1. business and industrial
2. shipbuilding

SPRING 2015
A Publication of Hyundai Heavy Industries
www.hyundaiheavy.com
New Horizons app is free to download
from App Store and Play Store.
Contents
04 CEO Message
·Laying the Foundation for a Big Step Forward
06 Cover Story
·Turning Around Struggling Business
16 Briefing
·Companywide
·Shipbuilding
·Offshore & Engineering
·Industrial Plant & Engineering
·Engine & Machinery
·Electro Electric Systems
·Construction Equipment
·Green Energy
22 Interview
·Every Second Counts in Winning the Race
24 Feature
·Outcome of Technological Convergence:
HHI LNG Total Solution
·Passion for Maximizing Cargo Capacity
32 Insight
·Oil Price Crash Penalizing Korean Shipbuilders,
But Only for the Immediate Term
·2015, Another Tough Year
For Global Shipbuilding Players
36 Global HHI
·Hyundai Construction Equipment Americas
40 Heritage
·Breakwater in Cheonsuman Bay:
Laid with Out-of-the-Box Idea
44 The Moment
45 Global Network
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CEO Message
Laying the Foundation
For a Big Step Forward
Many industry crystal ball gazers would
not differ much in their predictions for the
New Year. The year 2015 will likely present us with continued uncertainties, in the
absence of noticeable improvements in the
global business environment. Consequently, we find ourselves tackling a task of surmounting external difficulties surrounding
us while seeking recovery of our competitiveness through internal changes and innovations.
For 2015, HHI set its order target at
$22.95 billion and sales target at 24.33 trillion Korean won. Lofty as these goals may
seem, we are confident that they are within
our reach if we revive our competitiveness
with single-minded effort. We will do all we
can to ensure that this year will mark the
beginning of our big step forward towards
renewed growth. With this goal in mind,
we will zero in on the following objectives.
First and foremost, we will restore our
cost competitiveness to survive and thrive
amid fierce competition. Last year HHI
initiated competitiveness-boosting efforts
for each of its business divisions by launching a special task force team and redefining
the position of division heads as representatives to beef up total responsibility man-
agement. This year, we will continue to follow up with more concrete measures. The
task of regaining cost advantage will be our
highest priority throughout this year.
Second, we will put our focus on creating a work environment that is safer and
more systemized. Workers are the most
valued assets of HHI and the safe and efficient operation of the production facilities
is the cornerstone of our competitiveness.
Removing waste and material excesses and
achieving efficient and systematic operation on the basis of renewed focus on safety across the company will help enhance
our product competitiveness.
Last but not least, we will change the
corporate culture. Companies slow to
change fall behind and those with a bureaucratic corporate culture can neither
draw nor retain talented people. HHI will
now instill vigor and vitality into the company by driving changes in leaders and ensuring that the change permeates the whole
fabric of the organization.
It is in line with these objectives that
HHI has implemented major organizational realignment recently. We established the
Hyundai Marine Service Center combining
the aftersales service units of HHI, Hyun-
dai Mipo Dockyard and Hyundai Samho
Heavy Industries after integrating the sales
units of these three entities last year. We
also merged the Industrial Plant & Engineering Division with the Offshore & Engineering Division. In tandem with this
structural reorganization, we are making
ongoing efforts to streamline our human
resources to further boost competitiveness
of our business operations. All these reform measures have been taken with the
purpose of restoring our competitiveness
and better meeting the needs of our clients.
Meeting revenue targets and maintaining healthy profit margins is crucial for the
viability and prosperity of a company. However, in order to achieve turnaround in our
business, we need to put greater focus on
how we can revitalize the spirit of our employees, our internal organization and our
corporate culture with clear blueprint for
a better future. We will channel all our resources, capabilities and every ounce of our
creativity toward tiding over current challenges, while at the same time putting as
much attention to the basics and fundamental principles in business operation. We are
confident that all our stakeholders will continue to support us in our endeavor.
Choi Kil-seon, Chairman & CEO
04 | 05
Ne w H o r i z o n s 2 015 S p r i n g
Kwon Oh-gap, President & CEO
Cover Story
Turning Around
Alex Lee
“We find ourselves at a critical juncture, where we need to rise
above external difficulties surrounding us while seeking recovery of
our competitiveness through internal changes and innovations.”
Struggling Business
Cover Story
2
“We simply need to
share the sense of crisis
and make our best
endeavors to proceed
with existing work and
promote technological
advancement rather
than turning eyes to
new things.”
014 was a turbulent year for Hyundai Heavy Industries (HHI). The
world’s largest shipbuilder grabbed a
lot of headlines during the year with news
about its disappointing earnings, leadership
changes, a prolonged labor dispute and a
variety of unprecedented moves to streamline business operations.
A protracted maritime recession has
driven shipyards in South Korea, China
and other nations to fight for survival in increasingly choppy conditions. Profit margins have been devastated by growing
competition among rivals amid a persistent
supply glut. No one is sure about when the
industry in dire recession will bounce back.
HHI slid to the whopping operating loss of 3.2 trillion won in the first nine
months of 2014 as cost overruns mounted
in a number of new projects, and the company’s leadership is struggling to boost
profitability by slashing costs and overhauling the entire group, which also includes
shipbuilding units Hyundai Mipo Dockyard and Hyundai Samho Heavy Industries. The company has reduced the number of executives by about 30 % and plans
to cut the entire workforce by about 5 %
under a voluntary early retirement scheme.
Yoon Moon-kyoon, the 60-year-old senior executive vice president and chief operating officer of HHI’s Shipbuilding Division, said he can hardly expect a dramatic
business turnaround in the next few years
because of unfavorable market conditions
and stressed the need for all employees to
stand up with a sense of urgency to boost
competitiveness, develop new technology and work efficiently at a time of fierce
competition amid global economic uncertainties.
“It is impossible to have great expectations at this time. We simply need to share
the sense of crisis and make our best endeavors to proceed with existing projects
and promote technological advancement
rather than turning eyes to new things.
I think this is a shortcut to success,” said
Yoon, a 35-year veteran who has witnessed
the ups and downs of the world’s ship-
Cover Story
building industry.
HHI set aside billions of dollars in loss
provisions to cover project delays and cost
overruns last year, paying a heavy price for
tackling ever-more complex orders as Chinese rivals eat up the market for simpler
ships. Low-margin ship orders won in the
past few years will likely keep squeezing
profits in 2015 and 2016, dimming prospects that the company will quickly return
to a financial health.
Yoon said low- and negative-margin
shipbuilding contracts won in the past few
years will continue to be reflected in the
business results for 2015 and 2016.
To compete with Chinese rivals and
keep the shipyards busy, HHI and other
South Korean shipbuilders have chased
low-margin orders in the past few years
and offered deep discounts to clients, seriously damaging profitability. In recent
years, a number of Chinese shipbuilders,
taking advantage of cheap labor and government subsidies, have become more viable contenders by closing some technological gaps with South Korean peers.
Yoon said the company will stop trying
to win orders for ships at low prices in the
future, though it seemed inevitable in the
previous years to chase low-margin orders
to keep the company’s 10 drydocks busy
and maintain a proper level of backlog,
which currently stands at about 20 months.
Focusing on
High Value-Added Vessels
The Shipbuilding Division was particularly hit hard by cost increases on the construction of new types of specialized vessels
in which the company had no previous experience. Its lack of experience in building
ships like semi-submersibles and multi-purpose offshore construction support vessels
meant construction delays.
“The construction of those specialized
vessels disrupted delivery schedules for other types of vessels. We should have focused
our energy on certain types of vessels where
we have been doing well,” said Yoon.
Last year, HHI’s Shipbuilding Divi-
10 | 11 Ne w H o r i z o n s 2 015 S p r i n g
“We will try hard to
win more orders for
value-added and
fuel-efficient vessels
like LNG and
LPG carriers and
mega containerships
where demands
are expected to be
increased this year.”
sion met less than 70 % of its annual order
target, winning $6.2 billion in new orders.
This year, the Division aims to win new orders worth $8.35 billion.
“The outlook for the global shipbuilding industry is dark and external conditions
are not favorable, but we will try to bounce
back this year.”
Yoon said the company will try hard to
win more orders for value-added and fuelefficient vessels like LNG and LPG carriers
and mega containerships where demands
are expected to be increased this year.
Last year, more than half of the company’s new shipbuilding orders were
placed for LNG or LPG carriers.
Particularly, HHI dominated the global market of large-sized LPG carriers, grab-
bing 50 out of the total 70 orders placed for
such ships worldwide in 2014.
“Ship owners have given very high
marks for our technological standards in
the large LPG ship sector,” Yoon said.
HHI is to deliver to clients five Mosstype LNG vessels this year, and seeks to
win more orders for the same type of vessel. HHI is the only South Korean shipbuilder capable of building both membrane and moss types of gas carriers.
