The second part of the lecture took place at Busan, the birthplace of Korea’s shipbuilding industry, and touched upon the specific capabilities of the country’s shipbuilding sector with special focus on the DSME shipyards.
Daewoo Shipbuilding and Marine Engineering Corporation (DSME) is a key player in the Korean shipbuilding industry. It is one of the oldest and most technologically advanced shipyards in Korea with proven technical expertise in the manufacture of LNG (Liquefied Natural Gas) carrier ships. The session held at DSME by Odin Kwon, VP Design at DSME, highlighted the key capabilities of the industrial major as well as the competitive advantages it has to offer.
Innovations in design and manufacturing technologies have spurred DSME to engineer specific components, such as the hull and propellers, to yield a significantly better performance with higher speeds. The fact that gas supply to the east coast of the US during Hurricane Katrina was routed through a DSME-built LNG carrier stationed in the rough waters is a testament to the stability of its vessels.
Sea storage
Another exciting development is the increasing popularity of FSRU or floating, storage and regasification units. While an LNG storage facility on land requires significant capital investment and can take up to six years to build, an FSRU in the sea could be made operational in 32 months. Further, they can be mobilised as and when needed.
The crown jewel of DSME’s order books is the NO96 design-based Yamal Arc 7 ice-breaker LNG carriers designed to break through the Arctic ice sheets (in Russia) and transport LNG to China, Japan, South Korea and even India, if required. DSME is currently building 15 such carriers. The design involves a unique amalgamation of the ice-breaker design with that of an LNG carrier; and the DSME has been the first to achieve this successfully.
Given the low demand for commercial ships in India and a near negligible demand for LNG carriers, DSME doesn’t have many orders from Indian industry. The last order for the supply of ships was in 2005, from the Shipping Corporation of India. There is clearly much to be achieved in terms of mutual partnership.
KRX Derivatives Market
When in Busan, we also visited the Korean Stock Exchange (KRX) headquarters. Though the KRX is headquartered in Seoul, the derivatives trading is carried out in Busan.
Derivative trade involves the usual items such as gold, silver and some unusual commodities, such as petroleum, and even carbon emission trading. The emissions market is expected to gather pace in five to ten years as emission norms become stricter. A total of 31 products are on offer and account for 50 per cent of the KRX’ revenue.
The key success factors in any derivatives market involve volatility, access, liquidity and reliability. The KRX has succeeded in establishing its presence based on these four pillars. It is one of the most volatile exchanges in the world with more than 50 per cent of trading volumes coming from foreign investments. Further, it employs extra safeguards for investor protection as well as monitoring prices. The KRX recently entered into talks with India’s National Stock Exchange and intends to list some of its products there.
Fun activities
During our trip, we also visited the Haeundae Beach and the adjoining Busan aquarium. After a literal ‘international immersion’, we got some time off after a day full of techno-management lectures. The visit lasted for a few of hours and we returned to Seoul at the end of the day.