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  Korea Report - May 2006
  Author : Hwang & Co     Date : 06-06-14 09:22     Hit : 35133    
Topics.

- Korea¡¯s birth rate dropped to 1.08, the lowest in the world.
-Disgraced scientist Hwang still hold by faithful supporters.
-Chairwoman of main opposition party assaulted during campaign.
-Movement of US base faces confrontation with farmers and activists.
-NK cancelled agreed test run of cross border railway, a day before the trial.
-Export continuously grew despite surging oil price and strong Kwon.
-Prosecution continued its probe on Lone Star and Hyundai Motor.
-Kim Woo-choong, founder of Daewoo group, harshly sentenced.
-Shinsegae took over Wal-Mart Korea.
-KOSPI on roller coaster.
-Korea dominated global shipbuiling sweeping the ranking No.1 through No. 7.
-Family fued between HMM and HHI on the alleged take over deal of HMM.

GOVERNMENT AND SOCIETY

Korea, seventh-largest trading partner of the USA, would be the biggest economy with which Washington has a trade pact since it concluded the North American Free Trade Agreement with Mexico and Canada in 1994. US labor groups agreed to join forces with Korean militant labor group¡¯s rallies in Washington early June against a proposed FTA. Some 60 members of Korea's anti-FTA group will travel to USA to hold protests during June 4-7, with the major concerns that the opening up the farming markets through FTA will severely damage the local agriculture industry. US labor representative is to pay a reciprocal visit to Korea in mid-July when the second round of FTA negotiations are planned to be held in Seoul. Korea considers resuming the import of beef from USA on June 6, after experts from the authority inspect the 37 US meat processing plants during May 6-21. Korea has imposed a ban since 2003, when a case of mad cow disease was reported in USA.

The chairwoman of the country's main opposition Grand National Party has been hospitalized for a week after being slashed across her cheek by an assailant during the local election campaign. Park Geun-hye suffered an 11-centimeter-long cut to her face when she was attacked by a man wielding a box cutter during a campaign rally for her party's Seoul mayoral candidate. It required over 60 stitches and a two-hour operation. The attacker said he assaulted the GNP leader "out of frustration and dissatisfaction with society and democracy." Park, who recently hinted at her bid for presidency, is the eldest daughter of former President Park Chung-hee who was assassinated in 1979. The attack sent shockwaves through the nation about the nationwide local elections less than 10 days away. As the attack on Park tipped the scale over whelmingly in the GNP's favor, a landslide victory was brought to GNP.

Disgraced cloning expert Hwang Woo-suk has been indicted by the prosecution on charges of fraud, embezzlement and breach of a bioethics law in the stem cell fabrication scandal. Concluding a five-month-long investigation, prosecutors confirmed that the former Seoul National University veterinary professor fabricated data for his now discredited research papers that originally claimed to have cloned human stem cells and developed patient-specific stem cell lines. However, it appears that Hwang was also deceived by one of his researchers, who smuggled invitro-fertilized stem cells from a fertility clinic into the lab to make it look like he had succeeded in cultivating the patient-specific stem cells. Apart from the fraud charge related to his stem cell research, the prosecution also accused Hwang of embezzling KW2.8 bil worth of funds provided by state and private organizations and violating the bioethics law by buying eggs for use in his research.
Enthusiastic supporters of disgraced scientist Hwang launched a political group, dubbed "HwangWoo-suk National Solidarity" to nominate candidates for governors and mayors in the nation's 16 provinces and cities for the May 31 elections. Their loyalty to Hwang shows no sign of abating even after the prosecution concluded that Hwang directed the fabrication of his 2 stem-cell papers published in the journal Science and indicted him on a number of charges including fraud.
A couple of faithful Buddists promised to support Scientist Hwang by donation of KW60 bil for his study on the stem cell development, wishing him to continue research to contribute the nation and world to cure the uncurable disease.