The company has built and delivered
three of five 19,000 TEU containerships
ordered from China Shipping Container
Lines (CSCL) in May 2013. Two remaining
ultra-large containerships will be delivered
in March and April this year. HHI has
been the leading player in the ultra-large
Mr. Yoon Moon-kyoon, COO of Shipbuilding Division
Cover Story
containership sector in the past decade.
Yoon cited a differentiated technology
for welding job and higher fuel efficiency
as reasons for HHI’s success in the mega
containership sector. In the increasingly
competitive world of shipping, staying in
the game means deploying enormous vessels to save costs. For big ocean carriers, it’s
cheaper and more fuel-efficient to move a
whole lot of cargo on one big carrier than
two or three smaller ships.
External Challenges
Yoon said China has rapidly grown in the
shipbuilding market, challenging South
Korean shipbuilders even in more valueadded and sophisticated vessels like supersized containerships and LNG carriers.
“But there are still some gaps between
Chinese shipbuilders and large-sized Korean shipbuilders in terms of quantity and
quality.”
Yoon said, “We will maintain our technological advantage over China through
investment in R&D, and we will satisfy the
needs of clients by developing vessels with
advanced technology.”
He said Japanese shipbuilders have recently increased their market share in the
shipbuilding industry, on the back of the
yen’s weakness.
“Some Japanese shipbuilders have recently won orders for value-added ships
like LNG carriers or large-sized containerships, but looking at Japan’s shipbuilding
industry as a whole, bulkers account for
70 %. The vessel portfolio of Japan is similar to that of China but quite different from
our portfolio. So the recovery in Japan’s
shipbuilding industry will likely affect China to a greater extent.”
Analysts say low oil prices will affect
South Korean shipbuilders which have recently put a strong emphasis on offshore
businesses as conventional shipbuilding orders slumped.
But Yoon said the low oil prices may
positively affect the conventional shipbuilding sector in the longer term though oil rigs
and offshore support vessel industry will be
12 | 13 Ne w H o r i z o n s 2 015 S p r i n g
hit hard immediately.
“Consumption in oil-importing countries will rise with the economy improving.
This will lead to an increase in tonnage of
cargo, benefitting owners of commercial
ships,” he said.
As part of company-wide drive to improve efficiency and boost competitiveness,
HHI has set up a strong sales headquarters in Seoul, including 300 sales staffers at
its affiliates Hyundai Mipo Dockyard and
Hyundai Samho Heavy Industries. Design
team staffers will be working side by side
with the sales colleagues to improve coordination and efficiency.
It has also set up an integrated A/S
service center, Hyundai Marine Service
Center, in Ulsan for HHI and its shipbuilding affiliates to better accommodate the
growing customer needs for a single point
of contact and comprehensive services for
all Hyundai brand ships both during and
after the warranty period.
For the entire HHI Group, the order
target is set at $22.95 billion and sales target at 24.3 trillion won ($21.9 billion) for
2015.
In his New Year message, HHI President and CEO Kwon Oh-gap called the
targets “lofty, but easily reachable if we
make concerted efforts to revive our competitiveness.”
Renewed Growth in 2015
Kwon said the company needs to turn in
a profit to lay a foundation for renewed
growth in 2015, though the New Year “will
challenge us with the persisting global economic stagnation, plummeting oil prices
and intensifying competition with international peers such as China and Japan.”
“We find ourselves at a critical juncture,
where we need to rise above external difficulties surrounding us while seeking recovery of our competitiveness through internal
changes and innovations,” said Kwon.
Since taking office in October last
year, Kwon has taken a series of drastic reform measures to shake up the company.
The measures, unprecedented in the com-
pany’s 43-year history, include the integration of its Offshore & Engineering Division with the money-losing Industrial Plant
& Engineering Division, which is expected to raise production efficiency and cut
costs through the bulk purchase of components and materials. The company also introduced a performance-based salary system, despite objections from the unionized
workers. HHI shipyard, the scene of work
stoppages and violent clashes in the 1980s
and 1990s, has not seen a single workers’
full-scale strike since 1996.
The company’s restructuring task force
may come up with more measures, including spinning off of non-viable business
units and overseas offices, company officials said.
Kwon has also been pushing hard to
change a bureaucratic and rigid corporate
culture to improve efficiency and productivity. To help break hierarchies, there are
no separate rooms for department heads
and senior managers who are encouraged
to sit at desks near doors and close to junior staffers.
“Unchanging companies end up as
laggards, and a bureaucratic corporate culture makes a dull company, discouraging
talented people from joining the company
or encouraging them to leave the company. Now, HHI should seek increased dynamism and energy by driving changes in
leaders,” he said.
He added, “The business environment
is getting increasingly unfavorable, and a
number of challenges are lurking in front
of us. Yet, that should not discourage us
from making progress.”
Taking the CEO’s message further,
Yoon finally remarked, “We have a strong
legacy that will guide us on our path – the
insight and management philosophy of our
late founder, Chung Ju-yung. I am sure that
his pioneering spirit will be a great source
of inspiration at a time like this.”
The writer is a journalist based in Seoul.
Commemorating the Centennial Anniversary of
Late Hyundai Business Group Founder Chung Ju-yung’s Birth
Trials are not Failures
The following is an excerpt from “No Failures but Trials,” an autobiography published in
1991 by late founder Chung Ju-yung. In 2015,
the centennial anniversary of Chung’s birth, we
wish to turn to his legacy of inspiring words that
still resonate today.
O
ur glory today will vanish into
thin air the moment we abandon
our audacity, indomitable pioneering spirits and creative efforts—no matter how impressive our past track records
are and however sophisticated the technologies we have. South Korea has made
rapid progress after waking up from a long
hiatus, and now it has risen to global preeminence. I am proud that Hyundai played
14 | 15 Ne w H o r i z o n s 2 015 S p r i n g
a leading role in this radical transformation of the nation. If anyone would ask me
what drove Hyundai to lead the South Korean economy and join the league of global
business heavyweights, I wouldn't hesitate
to answer that it is Hyundai’s fearlessness
and unwavering spirits.
We opened new frontiers of South Korean industries out of wilderness. We cultivated the construction market, started shipbuilding, and laid foundations for the auto
industry. Except for Incheon Iron & Steel
(currently Hyundai Steel), we launched
all of our Hyundai companies by building each and every factory from scratch.
My determination to grow not into commerce but into production enterprises, and
put heavy focus on overseas markets rather
than domestic ones paid off and came to
fruition. This was largely attributable to the
pioneering spirit of our Hyundai members.
When observing from the theory of
principle, nothing would have been possible in the Korean economy. It had no
capital, no resources, and no accumulated
technologies to win in economic warfare.
There were repeated questions about our
success when we were building a shipyard
on credit, and when we were expanding it
against the backdrop of global supply glut.
But we built a shipyard that had been considered to be an impossibility, and now,
our shipyards (currently Hyundai Heavy
Industries) are dominating the global mar-
ket as the world’s best. This symbolizes
how we are accomplishing what is logically
or numerically impossible.
Every success or failure depends on
the mentality and attitude of a person who
does it. When there is no venture, we are
stalled, sidelined, and then relegated. It is
true that we have developed tremendously
compared to the past, but we are likely to
collapse if we are satisfied with the present
and slacken. We are now in a state of hesitating in which all kinds of difficulties are
befalling us at once.
Scholars marvel at Korea’s economic
growth as the “Miracle on the Han River.”
There might be miracles in religion, but I
don’t think there is a miracle in politics and
economy. What economists call a miracle
is only a poor excuse to what is thought
to be theoretically or numerically impossible but can become a reality by our mental strength. Korea’s economic growth has
been achieved by our members who put
in their high and frontier spirits and enthusiasm. It is the very strength of the human
spirit. Beliefs can create unwavering commitment. Audacity — this was the key to
our miracles.
I have run businesses to date by finding the joy of challenging what people
characterize as limitations and accomplishing them, and I still keep trying even today.
This unlimited human potential promises
anyone unlimited possibilities. I am just an
ordinary man, but I turned these possibilities into a reality by leveraging my given
potential to the extent possible.
It is just that I have never hesitated to
build on small experiences to achieve big
successes with proactive thinking and a
forward-looking attitude. I have been striving to learn whatever that’s necessary and
make them mine all my life. Anyone can
do anything only if he or she has genuine
belief in his or her goals, and put matching
efforts into it.
Everybody can achieve anything, once
the mind is set to it.
Companywide
Shipbuilding
Offshore & Engineering
Industrial Plant & Engineering
Engine & Machinery
Electro Electric Systems
Construction Equipment
Green Energy
Briefing
Offshore & Engineering
Localizing Offshore
Facilities Equipment
Offshore & Engineering
HHI and its local offshore equipment
supply partners completed
developing 74 equipment.
