Empty shipyard and suicides as 'Hyundai Town' grapples with grim future

[doombolt]

I think the grim reality is that mono-industry towns are not viable in the long run. The world seems to have a large supply of these and their future is never certain.

[WalterBright]

The American west is littered with ghost towns (usually mining towns).

[gaius]

I grew up in a single-company town; 30 years after the factory closed it hasn’t really recovered. Whole families used to work there, occasionally even 3 generations simultaneously! Loads of cases too of a father who worked on the factory floor and their kid was the first graduate in the family and in the graduate programme.

[ebbv]

So what's the solution? If a big company opens a factory in an area, then the hire a bunch of people at that factory, people obviously want to move closer to where work is. It's not like those people can then say "Hey we need another company to open a factory here just in case." Even if there are other jobs created in the town, the loss of hundreds (or thousands) of jobs is always going to be devastating anywhere outside of a big city.

It's easy to say "Oh well those people shouldn't have bet everything on that factory." but that's not realistic or providing any kind of solution.

[phobosdeimos]

Those shipyards used to be in my country until South Korea and other Asian countries took over in the 70s. Succesful countries adapt and survive.I hope the Korean government isn't stupid enough to try to save them. That simply won't work.

[clankfan]

The Korean government is democratically elected as recently noted in the news. Aren't you saying "I hope the Korean people aren't stupid enough to try and save themselves?"

[bane]

I've been to that region of South Korea a few times. The DSME (Daewoo) shipyard is in nearby Geoje-do. It's not far from the Samsung Heavy Industries shipyard. Geoje is home to some incredibly rugged and beautiful coastlines, a small city and other than the two shipyards, not much else except some fishing villages. Together, those three shipyards (including the Hyundai one in Ulsan) used to, and maybe still do, account for the three largest shipyards on the planet.

Gyeongju, another nearby city is mostly known for historical tourism and home to some incredible living UNESCO sites. But not much else since it was the capital of a now defunct nation in the 900s. Busan is the second largest city in South Korea and one of the few cities that made it through the Korean War without being flattened into rubble and who's principal industry is port logistics and fishing -- it's basically Singapore or Hong Kong of South Korea without all the financial business.

Ulsan is very much a company town on who's fate rests Hyundai's successes -- and Hyundai hasn't been killing it recently. The city is also home to the world's largest auto factory and number of other Hyundai conglomerate sites. As Hyundai's fate twists and turns in the global winds, so does the entire city. It doesn't have much to do with the other nearby cities, and it's on the northern edge of an isolated region that's politically aligned with the ruling party, while the rest of the region it and Busan exist within voted for the other guy.

The relationship with China has been rockier than I think anybody has let on to and historic relations with Japan have never been exactly "warm". The recent THAAD anti-missile situation really rattled the Korean-Chinese relationship and between turning the Chinese public away from obviously South Korean goods in bulk numbers, China has also seriously ramped up ship manufacturing and I believe now leads in total tonnage.

In addition, new shipyards are coming online in India and Vietnam putting additional downwards economic pressure on these three shipyards that used to enjoy a near monopoly. Even worse, global shipping hasn't recovered, and movement of energy products (oil and gas) is geographically shifting (less oil needing to move from Saudi to the U.S. for example) so demand for ships is down, AND several large shipping companies went out of business putting more ships up on the secondary market AND it turns out very very very large ships didn't work out as well as was hoped, so orders for that equipment never materialized.

As for the other major business there, Korea's auto manufacturing business has also been consolidating and changing. Hyundai is the major manufacturer, but Hyundai-Kia has moved much of their manufacturing overseas from Korea into the domestic markets they sell into and the rest of the auto industry in Korea is in disarray and succumbing to foreign manufacturers finally clearing various import hurdles and selling in larger and larger numbers. Among the "basically defunct": Daewoo Motors (now GM), Samsung Motors (now majority owned by Renault), SsangYong Motors (now owned by Mahindra). Some of these are still large, but dying giants.

It looks pretty bad to be honest and my guess is that Ulsan may soon turn into South Korea's Detroit.

Here's a pretty good article that outlines some of these problems in terms of raw tonnage https://wolfstreet.com/2018/07/07/big-three-korean-shipbuild...

[jpatokal]

South Korea needs to go upmarket and specialize. Shipyards in Finland and France, the very opposite of low-cost manufacturing destinations, survive because they build things like the world's largest cruise ships now:

https://en.wikipedia.org/wiki/MS_Symphony_of_the_Seas

https://en.wikipedia.org/wiki/MS_Oasis_of_the_Seas

Also, while Busan has a thriving port, having been to all three you'd have to down a few shots of soju and squint pretty hard until it starts looking like Singapore or Hong Kong...

[clankfan]

Thank you so much for this valuable post. Did you mean that China leads the usa in tonnage? And did you mean that large liquid natural gas ships aren't planning out when you said very very large ship orders aren't materializing? Isn't there a large effort underway to put natural gas on ships, therefore undermining Russia's pipelines and also bolstering large ship production?

[Animats]

This could work out. The US Navy needs to expand but the US lacks sufficient shipbuilding capacity.

[gaius]

The US Navy needs to expand but the US lacks sufficient shipbuilding capacity

The UK did this https://www.bbc.co.uk/news/business-17127488

[belorn]

The article doesn't state it, so what does the gender distribution look like for the suicide rates? An age group of 25 to 29 and strongly connected with job loss gives a rather strong hint that the numbers are not evenly spread. If the total number has doubled then I suspect the increase for that gender and age group has increased far more than double.

[forkLding]

Its much harder to compete now, even originally Chinese-based jobs are being outsourced too.

[sn41]

I have heard the phrase that "Africa is China's China". I don't know how much quantitatively, offshoring has happened from China.

[petermcneeley]

He might not have a job now and at 52 maybe never again, but he needs to look at the positive side; likely due to labor offshoring a new Hyndai vehicle might end up being 30% cheaper.

[gaius]

Unlikely; all products are sold at what the market will bear, irrespective of the cost of making them. So in fact Hyundai will be 30% more profitable and the managers who took his job away will get bigger bonuses which will in turn create jobs in the Rolex factory and also with luxury yacht makers, golf courses, and so on

[closeparen]

He likely had the job in the first place because Hyundai exports to foreign markets, like the US.

[aetherson]

And also other, poorer 52 year old men will have jobs.

Which doesn't mean it doesn't suck for him.

[cinquemb]

…that he might actually be able to buy without having a job once korean regulators give the green light for would-be investors to pour their and their friends/families life savings into making unsecured p2p loan platforms popular.

[simula67]

Please do not deploy demagoguery here