The Seoul government has dispatched a 19-strong emergency medical team, including doctors and nurses, to Indonesia to help victims after the  earthquake. It also sent relief goods including medical aid, blankets and food. A magnitude 6.3 quake struck Yogyakarta, on Indonesia's main island of Java, killing at least 3,700 people and wounded thousands of others in the country's worst disaster since the 2004 tsunami.

It will be easier for ethnic Koreans from July to enter the country and get jobs, as the government seeks to relax rules on visas and employment for them, as a part of its policy to embrace foreigners of Korean heritage while meeting a labor shortage in small companies. They will be also permitted to stay here for 3 years. The government is also moving to ease restrictions on the employment of ethnic Koreans, even though it will continue to limit the number based on a quota system. If the new visa system is implemented, firms can freely hire a pre-set number of ethic Koreans. Ethnic Koreans who do not have any relatives in Korea will also be eligible for the new visa.

US Super Bowl MVP Hines Ward, a Korean American football player, came to Korea to create a foundation to support multiracial children, as he promised during his first trip last month. Hines Ward and Pearl S. Buck International agreed to launch a joint foundation to support mixed heritage youths in Korea. They agreed to set up a $2.2 mil foundation for underprivileged children. Ward donated $1 mil and pledged $1.2 mil he raised from Korean companies for the Hines Ward Helping Hand Korea Foundation.

The nation's birthrate has fallen to a record low as married couples try to Avoid pregnancy due to mounting childcare costs and other financial burdens. The total fertility rate tumbled to 1.08 last year, down from the previous lowest of 1.16 recorded in 2004. Korea's birthrate falls far behind those of other advanced economies, such as USA with 2.05, France with 1.9 and Italy with 1.33. Even Japan, the world's most aged society, has a higher birthrate than Korea with 1.29. The birthrate has been consistently declining over the past few decades from 4.53 in 1970. With no substantial pickup in the birthrate over the short term, the aged population over 65 is estimated to make up 20% of the population by 2026.

World Health Organization chief Lee Jong-wook died suddenly after weekend emergency brain surgery. President Roh paid tribute and sent a message of deep condolences to the bereaved family. He was praised by with international society for his life-time contribution to improve public health, especially in poor nations. Lee was elected to lead the WHO in 2003 for a five-year term.

The number of school children in Korea who went abroad for study hit a record high of 7,001 last year, up 15% on year. Meanwhile, the nation's competitiveness in the education sector fell to 42nd place from 40th last year, mainly due to the lower expenditure spent on public education compared to other OECD member countries.

NORTH KOREA AND NATIONAL DEFENSE

USA indicated to consider peace treaty talks with NK if it returns to 6 nation negotiations aimed at ending its nuclear weapons program. NK has long demanded a peace treaty with USA to replace a cease-fire negotiated with the US-led UN command, which fought to defend S Korea in the 1950-53 Korean War.
The US government has increased pressure on NK by imposing a ban on American banks from dealing with one of Pyongyang's key banking partners in Macau, and for the first time accepting 6 NKorean defectors. NK has remained adamant in its refusal to open the next round of the multilateral nuclear talks since last Nov.

The government deployed about 15,000 riot police and soldiers and 700 security workers to the farmland near Camp Humphreys, a US military base in Pyeongtaek, a city just 70 kilometers from Seoul, to enforce a delayed land expropriation for the expansion of the US base to triple in size by 2008. While riot police evicted the protesters, engineering soldiers set up a barbed wire fence around the land designated for the US base's expansion. The US military plans to relocate its Yongsan Garrison in downtown Seoul and the 2nd Infantry Division near the border with NK to the region. Camp Humphreys will become the prime site of the US forces in Korea. In return for providing the almost 3,000 acres of Pyeongtaek land, Korea will be reciprocated with more than 40,000 acres of land that currently houses Yongsan Garrison and the 2nd Infantry Division near the border with NK. For the relocation is delayed, government could lose up to KW100 bil every year. During 2 violent clashes, 640 demonstrators were detained and 16 of them were arrested. The protesters, consists of activists,labor unionists, students and farmers, demanded cancellation of the U.S. base's expansion and the release of  arrested activists.