Sail-away of
The World’s Largest
Cylindrical FPSO
HHI and its local offshore equipment supply partners completed developing 74 equipment that the company has mostly secured
from overseas suppliers. Moreover, HHI already received an approval from its clients for the use of 31 items for the on-going projects in HHI’s offshore yard.
Under the four-year-long plan for localizing offshore facilities equipment and components, HHI will continue to work on
localizing a total of 151 major equipment including pressure vessels and chemical injection pumps for semi-submersible rigs and
FPSO, and subsea pipelines in cooperation with the local partners
by 2018.
Engine & Machinery
HHI delivered the world’s largest
cylindrical FPSO, Goliat, to ENI
Norge on February 13, 2015.
Development of
10.5-generation
LCD Handling Robot
HHI delivered the world’s largest cylindrical FPSO, Goliat, to
ENI Norge on February 13, 2015. The 59,000 ton-FPSO, measuring 112 m in diameter and 75 m in height, can produce more
than 100,000 barrels of crude oil and 3.9 million standard cubic
meters of gas per day as well as storing up to one million barrels
of oil.
HHI, as an EPC contractor, undertook all the project works
covering engineering, procurement, construction, onshore commissioning and optional transportation. The offshore floater built
in compliance with NORSOK standard and fitted out for Arctic
conditions will start operation in Goliat field, 85 km northwest of
Hammerfest, Norway.
Offshore & Engineering
Companywide
Shipbuilding
New COO for
Offshore Plant
Business
Launch of Integrated
Ship A/S Center
Approval of
HD12000
Drillship Design
By ABS
HHI promoted Mr. Park Jong-bong, executive vice president, to
senior executive vice president, and appointed him COO of its
Offshore & Engineering Division on January 6.
Mr. Park who took over from Mr. Kim Jong-do, the former
COO, is a 34-year veteran in the offshore engineering business.
Since he first joined HHI in 1981, Mr. Park has served in various
important roles at HHI including executive vice president of engineering and design department for all engineering works of major
offshore projects.
HHI launched a Hyundai Marine Service Center in Ulsan by
merging the aftersales service units of HHI, Hyundai Samho
Heavy Industries and Hyundai Mipo Dockyard on January 19.
Upon completion of the merge, HHI also intends to incorporate the service units of Engine & Machinery Division and Electro
Electric Systems Division into the center at a later stage.
The integration is aimed at accommodating the growing customer needs for a single point of contact and comprehensive services for all Hyundai brand ships both during and after the warranty period.
HHI’s next-generation HD12000 drillship design, based on HHI’s
proprietary technology, was granted approval in principle (AIP)
by American Bureau of Shipping, a classification service provider, for its full compliance with the American Bureau of Shipping
(ABS) Guideline for the Classification of Drilling Systems.
The drillship can operate in water depth of 3,658 m with a
drilling depth of 12,192 m, and features a state-of-the-art hull form
and a 20,000 psi blowout preventer. It also comes with improved
dynamic positioning capability, which ensures reduced hull resistance, thruster reaction and improved motion performance.
Shipbuilding
“The Ship of the Year”
For 32 Consecutive
Years
The three ships HHI built were selected “The Ship of the Year
2014” by Naval Architecture, a UK-based shipbuilding and shipping magazine. The ships that won the honor are a 19,000 TEU
containership, CSCL Globe for CSCL; an 84,000 m³ LPG carrier,
Gas Star for KSS Line; and a 208,000 ton bulk carrier, Linda Olendorff for Olendorff.
With three more of its vessels winning the title, the total number of HHI-built ships that won the recognition for 32 years in a
row rose to 55.
Engine & Machinery
With the development of this new
robot, HHI now has a full line-up of
10 different models ranging from 2nd
generation to 10.5 generation.
Commissioning
Its First Dual-Fuel
2-Stroke Marine Engine
HHI completed commissioning
its first dual-fuel 2-stroke marine
engine (No. 5G70ME-C9.2-GI) on
December 29, 2014.
HHI completed commissioning its first dual-fuel 2-stroke marine
engine (Model No. 5G70ME-C9.2-GI) on December 29, 2014.
The dual-fuel engine allowing the ships to run on both marine diesel or natural gas shows higher fuel-efficiency and reduced emission compared to traditional marine engines that only burn diesel.
The 24,750 bhp low-speed engine, developed in a technical
cooperation with the Danish engine manufacturer MAN, was delivered to a Korean shipbuilder.
HHI reached the production milestone of 150 million bhp in
2-stroke engines in 2015. HHI is also a leading manufacturer of
propellers, cargo oil pumps, ballast water treatment systems, and
side thrusters.
HHI developed a new 10.5 generation LCD handling robot and
held a demonstration ceremony with the attendance of guests
from the Chinese LCD manufacturer BOE on February 11 and 12.
At the event, the LCD handling robot, jointly developed with
HHI’s Engine & Machinery Institute, displayed its capability of
handling large–sized LCD glasses measuring 3,370 mm by 2,940
mm with a weight of 120 kg at a maximum height of 6.9 m with a
high level of precision. Its foldable structure maximizes users’ convenience in transportation and installation. The robot also features
enhanced joints providing improvements in speed, weight, performance and reliability from its previous generations.
With the development of this new robot, HHI now has a full
line-up of 10 different models ranging from 2nd generation (cellphone display screen) to 10.5 generation (ultra-large TV panel).
Shipbuilding
Engine & Machinery
Electro Electric Systems
Green Energy
Naming of
Two 10,000 TEU
Containerships
HHI Gas
Management
System for
Fuelling LNG
Carrier
$6 Million High
Voltage Motor
Order in Kuwait
HHI PV
Laboratory
Authorized by
VDE
HHI hailed the New Year by naming two 10,000 TEU containerships for Oceanbulk Maritime SA, on January 5. The naming ceremony was attended by Mr. Spyros Capralos, chief executive officer of Oceanbulk; Mr. Nicos Rescos, chief operating officer of
Oceanbulk; Mr. Yoon Moon-kyoon, chief operating officer of
HHI’s Shipbuilding Division; and 44 other guests at HHI’s yard
in Ulsan. At the simultaneous naming ceremony, the vessels were
named Cezanne and Dali, respectively. The two containerships are
identical in measuring 300 m in length, 48.2 m in width, and 24.8
m in depth with a service speed of 22 knots.
HHI independently developed HHI Gas Management System
re-liquefying boil-off gas (BOG) from a membrane LNG containment tank to use it as fuel for LNG carriers on December 8, 2014.
The newly developed gas treatment system can re-liquefy 100
% of the BOG and re-store it in the LNG tank which can later be
used as the ship’s fuel. The LNG carrier equipped with this system
can save up to 50 % of the fuel cost in comparison with the standard vessel using heavy fuel oil (HFO) or marine gas oil (MGO),
and produce 92, 80 and 23 % less emissions of SOx, NOx and
CO2, respectively.
HHI signed a $6 million frame agreement with a Japanese engineering company, JGC, to supply 140 units of 6.6 kV motors for
Clean Fuel Project (CFP) of Kuwait National Petroleum Company
(KNPC).
Under the CFP, KNPC will integrate and upgrade the 270,000
bpd Mina Abdullah and 466,000 bpd Mina Al Ahmadi refineries
located 45 km south of Kuwait City. The newly integrated refineries will operate as a merchant complex with total capacity of about
800,000 bpd. HHI will provide 140 motors that are needed to run
industrial pumps and compressors by 2016.
HHI’s PV laboratory in Eumseong, South Korea was accredited
for operation of Witnessed Manufacturer’s Testing (WMT) by Verband Deutscher Elektrotechniker (VDE), the Association for Electrical, Electronic and Information Technologies on November 28,
2014.
With the accreditation of VDE, HHI now can perform critical
quality and safety tests of solar modules it produces with its cuttingedge facilities and qualified engineers which in turn will further improve the credibility of its solar modules and shorten module development period as well as lowering manufacturing cost.
Interview
S
Every Second Counts in
Winning the Race
Te r e s a L e e
“We have chosen five technologies per
institute that fit a vision put forth
this year – technologies that are
differentiated, advanced and robust,
or DART for short.”
22 | 23
Ne w H o r i z o n s 2 015 S p r i n g
hin Hyun-soo, the 58-year-young chief
technology officer of Hyundai Heavy
Industries (HHI), runs marathons not
just on his off time but during work as well.
Shin has applied the endurance learned
through long hours of training to cut seconds
off one’s record during 26 completed marathons, to a 33-year R&D career at HHI –
which can mean long hours striving for minute improvements in product performance.
