German firms want to place Korean shipping orders on ice

Feb 10, 2010, 5:04 GMT

Seoul - German shipowners want to delay taking delivery of vessels they have ordered from South Korean shipyards, a German government official said in Seoul on Wednesday.

The owners are also seeking an extension for payment rates already due for the ships, said Hans-Joachim Otto, parliamentary secretary of state in the economics ministry.

Otto told the German Press Agency dpa that the German overtures were linked to the recession in the global shipping market.

Some 195 ships ordered by German firms from South Korean yards are due for delivery in the coming months, most of them container vessels.

These deliveries come at a time when the industry is reeling from the economic downturn and 'ruinously low charter rates,' Otto said.

The minister, who accompanied German President Horst Koehler on a state visit to South Korea, said there was an overcapacity of at least 10 per cent in the shipping market.

He said he had made it clear in his talks in Seoul 'that it was in the interests of both sides to resolve the difficulties in a such a way that South Korean shipbuilders do not see their customers dying off.'

Although the issue involved the companies themselves, the South Korean government was aware of the problem, he said.

If the German government is prepared to put up state guarantees for the shipowners' obligations, then a moratorium was possible, Otto said.

The official said other European countries had given such guarantees and Berlin was looking into whether it should follow suit in order to ensure German firms had the same competitive chances.

Nevertheless, the issue of competition was something the firms had to sort out themselves, said Otto.

At present Hapag Lloyd was negotiating with its South Korean partners about not taking delivery of ships and a delay in repayment rates.

The South Korean government has given the equivalent of 10 billion euros (13.7 billion dollars) in direct assistance for the country's shipbuilder and shipping operators.

Seoul is also ready to do even more in order to maintain its competitive edge as the biggest shipbuilding nation, Otto said, adding he was hopeful wanted to see the issue resolved.

'The are no precise figures, but I have cause to believe there is the necessary flexibility and awareness of the problem on the part of the Korean side,' he added.