The first ever acceptance by USA of 6 NKorean defectors as refugees is widely seen as a Washington¡¯s gesture to ramp up the pressure on NK over its human rights abuses. In a similar case, on April 27, Los Angeles immigration office accepted Suh Jae-seok as a political refugee. Suh had defected to SKorea in 1999, when US authorities rejected Suh's case, explaining that the NKorean Human Rights Act applied only to defectors directly from NK and China. President George W. Bush signaled more proactive position by meeting NKorean defectors and families of Japanese abductees by NK last month. In Oct 2004, Congress passed the NKorean Human Rights Act into legislation, providing wider latitude for NKorean refugees to settle in USA.
A senior NKorean scientist has fled the country and is seeking asylum in SKorea. He could be the highest ranking scientist ever to defect from North to South. He was known not to be engaged in nuclear research, but senior enough to know the status of NKorea's nuclear weapons program. More than 8,200 NKoreans have defected to the South since the end of 1950-53 Korean War.

Korean troops in Iraq, the third largest foreign contingent in Iraq after USA and Britain, is to reduce its troop from the current 3,200 to 2,200 by the end of this year. Since their dispatch in August 2004, the Korean troops have paved roads, built schools, health centers and water supply facilities, treated more than 30,000 patients and provided vocational training for young Kurds. Its accomplishments have reportedly attracted the favor of local residents as well as the attention of other coalition forces.

Koreans residents in Japan loyal to the North and the South a held their first meeting since they were forced to take sides afer World War II and nnounced they would work to reconcile, reflecting reunification efforts on the Korean Peninsula. Some 700,000 Koreans live in Japan, and are mostly descendants of people who immigated or were enslaved during Japan¡¯s 1910-1945 occupation of the Korean peninsula. The 2 groups are to start reconciliatory event, such as jointly celebrting the independence of Koreans from Japanese colonial rule on Aug 15.

NK cancelled the 2 Koreas' plan to test run the cross-border railways  just a day before the locomotives were set to roll out with ground breaking ceremonies, saying that it would not be able to go ahead with the test run of the railways, citing the absence of military guarantees and unstable situation in the South. SKorean Unification Ministry strongly lambasted NK for canceling the epochal event at the last minute without justifiable reasons. The communist state's military has been hesitant in giving security guarantees for such events for fear of exposing its facilities around the highly sensitive border. South and North Korea agreed earlier this month to test run 2 cross-border railways that run on the east and west sides of the Korean Peninsula, signaling that more inter-Korean exchanges would come. Seoul hinted that SKorea may suspend planned aid to NK because of its abrupt cancellation.

The Air Force submitted a petition to the government seeking arbitration in the dispute over Lotte Group's plan to build the 112-story, 555-meter-high structure in Jamsil in southeastern Seoul. The military has long demanded the group reduce the height of the building for safety reasons, but the Seoul Metropolitan Government went ahead and approved the plan in March. The Air Force claim the planned building has raised concerns for the safety of aircraft landing at the nearby Seongnam air force terminal. The military maintains the height of the planned building should be less than 203 meters to prevent possible accidents.

The Korean Peninsula Energy Development Organization announced the termination of the light-water reactor project in NK. SKorea, USA, Japan and EU created KEDO in 1994 following an agreement between Washington and Pyongyang to build a reactor in return for NK's suspension of any nuclear activities. The construction began in Aug 1997, but was halted in 2002 when USA accused NK of a clandestine nuclear weapons program using uranium which can be extracted from reactor. All the materials that were being built outside NK for the reactor will be handed over to SKorea's Korea Electric Power Corporation, the main contractor for the project.

ECONOMY AND POLICY

The government hopes to achieve a 5% GDP growth this year backed by strong exports and private spending. OECD raised its prediction of Korea¡¯s GDP growth rate this year from 5.1% to 5.2%, attributing the recovery on investment and favorable growth of exports. Samsung Economic Research Institute lowered Korea¡¯s economic growth rate to 4% from its previous 4.5% for second half, maintaining 4.8% for a whole year, citing high oil prices and strong KWon.