“When I headed ship research in 2012,
there was an order we needed to win but
we couldn’t get the speed down to where
we wanted. So I suggested a competition
between the research team and the Shipbuilding Division’s design department
to model a ship that would shave 0.1-0.2
knots off the speed,” he said.
After days of running at full tilt in order to win the in-house competition, the research team edged out a victory through a
better stern design – which it immediately shared with the Shipbuilding Division to
build a HHI model that eventually satisfied the client.
“To be able to facilitate the efforts of
those selling our products, we need to be
able to develop and provide a product that
has even a slightest edge over the competition. Looking at products like LNG vessels,
even minor improvements in technology
can make a huge difference in winning orders,” said Shin.
With such a mindset, Shin now heads
HHI’s Corporate Technology Institute –
the company’s R&D center – which under
his leadership has gained a new focus on
converging information technology and existing products.
“If a ship’s assessment criteria in the
past were limited to factors like durability
and speed, now is the age of “smart ships”
that require considerably intelligent technology. Systems that calculate routes that
use the least amount of fuel, automatic collision prevention and other tech that allows
the sailor or owner to monitor and control all information from the voyage will be
called for,” Shin said.
Besides the newly-christened Conver-
gence Technology Institute that leads this
push to develop new revenue streams, the
center has two other outfits – the Advanced
Technology Institute that researches technological cornerstones such as hydrodynamics and structural mechanics, and Industrial
Technology Institute that develops methods
to increase productivity.
In order to contribute to a company buffeted by shifting oil prices and other headwinds, Shin says a capacity for increasingly
sophisticated design that can satisfy stronger environmental and safety regulations, increased efficiency in production as well as
focusing and expanding what HHI already
does best are necessary R&D features.
“We have chosen five technologies per
institute that fit a vision put forth this year
– technologies that are differentiated, advanced and robust, or DART for short. We
will focus our resources and assessment on
these capabilities, including conducting interviews,” he said.
Mr. Shin Hyun-soo, Chief Technology Officer
“We have also sent out around 150 research personnel to business divisions in order to slim down while increasing efficiency
in the division.”
HHI’s businesses are divided into group
A and B – the heavy, top-tier businesses
such as shipbuilding and offshore, and the
relatively small-scale productions such as engine and electro-electrical systems and construction equipment. Shin noted HHI’s total
R&D investment is at the low end at around
1 % of revenue, adding there is comparatively larger investment in group B – but with
minimal differences.
“We need more decisive investment in
both groups – including top-tier businesses,
where we cannot rest on our laurels but continue to differentiate,” he said.
Shin, who likes to split his time to read
thousand-page books on the life of Deng
Xiaoping or the Roman Empire, underlined
his confidence that HHI has what it takes to
endure and grow – after looking back on his
own career milestones such improving the
endurance of ExxonMobil Kizomba FPSO
(floating production, storage and offloading
unit) in the early 2000s, the largest project
HHI had single-handedly built until then.
“My assignment was to make the structure fatigue-proof, meaning how a fixed
structure in the high seas can endure against
waves that strike once every 6-7 seconds – or
a hundred million times over the vessel’s service time of 20 years or more. It was the first
time we had tackled the issue to the exacting
safety standards of a client like ExxonMobil – and not only did we deliver the vessel
ahead of time, what we heard back was ‘excellent’,” said Shin.
“Although we are going through difficulties due to adverse macro business conditions, we are a company with strong foundations. We have success in our DNA. If we
overcome current tribulations, we will be
able to grow a step further,” he said.
The writer is a journalist based in Seoul.
Feature 1
Hi-GAS (Hyundai Integrated Gas Supply System)
HiMSEN DF Engine of Total LNG Package Solution
Outcome of
Technological Convergence:
HHI LNG
Total Solution
K o o Yo u n g - j u n
HHI provides total solutions with
a package of its dual fuel engines and
LNG fuel supply system.
24 | 25
Ne w H o r i z o n s 2 015 S p r i n g
H
yundai Heavy Industries (HHI)
is proving itself an early adapter
to the accelerating trends in the
shipping industry towards the use of LNG
as fuel. Holding proprietary technology in
the LNG-fuelled ships, HHI provides total
solutions with a package of its dual fuel engines and LNG fuel supply system.
“With development of the LNG total solution, the LNG-fueled vessels will be
deployed on a commercial scale soon with
improved fuel efficiency and reduced emission,” said Han Ju-seog, a senior engineer
at marine machinery design and engineering department of HHI’s Engine & Machinery Division.
According to IMO regulations, all vessels navigating in the emission control areas (ECA) are required to use fuel with
a sulfur-content of less than 0.1 % start-
ing from January 1, 2015. With the shale
gas revolution, LNG is becoming an increasingly attractive solution in both economic and environmental aspects, pushing
aside expensive marine diesel oil (MDO)
and marine gas oil (MGO). In view of such
global market trend, HHI swiftly shifted its
R&D efforts into high gear a few years ago.
On March 23, 2010, HHI entered into
a joint technology development agreement
with MAN Diesel & Turbo (MDT), Denmark’s 2-stroke engine designer, to convert
4T50ME-X, a test engine at their R&D center, into 4T50ME-GI dual fuel engine. A
year-long intense collaboration resulted in
successful completion and trial run of the
4T50ME-GI engine at MDT’s R&D center on May 8, 2011. However, faced with
lukewarm response from the market, HHI
signed another agreement with MDT on
May 8, 2011 to build another ME-GI engine and operate it at the factory of HHI.
The result of this collaboration is
8S70ME-C8.2-GI engine and HHI went
on to develop its own LNG fuel supply system called “Hi-GAS” system, and executed
LNG bunkering for fuel use on October 11,
2012 – for the first time as an engine maker
in the world. HHI applied its own patented technology in building the Hi-GAS system and the company received its patent
on the technology, three months ahead of
its competitors, acquiring proprietary technology in this field.
On November 9, 2012, HHI successfully completed a trial run for the Hi-GAS
system by operating it as a package with
8S70ME-C8.2-GI and HiMSEN 8H35DF
generator that HHI independently developed and tested in the presence of over
300 representatives from its clients.
The successful result of the test was soon
followed by actual orders to install ME-GI
engines on the world’s first LNG-fuelled
ships: 3,100 TEU containerships owned by
TOTE and 173 m³ LNG carriers for Teekay.
Traditionally, LNG carriers have been
equipped with dual fuel diesel electric
(DFDE) propulsion system with Wärtsilä’s
50DF. However, the adoption of the MEGI engine as the main engine has enabled
the application of a variety of LNG cargo
handling and fuel supply systems.
Following the development of the HiGAS system, HHI then set out to carry out extensive research into re-liquefaction technology. As a result of these efforts,
HHI succeeded in single-handedly developing an efficient and cost-effective boil-off
gas (BOG) re-liquefaction system, which
Feature 1
Feature 2
HHI Gas Management System
3
1
2
3
4
DFDE
MEGI
Fuel Gas Supply System
Re-liquefaction Plant
4
1
2
Passion for
condenses BOG from LNG cargo tanks
and burns it for fuel and then re-liquefies
the surplus gas by recovering heat through
the use of BOG cold energy and passing it
through Joule-Thomson valves. HHI filed
a patent application to the Korean Patent
Office on May 29, 2013. The patent for the
technology was registered on July 17, 2013
and an amended patent was also registered
on March 26, 2014.
HHI has incorporated its re-liquefaction technology in a product called Hi-ERS
(Hyundai Innovative Economical Re-liquefaction System). It is a highly innovative
system which enables partial re-liquefaction of BOG without using N2 refrigeration
system, giving HHI an edge over its competitors through reduced initial investment
cost, its smaller area for system installation
and low power consumption.
2 6 | 27
Ne w H o r i z o n s 2 015 S p r i n g
On October 29, 2014, HHI also carried out HAZOP (Hazard and Operability) study on Hi-ERS in conjunction with
DNV-GL and received an approval in
principle (AIP) certificate on the product in
recognition for its safe design and excellent
operability.
Then, at the end of last year, by fusing
together the technologies required for producing the products such as DFDE, MEGI,
Hi-GAS and Hi-ERS, HHI developed “Gas
Management System” and will install it on
the two 176,000 m³ LNG carriers ordered
from Norway’s Knutsen due for delivery
in mid-2016. With the alternative fuel consumption, the LNG carrier equipped with
this package is expected to save up to 50
% of the fuel cost in comparison with the
standard vessel using heavy fuel oil (HFO)
or MGO, and produce 92, 80 and 23 %
less emissions of SOx, NOx and CO2, respectively.
“HHI can take pride in the fact that, as
the world’s largest shipbuilder and engine
maker, it has adapted to the shifting market trends toward LNG-fuelled ships and
engines, based on its expertise and experience, faster than its competitors and are
already carving out new markets on the
strength of such advanced technologies,”
Han said.
