuilding industry official stated, "The immediate impact on shipbuilding is not significant," but added, "While the project itself will not disappear, the timing of orders could be affected."

The automobile industry is expected to be less affected since Iran is already under international sanctions. However, they are closely monitoring the situation as a prolonged crisis could lead to a downturn in the global economy.

This content was produced with the assistance of AI translation services.