Korea's exports grew 21.1% on year in May, the largest gain in 18 months despite the high oil prices and a strong KWon. Exports totaled $28 bil, helped by robust demand for auto parts, liquid crystal display screens and chips in such major overseas markets as China and USA. Asia¡¯s third-largest economy has achieved double-digit growth for the fourth straight month since Jan.
Korea recorded a $735 mil trade surplus with USA in March, compared to $1.19 bil in Feb and $1.35 bil in March 2005. The country's service trade deficit in March amounted to $1.54 bil due to a drop in surplus of transport services and a rise in overseas travel spending and overseas study. It was widened from the $1.17 bil in March 2005. The exports of services climbed 11.8% to total $4.36 bil from a year ago, while imports rose 16.4% to total $5.91 bil.
The country's industrial output shrank 1.5% in April from a month ago as several major industries saw their sales decline due to high oil prices and strong KWon. The sales in car and mobile phone dragged down the total industrial production of Asia's third largest economy.

The nation's current account deficit in April exceeded $1.5 bil, the largest since the 1997-98 financial crisis, casting doubts on solid growth on the trade front. The deficit followed a shortfall of $426.8 mil in Feb and $782.8 mil in March and $994 mil a year earlier. BOK say the shortfalls are only a temporary phenomenon considering the fact that dividend payments to offshore investors surge in March and April.

Koreans' overseas spending on credit cards surpassed $1 bil to $1.05 bil in the first quarter, 32.4% up on year, as KWon's appreciation against USDollar boosted purchasing power of those who traveled abroad. The quarterly spending was the ninth consecutive increase since the first quarter of 2004.

Finance Ministry seek to raise the ceiling on bond issuance to stabilize the foreign exchange market. The ministry believes that Korea is less vulnerable to currency fluctuations than before and KWon/USDollar rate has already hit bottom. This year, the government plans to sell KW11 tril of foreign exchange stabilization fund bonds and issue KW10 tril of the bonds in 2007 and KW8 tril in 2008. The KWon's ascent against USDollar can offset rising oil prices and that should help the nation achieve a growth rate of 5%, it predicted, while they make export goods less competaetive.
As part of efforts to stabilize fluctuations in the local currency and establish an efficient foreign exchange market, the Finance Ministry is to advance its foreign exchange deregulation scheme by 2 years to 2009. The rescheduled plan includes raising the limit on local currency lending to foreigners to KW10 bil from KW1 bil this year, aiming to boost demand for the local currency in the market. To make better use of the country's huge foreign exchange reserves of $200 billion, the ministry plans to soften the rules allowing local investors and corporations to invest up to $1 mil for the purchase of real estate abroad. Korea also plans to allow domestic banks and other finance firms to half of their net assets in foreign currencies from the current 30%.

Local commercial lenders posted a combined net profit of KW3.51 tril in the first quarter this year, up 26.5% on year and 13.2% up from the previous quarter. The nation's commercial banks also set aside less for the bad loans, KW516 bil in the first quarter from KW1.1 tril a year ago.

The prosecution detained the president of Lone Star Advisors Korea, on charges of embezzlement and misappropriation of funds, saying that the detention will be a starting point for commencing a full fledged investigation into suspicions surrounding the sale process of Korea Exchange Bank. Lone Star Funds is under investigation over allegations of evading taxes, illegally transferring $8.6 mil overseas and irregularities in its acquisition of the KEB. The probe has intensified because the US private equity fund is trying to cash out by selling its controlling stake in KEB, which it bought from majority shareholders at a fire-sale price in 2003.
The board of Kookmin Bank, Korea¡¯s largest lender, has approved the takeover of a controlling stake in KEB for KW6.3 tril from Lone Star Funds. The payment will be deferred until prosecutors and the nation¡¯s top auditor complete investigations into Lone Star¡¯s 2003 purchase of KEB and regulators approve Kookmin¡¯s acquistion.
In another case, Lone Star Funds will have to fork over up to KW25.2 bil in taxes for its acquisition of the Star Tower building following a government ruling that Lone Star failed to pay taxes in full when it acquired Star Tower for investment purposes. In 2004, it sold the building to the Government of Singapore Investment Corp that is also recently levied with a multi-billion won tax bill for using front companies to purchase the building. The ministry ruling reflects 20% additional tax plus the registration taxes the fund should have paid. Lone Star claims it was protected by a tax treaty between Korea and Belgium from where it controlled the investment.