HHI will continue to meet its clients’
needs with best quality LNG carriers and
LNG-fuelled vessels through relentless efforts towards technological development
and enhanced cost competitiveness.
The writer is a copy editor of New Horizons.
Maximizing
Cargo Capacity
Ha Jeong-su
HHI’s engineers and researchers have
continuously explored ways to maximize
cargo capacity and the fruits of these
efforts are beginning to emerge recently.
C
ontainerships are cargo ships that
carry their entire load in truck-size
intermodal containers, by a technique called containerization. They are a
common means of commercial intermodal
freight transport and now carry most seagoing non-bulk cargo. Containership capacity
is measured in twenty-foot equivalent units
(TEU). Typical loads are a mix of 20-foot
and 40-foot (FEU) ISO-standard containers,
with the latter predominant.
Carrying billion tons of cargo across our
oceans every year, there is no doubt that the
demand for containerships is high. The vast
improvement in efficiency of container shipping has been noted throughout the world of
logistics, with ships getting larger and more
eco-friendly as the maritime boom continues. Of note, the trend toward gigantism of
containerships is accelerating rapidly. It fol-
Feature 2
19,000 TEU Containership
The CSCL Globe is as large as four soccer fields or 37 basketball courts. Inside those containers,
shipowners could fit about 38,000 cars or 910 million tons of baked beans.
38,000 units
910 million tons
400 m
Computerized Image of 19,000 TEU Containership with SkyBench™
SkyBench™ is
a new type of
cargo loading system
which overcomes
the limitations of
space utilization
using mobile concept
at superstructure.
28 | 29
Ne w H o r i z o n s 2 015 S p r i n g
lows global shipping companies’ changing
business strategies to improve their earnings
through economies of scale.
The expansion of containerships has begun with the introduction of a 4,300 TEU
post-Panamax containership in 1988, and
was accelerated by the arrival of a 6,000
TEU vessel in 1996. While it used to take a
staggering 24 years to double the vessel size
from 3,000 TEU to 6,000 TEU, we are now
seeing the onslaught of mega-size ships of
over 8,000 TEU since 2003 thanks to technology advancement. Back in 2005, industry
analysts projected that containerships of over
12,000 TEU would reach a tipping point due
to lack of economic viability: a 12,000-orover TEU ship requires two engines fit for
mega-ships to maintain the sailing speed,
which results in increased fuel and costs, difficult port berthing and inconvenience in
loading and unloading operations. However,
the deployment of mega-size containerships
is gaining traction on the back of marine
technology that automates fuel adjustment
according to sailing speed, the Panama Canal expansion project and improvement in
port and terminal infrastructure.
Shipyards around the world are developing their cargo capacity in order to satisfy
shipowners’ needs. It is the same for Hyundai Heavy Industries (HHI). HHI’s engineers and researchers have studied cargo capacity maximization, which is beginning
to bear fruit now. The most representative
achievements are two: 19,000 TEU containerships and SkyBench™ design.
The Completion of the World’s
Largest Containership
HHI held a naming ceremony for the
world’s largest containership on November
18, 2014. It was the first of five 19,000 TEU
containerships ordered from China Shipping Container Lines (CSCL) in May 2013.
The vessels are the world's largest containerships, surpassing Maersk Line's Triple-E
class containerships that have container capacities of 18,000 TEU.
Construction of the first ship began
with the first steel cutting in January last
year. Sea trials were successfully completed
in October and the vessel was christened
CSCL Globe at a naming ceremony held at
the Ulsan yard in November. The CSCL
Globe, measuring 400.0 m in length, 58.6 m
in width and 30.5 m in depth, is as large as
four soccer fields or 37 basketball courts.
Inside those containers, you could fit about
38,000 cars or 910 million tons of canned
baked beans.
Xu Li Rong, chairman of China Shipping Group; Qiu Guo Hong, Chinese ambassador to Korea; Choi Kil-seon, chairman and CEO of H H I and 150 other
guests attended the naming ceremony for
the world’s largest containership. Recently,
the shipbuilding industry is reviewing an
idea of building ultra-large containerships
over 20,000 TEU as a way to further save
fuel and transport cost. Global shipbuilders
including HHI are trying to win as many
orders for mega containerships.
The Innovative Design to
Extend Cargo Capacity
HHI developed a new design feature to increase cargo capacity last year. The patented concept named SkyBench™ is a new
type of cargo loading system which overcomes the limitations of space utilization
using mobile concept at superstructure and
provides the owners with maximized utilization of space through loading more cargo compared with the similar size of conventional design. SkyBench™ is the name
for which HHI filed for trademark registration. It has been thus named as it is shaped
like a long bench towering in the sky. Besides, the term, ‘bench’ is another name of
the container supporting structures formed
inside cargo hold.
SkyBench™ has an extended capacity
of loading 350 and 450 more boxes compared with conventional 14,000 and 19,000
TEU class containerships, respectively by
using the mobile part design.
The images on the following page
show procedures for cargo loading from
left to right when SkyBench™ system is incorporated. The mobile part moves over a
Feature 2
Loading Procedure of SkyBench™
A
B
C
Mobile part is located
A
in the aft bay of the two
bays equivalent to the
span and containers are
loaded into the cargo
hold of fore bay.
Containers,
Leading the Marine Transport Industry
BLoading on deck of
fore bay.
Mobile part to move
C
D
E
F
forward and park.
Loading into the cargo
D
hold of aft bay.
Loading on deck of aft
E
bay.
Malcom Purcell McLean (1913–2001) / Photo © Wikipedia
Loading into the
F
remained bays.
Plan of the SS Ideal X (1956) / Photo © Wikipedia
span of two 40 ft-bays. The final position of
the mobile part is the fore end of the span
when cargo loading is done. Then parking
of the mobile part is applied before voyage. The final position was decided based
on conventional wisdom that more cargo
can be loaded when the deckhouse is located relatively closer to the front part of the
ship for improving visibility. In case there
is another purpose, the final position could
be on the aft end of the span.
Since the mobile part adopts driving train and parking system like the onboard gantry crane, an emphasis should
be placed on the driving power considering trim and heel in port, safe speed on the
go and redundancy of driving power considering emergency situations for its durability and reliability. The main traveling
system of the mobile part in SkyBench™
3 0 | 31 Ne w H o r i z o n s 2 015 S p r i n g
consists of four electric-driven train and
parking units. The design life of the traveling systems has been set as 25 years based
on 60 round trips of ship per year. Compared with the general design life of container carriers and the number of operations based on Asia to Europe route, the 25
years and 60 round trips per year are sufficient for having design redundancy. Moving speed adjusted for safety is about 1.3 m
per minute. In case of moving span with 13
m, it takes about 10 minutes. Power redundancy has been set as 100 % to be ready
for maintenance when serviceability limit
state or accidental limit state happens.
There are many advantages in addition to the increase in cargo capacity. Better stability and increased loadable capacity in the design aspect can be achieved
through rearrangement of compartments.
For the global hull girder strength, reduction in still water bending moment and its
relevant positive effects is attainable. Better
habitability and reduced fatigue can also
be achieved through SkyBench™’s unique
vibrational and noise characteristics.
Based on containership building knowhow and experience, HHI is further reinforcing its position and competitiveness in
the merchant vessel market by maximizing
containership’s cargo capacity.
The writer is a copy editor of New Horizons.
S
hipping containers, which came into being for the unitization of cargo transport, have become an important
means of transportation that is indispensible for maritime
trade today. This is because they sharply reduce logistics expenses and allow for trade goods to be transported conveniently around the world. When did these containers, which now
enable us to move around a variety of goods cheaply, begin to
be used for transportation?
Containers were originally used for land transportation. In
1921, New York Central Railroad launched its container service
for the first time in the history of railroads. Soon after, Britain
introduced containers to the transportation process in 1929,
and many countries in Europe and elsewhere also began to use
railroad containers in full scale after World War II. Records
show that Bowling Green Storage & Van Company, a transportation warehousing company in New York, used a steel container on a trans-European railway route in 1926.
However, it was Malcom Purcell McLean (1913–2001), the
“father of containerization” who became hugely successful with
steel containers. Although he was not the inventor of the transport containers, the American entrepreneur pioneered and
boosted container transportation by establishing the container
shipping business.
His company transported containers between New Jersey
and Houston in April 1956, and the name of a ship that was
used at that time was SS Ideal-X. The ship was converted from
an oil tanker that had been built around World War II, and it
loaded metal boxes, or containers, onto the deck. Not many
people paid attention to the ship’s operation at that time, but
this voyage was a watershed moment that ushered in the age of
container shipping.
Building on this experience, he made inroads into the container shipping business by establishing Sea-Land Service, Inc.,
a global container transportation company. In 2007, Forbes
magazine named McLean, who made a significant impact on
the world trade by pioneering maritime transportation, one of
the “15 People Who Changed the World.”
Insight 1
Oil Price Crash
Shipbuilders strong
enough to weather
a sustained drop
in offshore orders
should be rewarded
for their unrivalled
competitiveness in
the offshore business.
Until then however,
they should brace
for a difficult time
going forward.
Penalizing Korean
Shipbuilders, but Only for
The Immediate Term
H a n Yo u n g - s o o
Global Offshore Oil Production vs. WTI Price Trends
Source: Clarksons, BP, Samsung Securities Estimates
Annual Average WTI Price (LHS)
Offshore Percentage of Oil Production (RHS)
(USD m)
(%)
35
120
30
100
Offshore Oil Production Stable Despite
Price Volitility
25
80
20
60
15
40
10
20
5
0
0
1994
32 | 33
1995
1996
1997
1998
1999
Ne w H o r i z o n s 2 015 S p r i n g
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
The WTI (West Texas Intermediate) nosedived 41 % in the fourth quarter last year
alone, resulting in an average 19 % drop
in the stock prices of Korean shipbuilders
for the same period as offshore businesses constitute a sizable share of their portfolio. This is indicative of growing concerns
about a possible reduction in offshore demand driven by oil price crash. As a matter of fact, offshore structures, i.e., drilling and oil production facilities represent
roughly 61 % of the order backlog held
by the three biggest Korean shipbuilders,
namely Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering.
The potential knock-on effect of weak
oil on offshore facilities demand can be
broken down to long- and short-term periods. In the long haul, offshore facilities orders may be continuously placed at above
a certain level despite plunging oil prices. This is attributable to, first, lingering
doubts over sustainability of the current oil
prices. Of course there are onshore oilfields
which can make profit even at oil price of
$30/bbl with competitive production costs
in Middle East, but countries in the region
still need a substantial price hike to maintain their current fiscal spending. Second,
the significance of offshore oilfields in the
global oil production. Offshore demand is
likely to be sustained despite the oil price
fall, as demonstrated by offshore oilfields’
substantial contribution to global oil production, ranging at 28-33 % for the last two
decades—a very stable reading compared
to the highly volatile oil price during the
same period.
In other words, demand should be
buttressed in the long term by: 1) the presence of offshore oilfields that remain commercial even in the face of current oil prices; 2) continued needs for development of
offshore oilfields for energy security given
geopolitical risks in the Middle East; and 3)
attempts to secure oil reserves by international oil majors that have difficulty in attaining additional onshore oilfields.
However, a slowdown in offshore or-
ders seems unavoidable this year. Oil majors are likely to postpone their exploration
and production spending when oil prices
remain range-bound. Any changes to their
long-term oil price assumptions can lead
to changes to expected profitability of oilfields under development, since they refrain from aggressive investment in timeconsuming, money-gobbling programmes
during times of uncertainties.
Moreover, even if offshore facility contracts dry up for only a short period of time,
the blow on Korean shipbuilders can be
heavier than forecast. A significant number
of domestic shipbuilders had recorded steep
losses in 2014 owing to a flurry of EPC contracts signed in 2011-2013 that landed at a
cheap price due to lowball bids. Also, losses
on such projects and accumulation of loss
reserves eroded the fiscal condition and
cash flow of domestic shipbuilders. This
could be exacerbated by a possible decline
in new orders this year, as it entails such issues as reduction in advance payment, intermediate payment and top-line growth.
Clinching more commercial ship deals can
be a viable but a tough option considering the chase of Chinese and Japanese shipyards. In conclusion, shipbuilders that are
strong enough to weather a sustained drop
in offshore orders should be rewarded for
their unrivalled competitiveness in the offshore business. Until then however, they
should brace for a difficult time going forward. For the time being, we expect more
newsflows about Korean shipbuilders’ costcutting or restructuring efforts.
The writer is an analyst based in Seoul.
Korean Big Three Shipbuilders’ Offshore Order Book Trends
Note: Drilling rigs are classified as offshore orders / Source: Samsung Securities
Big 3’s Offshore Order Book (LHS)
Portion of Total Order Book (RHS)
(USD m)
(%)
90,000
80
80,000
70
70,000
60
60,000
50
50,000
40
40,000
30
30,000
20
20,000
10
10,000
0
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Insight 2
2015,
Another Tough Year
Capex spending cuts
by global oil majors
due to falling oil
prices will have a
negative impact on the
offshore order flow
this year. Protracted
ship gluts and fierce
competition among
shipyards will cast a
cloud over the outlook
for commercial
shipbuilding orders
and pricing.
For Global Shipbuilding Players
Sanjeev Rana
Global New Shipbuilding Orders
(m DWT)
300
250
200
150
100
138.9m DWT (15 years average)
50
0
1997
34 | 35
1998
1999
2000
2001
Ne w H o r i z o n s 2 015 S p r i n g
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015F
2014 was a tough year for the global shipbuilding industry with orders down 39 %
year-over-year (YoY) to 110 million DWT
(based on Clarkson data). Global investments in newbuilding contracts were down
23 % YoY to $101 billion. Total orders at
Korea’s four major shipyards — Hyundai
Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering (DSME), and Hyundai Mipo
Dockyard — were down 28 % YoY to $44
billion and all shipyards with the exception of DSME failed to meet their original
order targets set at the beginning of 2014.
With oil prices plunging nearly 50 % in the
2H14, offshore orders (drilling rigs, floating production platforms, FLNG, etc.) at
major Korean yards declined 49 % YoY.
On the other hand, orders for commercial ships (bulk carriers, tankers, containerships, LNG ships, etc.) were down only 3
% YoY thanks to the strong order flow for
LNG carriers from gas projects in Russia
and shale gas exports from the US.
The headwinds faced by the global shipbuilding sector in 2014 are likely to
continue in 2015. In particular, offshore-related orders which accounted for 56 % of
the total orders at the major Korean shipyards in the last four years are expected to
remain weak due to the decline in oil prices. Offshore orders at Korean shipyards
and oil prices have shown a 82 % correlation from 2004 to 2014, and with consensus
view calling for oil prices to remain subdued in the near term and many oil companies announcing cuts to exploration and
production spending in 2015, offshore orders are likely to be negatively impacted.
As for the outlook for commercial ship
orders is concerned, even though oversupply in certain segments (e.g. bulk carriers,
containerships) is easing to a certain extent, overall orders in 2015 are still likely
to decline another 15 % in 2015 (after a 39
% decline in 2014) due to weak finances of
shipowners, low charter rates and relatively high ship prices (from shipowners’ perspective). At the same time, competition is
likely to intensify with Japanese yards mak-
ing a comeback on the back of weak yen
and Chinese yards looking to gain market
share in high value-added segments such as
LNG carriers. In particular, with Japanese
yen’s 30 % and 40 % depreciation against
KRW and the USD since 2013 and years
of restructuring, many Japanese shipyards
appear to be regaining their lost ground
and are likely to use currency depreciation
to offer attractive pricing terms.
LNG carriers are the only segment
which is likely to see another year of
healthy order flow. 2014 was one of the
strongest years for global LNG shipping
demand, helped by demand from U S
shale gas exports and Russian gas projects.
Last year, orders for 65 LNG vessels were
placed (45 in 2013) which is more than
double the average of the past 10 years. In
2015, LNG carrier orders are likely to be
about 50 units which would be a 23 % decline from 2014 but nevertheless solid by
historic standards. Korean shipyards’ dominance in the global LNG carrier market is
likely to continue. The Korean shipyards’
market share in the LNG shipbuilding industry has fluctuated between 70 % and
85 % in recent years and is likely to hover around between 72 and 75 % this year
(similar to 2014).
Finally, new shipbuilding prices which
are another key determinant of the health
of shipbuilding demand are likely to remain
at the current low level. The Clarkson new
shipbuilding price index was up 3.8 % in
2014 with prices of major ship types showing low- to mid-single digit increases. Prices
of major ship types peaked in 1H14 and we
saw mild correction in 2H. Shipping companies are pushing shipyards to lower their
new shipbuilding prices and competition
among players within Korea and in China
and Japan is also negatively impacting ship
prices. At the same time, as major shipyards
are reeling from very weak profitability and
tattered balance sheets, they are unlikely to
cut prices dramatically further to win orders
and thus an additional drop in new shipbuilding prices may be limited.
The writer is an analyst based in Seoul.
Global HHI
Hyundai Construction
Equipment Americas
With the vast experience and technical
know-how of HHI, HCEA has significantly
expanded its business and now offers
an extensive line of quality construction
equipment in North America.
Berkeley Lake
Perimeter
Center
HCEA
Tucker
Lilburn
Northlake
North
Druid Hills
Clarkston
Atlanta
HCEA History
In 1991, Hyundai Construction Equipment
(HCEA) landed the North American market,
introducing its first brand of two Robex (Robust Excavator) models, the 21 ton and 29
ton crawler excavators. In order to expand
its business in North America, Hyundai
Construction Equipment USA was formed
two years later in 1993 with headquarters in
Elk Grove, IL (Chicago office) which helped
expand HHI’s presence within the North
American construction equipment market. During the 1990s, HCEA increasingly built a strong dealer network and broadened its product offering in North America
to meet the growing needs of all customers.
In a move to further cement its position in
the market, HCEA strategically relocated
its headquarters in 2011 to a 57,540 square
meter (619,405 square foot) location in Norcross, GA (Atlanta Office), where it currently
operates the Chicago office as a parts center.
Photo © Georgia Department of Economic Development
With the vast experience and technical
know-how of HHI, HCEA has significantly expanded its business and now offers
an extensive line of quality construction
equipment including mini excavators (1.6
ton to 6 ton), hydraulic excavators (8 ton to
120 ton), wheel loaders (125 hp to 350 hp),
compactors (2.5 ton tandem to 14 ton single drum) and Class 1, 2 electric and Class
4, 5 IC forklift trucks.
HCEA Marketing Activity in
North America
As all can assume, North America is a very
mature market with well-established competitors; it was not easy for HHI to penetrate. However, using the HHI brand along
with quality machines and services, HCEA
is actively conducting its marketing activity to build a stronger presence in North
America every day.
As an example, HCEA was hugely
Global HHI
HCEA (6100 Atlantic Blvd Norcross,
GA 30071, United States)
HCEA Exhibition
March 23 – 26
Exhibition
Promat
Place
Chicago
Main Exhibit 25BC-9, 18BRP-7A,
18BT-9, 25L-7A, 80D-9
Marketing Strategy
For the last six years, HCEA sales have
grown over 36 % every year and HCEA
continues to cement its market presence by
providing quality machines and services.
However, like any other business, there are
always a number of opportunities and challenges – which is especially true with the
80D-9
38 | 39
successful in the 2014 Conexpo, which is
the most famous International Construction Equipment Exhibition held in Las
Vegas, Nevada every three years. Over
the course of the show, HCEA’s booth attracted more than 5,000 visitors. HCEA
showcased its specialized machines which
included the R220LC-9A amphibious machine, R520LC-9A demolition, R1200-9
large excavator and HL760-9A waste handler. These machines drew visitors’ attention at a single glance.
HCEA seeks to consistently expand its
marketing activities in 2015. The first show
on its calendar was the World of Concrete
(WOC) show held in Las Vegas on February 3 where it displayed its newly developed hydraulic excavator machines, including the R60CR-9A and R125LCR-9A.
After the World of Concrete show, HCEA
also participated in the 2015 ARA rental
exhibition held in New Orleanson on February 23, 2015, for the second consecutive year to increase the public exposure
of its rental and lease business segments.
In March 2015, HCEA plans to attend another big exhibition in Chicago, called Promat 2015 which is the world’s largest forklift trade show hosted every three years. At
Promat 2015, HCEA will be showcasing
five most popular models including 180D9 and 80D-9.
Since 2014, HCEA has touted the
theme, “The Power of Hyundai,” emphasizing HCEA’s commitment to providing
greater satisfaction for its customers. The
Power of Hyundai translates into providing enhanced quality, reliability, technology, standard features, durability and overall improved product performance for our
customers.
Ne w H o r i z o n s 2 015 S p r i n g
construction equipment business. HCEA
continues to work together as one strong
team and recently invited its valued dealers to its headquarters to share ideas and
strategies to achieve even greater success in
2015.
HCEA is now moving towards the
next stage for even better performance and
customer satisfaction. To achieve its goals,
it is continually working on improving its
dealer network to well beyond 130 dealerships, keeping its parts availability up to
the industry standard fill-up rates and upgrading its customer support. HCEA also
offers Webinar (Web Seminar) training, inhouse product training sessions and periodic on-site training.
Additionally, HCEA promotes the
HHI brand on a corporate level to end users in North America as well as supporting
its dealers with various finance programs
and proper marketing tools to ensure that
they carry a consistent HHI brand message to the entire industry.
Vision
Despite HCEA’s seemingly belated entry
to the North American market, HCEA is
assumed to have had a successful soft landing. HCEA’s goal is to never stop aiming
higher and to lead the construction equipment market. Its future focus aligns closely with HHI’s objectives of strengthening
the competitiveness of existing products,
launching new products and beefing up the
HHI dealer network in North America.
Like HHI, HCEA holds a fervent belief that technological innovation is the surest path to sustained growth and profitability in today’s competitive marketplace. It
is committed to providing customers with
the latest and greatest products. R&D has
always been an integral part of the HHI
DNA – and will remain so in years to
come.
HCEA is making vigorous preparations for its next phase of growth. With its
top priority firmly fixed on its customers, it
continues to strive for the highest level of
customer satisfaction.
Stone Mountain Park:
A Colossal Rock Soaring High in Atlanta
Photo © Wikipedia
P
ut in the spotlight by Gone with the Wind, an American
film adapted from Margaret Mitchell's Pulitzer-winning
1936 novel of the same name, Atlanta is the capital of
and the most populous city in the U.S. state of Georgia, as well
as the site of historic battles from the Civil War. While driving
eastward from the beautiful city for a half-hour, you will come
upon a splendid view: a mountain rising high in the middle of
a thick forest with lush foliage. This is a granite mountain consisting of a single rock. The granite is 8km in circumference
and 252m in height. Officially called Stone Mountain, this
quartz monzonite dome is a single rock formation and measures 514 meters above sea level.
The enormous Stone Mountain itself is a natural attraction,
but the bas-relief on its north face is also a popular site that
represents Atlanta. The largest bas-relief sculpture in the world,
the Confederate Memorial Carving depicts three Confederate
leaders from the Civil War—President Jefferson Davis¹, General
Robert E. Lee² and General Thomas J. “Stonewall” Jackson³.
The entire relief is 60 meters long and is as big as a soccer
field. The carved surface took a significant amount of time to
complete. It was planned in 1912, commissioned to Gutzon
Borglum4 in 1923 who abandoned the project two years later,
and completed in 1970 only after undergoing several work suspensions.
On the relatively gentle slopes to the west of the mountain is a walk-up trail. Although the mountain’s summit can be
reached in about 40 minutes maximum, most visitors prefer to
go to the top of the rock by riding the Summit Skyride cable
cars installed at the park, which provide visitors breathtaking
views of the relief.
A good time to visit the Stone Mountain Park is from April
to October. On summer evenings, Stone Mountain hosts the
colorful Laser Show Spectacular, a fireworks and laser lightshow that is projected onto the rock wall of the mountain. Visitors can enjoy true relaxation in nature at this picturesque
park complete with forests, artificial lakes, a golf course, campground, accommodations, restaurants, and sports facilities of
all sorts.
1. Jefferson F. Davis (1808 – 1889) was an American politician who served as the President of the Confederate States of America during the American Civil War (1861–1865).
2.Robert Edward E. Lee (1807 – 1870) was an American soldier and educator. During the Civil War, Lee was appointed the commander of the Confederate Army and a senior military adviser to
President Jefferson David. Lee rendered many distinguished services while leading battles.
3.Thomas Jackson (1824 – 1863) joined the Confederate Army during the Civil War, and received his famous nickname "Stonewall" as he excelled in battles. He is also well-known for having
harassed the Union soldiers as General Robert Lee’s right-hand man.
4.Gutzon Borglum (1867 – 1941) was an American sculptor who mainly worked on large-scale public sculptures after completing his studies in Paris. His signature work was the Mount Rushmore
project, creating sculptures of four U.S. presidents - Thomas Jefferson, George Washington, Abraham Lincoln and Theodore Roosevelt.
Heritage
Breakwater in Cheonsuman Bay
Laid with Out-of-the-Box Idea
Shim Sung-won
Seosan
South Chungcheong Province
“Experience without knowledge is better than
knowledge without experience.”
B
orn into a large impoverished family of peasants in the early 1900s,
the late Hyundai Group founder Chung Ju-yung must have dreamed of
owning a huge-scale farmland which is
able to fill the entire family members with
a good meal. Working for a rice shop as a
delivery boy later on, the teenage Chung
must have vowed to help his farming compatriots overcome “the barley hump” —
a metaphorical expression of the period
of spring poverty. The renowned Seosan
breakwater construction saga might have,
or must have, started from there — both
out of the business tycoon’s desire and obligation.
An out-of-the-box idea occurred when
Chung decided to reclaim a huge tract of
land from the ocean and make it into productive farmland in the early 1980s. People know that Chung loved to describe
himself as a simple farmer at heart. He was
proud of his peasant background and frequently scoffed at the middle class backgrounds of some of his chief rivals.
In this context, Chung decided he
needed a challenge of a very different di-
4 0 | 41 Ne w H o r i z o n s 2 015 S p r i n g
mension. For many years, he had been
concerned about the inefficiencies of family farming in Korea, where a typical family barely had enough land to support itself
and sell a bit of rice on the side. Although
Chung believed in supporting rural communities, he felt that at least some farmers
should become sufficiently large and productive to be able to export food grains.
Breakwater Challenge Kicks Off
In 1979, Chung purchased the land surrounding much of the Cheonsuman Bay
in Seosan in western Korea in a bid to reclaim more than 24,000 acres of land from
the Korean Peninsula’s West Sea, or the
Yellow Sea, and convert it into Korea's
largest mechanized rice farm. He traveled to California’s Sacramento Valley to
study how huge mechanized farms could
efficiently produce crops. His dream consisted largely of two parts. One, he wanted to prove that Hyundai could succeed
in reclaiming a vast piece of land from the
ocean, with the other to prove that Korea
could obtain the name as a major rice exporter in the global market. After obtain-
ing government approval and the requisite
land reclamation permits, Hyundai began
the mammoth project in April 1982.
The Seosan land fill project, as is well
known, required that two large dikes be
constructed to close out the seawater. To
construct the dikes, workers would use a
textbook operation of building two narrow
peninsulas out from each shoreline toward
one another. Eventually, the two peninsulas would meet in the middle of the bay,
thereby closing off the sea. The reclaimed
area could then be drained and new soil
could be brought in to create fields for
food grains. Beginning the project, the
workers were likely to see no end to the
construction even of the first and smaller
of the two dikes because of the turbulent
waters.
As rocks and dirt were poured into
the sea to make a barrier, rushing waters would repeatedly wash them away.
To overcome this, Chung came up with a
new method — widely used today — wrapping rocks and boulders in a wire net and
lowering the net into place. The combined weight of the caged rocks was heavy
226,000-ton Oil Tanker Blocking the Tide
Heritage
enough to remain under the sea. Owing to
this method, the first dike was successfully
completed in 1982.
The workers then began constructing
the bigger second dike for the reclamation
project in July 1983. This four-mile-long
dike proved to be much more difficult. As
the end of the second dike was getting closer to the first one, the turbulent ocean current flowing in-between was intensifying
in both the speed and strength. As a result,
the wild, violent current repeatedly washed
away the rocks and dirt dropped by armies
of dump trucks into the chasm of the dike.
Even the so-called “wire-net method” that
had proved so effective on the first dike
failed to bear out the rushing current.
Such an ordeal did not make Chung
hesitate and instead prompted him to consult with engineering experts and scholars.
But no one seemed to have a solution other than continuing to pour rocks and dirt
into the bay. Chung realized that such an
action would only serve to pollute the offshore area further and destroy fragile fishing habitats near the edge of the bay.
In March 1984, he called and ordered executives of Hyundai Heavy Industries to send a large oil tanker that was
destined to be decommissioned to the Seosan Bay. What he chose was a 1,050-feet
and 226,000-ton oil tanker. The tanker was
pulled into place across the 886-foot gap
in the dike and then scuttled in the water,
effectively blocking the tide while workers completed filling in the dike. As usual, many experts thought Chung went out
of his mind but his scheme succeeded once
again. With the dike filled in, the ship was
refloated and driven away. To this day,
many engineering textbooks refer to the
breakwater work as the “oil tanker method”, or the “Chung Ju-yung method.”
Later on, a sign was placed in the elevator at Hyundai’s corporate headquarters
back in Seoul that read, “Experience without knowledge is better than knowledge
without experience.”
With the two dikes completed, Chung
embarked on a long-cherished plan to cre-
42 | 43
Ne w H o r i z o n s 2 015 S p r i n g
ate his own farm. He repeatedly told visitors
that he would eventually retire to Seosan to
become a farmer again as in his youth. The
vast land was nourished and supplemented with new soil for rice planting. A fleet of
planes, jokingly referred to as the “Hyundai Air Force,” was used for Korea’s first attempt to seed rice fields by air. A cattle-raising business was also established at one
corner of the farm. Korea’s largest grain silo
and a processing plant were also constructed on site to store, process and package the
grain. Chung is said to have spent $760 million on the Seosan project.
In reality, it took Chung years to improve the soil enough to grow sufficient
quality rice for its commercial viability
but the Seosan project created thousands
of new jobs during construction and after completion. Currently, the Seosan farm
produces 54,000 tons of rice per annum.
As mentioned above, the Seosan
project began with the sinking of a derelict tanker ship to start building a seawall,
an unprecedented and ingenious method Chung devised, and the farm he established there was the source of the cattle
that he shipped to North Korea. The Seosan reclaimed land is 30 times larger than
Yeouido island in Seoul (the Korean version of Manhattan), and once was a place
that harbored hopes for the North Korean
business of the Hyundai Group.
Fresh Challenge Comes in
Even today, Chung’s endeavors have been
inherited and carried on via a wide range
of industrial projects on the vast reclaimed
area.
In 1979, Seosan became the first privately funded plantation program supported by the government and was cultivated
for rice production from 1986. It also contributed to achieving Chung’s own breakthrough visit to North Korea with the Korean Cow Program in 1998. Now, Taean
Tourism and Leisure Corporate City is envisioned to be built in phases under the
name La Tierra, the city of dream, over the
coming several years.
La Tierra, set to be established from
2007 to 2020, will become an international
tourism and leisure city. Supported by the
Korean government, Taean City and investors from both home and abroad, more
than nine trillion Korean won will be invested in a land site of 3,619 acres that will
feature 6,000 buildings and houses. The
city is expected to draw nearly 8 million
tourists per annum.
In addition, Hyundai Oilbank, the nation’s fourth-largest refiner, has completed
its second facility for converting heavy oil to
pricey light oil such as diesel and gasoline in
part of the reclaimed land. The outfit’s first
heavy oil upgrading (HOU) plant in Seosan
City has a capacity of 68,000 barrels a day,
and the second one in the city will jack up
the figure to 120,000 barrels.
Celebrating the completion of the Seosan plant, then Hyundai Oilbank Chief Executive Officer and now President and CEO
of Hyundai Heavy Industries, Kwon Ohgap said, “I am very glad and proud that we
have wrapped up construction of the second HOU plant in Seosan, where founder
Chung Ju-yung’s pioneer spirit is alive.”
Nobody casts doubt on such a eulogy
that the late business tycoon deserves to receive.
The writer is a journalist based in Seoul.
Cheonsuman Bay in Seosan,
A Haven For Rare Migratory Birds
Photo © Seosan Birdland
A
wide variety of endangered species like storks, hooded cranes, spoonbills, and bean geese cannot be easily seen, and are all the more difficult to spot in one
place. These birds fly to Cheonsuman Bay in Seosan, Chungcheongnam-do Province, South Korea, where they stay to get
through cold winters. Consisting of wetlands and shallow lakes,
the bay is home to tens of thousands of migratory birds every
winter. A flock of small and beautiful Baikal teals wandering
about with the sun in the background creates a beautiful scene,
leaving any onlooker spellbound.
It has been less than three years since the bird sanctuary
came into being. In 1984, the Seosan Reclamation Project was
enacted, which involved the construction of the artificial freshwater lakes Ganwolho and Bunamho. Farmland was formed in
an area that was formerly a mud flat (6,400 ha). Birds usually
migrate with shores, big rivers, lakes, and mountain ranges as
their milestones, and the Cheonsuman area has become an international sanctuary for many bird species thanks to rice fields
that leave grains after winter harvests for birds to feed on.
The construction carried out at Cheonsuman Bay was a
dream of one person. Mr. Chung Ju-yung, founder and late
chairman of the Hyundai Group, dreamed of reclaiming the
land off the curved western coast and making it into a rich paddy field. Although it was generally considered unachievable,
he successfully completed the reclamation project, surprising
the world with the so-called “Chung Ju-yung method.” Waves
were blocked by filling an old oil tanker with water. This method was used at the time of closing out seawater for Ganwolho
Lake.
The farm road, which boasts an area so vast that there is
no end in sight, has now become a popular trekking course and
an excellent bird-watching place. Its field path, which embodies one man’s dream and the marvels of the nature, can be enjoyed with deeper appreciation in autumn when the rice fields
look like a sea of golden waves and in winter when the sky is
dotted with migratory birds.
The Moment
“We should look into the future with
our wildest dreams and positive blueprints.”
Chung Ju-yung, Hyundai Group Founder
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Technology helps create the world that
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our technology is everywhere, improving the quality
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