Dubai crude oil prices soared to a record high of $68.33 per barrel this month, due to geo-political situation in Iran, explosion of the pipelines in Nigeria and the possible terrorism in Saudi¡¯s oil production facilities.  The soaring price of crude oil drove the average retail cost of gasoline to KW1,543.49 per liter, a record high, topping the previous record set 8 months ago after the hurricane Katrina shut down several US refineries. The price of diesel also jumped some 20% to KW1,253.07.
About 60% of Korean companies might consider suspending operations temporarily should the oil price top $80 per barrel. Even though Korean firms benefited from the rising KWon against USDollar when it comes to the import of raw material prices, the average cost still rose by 6.5% in the first fourth months of this year.

CHAEBOL

The Fair Trade Commission is scrutinizing the operations of about 10 major local conglomerates, namely Samsung, HMC, SK, LG, Lotte, POSCO, KT, GS, Hanjin, and HHI, in an effort to eradicate the deep-rooted practice of illegal business transactions among their affiliates. A local civic group lodged a complaint against HMC Group and other leading industrial groups last month, claiming that they have been abusing inter-affiliate deals to facilitate a father to son succession, and create slush funds.

Samsung Electronics (SEC), the world¡¯s third-largest handset maker,  has developed a new mobile phone, which it claims is the slimmest in the world. The SGH-X820 model with a width of 6.9 millimeters, is equipped with a 2 megapixel camera, an mp3 player and a video-recording capability.
SEC¡¯s Mobile phones and HD TV were selected as the best brand in USA for 5 consecutive years, ahead of Black Berry, Motorola, Sony and Toshiba.
Samsung Engineering won the TASNEE Petrochemicals project worth $860 mil from Saudi authority. The plant will produce annually 1.0 mil tons of ethylene and 300,000 tons of propylene when it is completed in Nov 2008.

The Fair Trade Commission launched an investigation over Hyundai Motor (HMC) and its affiliate Kia Motors for its allegedly twisting the arms of their smaller parts suppliers to cut delivery prices. They investigated also other car makers including GM Daewoo, Ssangyong Motor and Renault Samsung Motors, some of whom are accused to abuse their power as habitually pressed auto parts suppliers into cutting prices.

HMC Group is facing increasingly difficulties to make strategic decisions, after the prosecutors indicted Chairman Chung, 68, on charges of misappropriating KW103 bil, causing over KW400 bil worth of damage to HMC and affiliates through breach of trust. With its charismatic commander absent, most of the major projects including overseas plants and the development of new models have ground to a halt. The chairman's absence has also left the Group unable to cope with the dilemmas over pricing it faces in the US market due to the continuing strength of KWon. The credibility of the company is also at stake, amid fears that a prolonged management vacuum might hurt its key business deals. HMC Group is to delay the rollout of mass-produced hybrid cars, originally planned at the end of this year, by 3 years to 2009. Kia Motor postponed a scheduled April 25 ground breaking of its factory in West Point, Georgia.
The head of a state-run agricultural cooperative federation, the nation's largest farmer's organization, has been detained in connection with the accepting millions of won from Hyundai in 2001 in return for helping arrange a below market price for the purchase of the group's 21-story building in Yangjae-dong in Seoul. The prosecution suspects that HMC used part of its secret slush fund, worth tens of billions of won, to bribe Seoul city government officials to win approval to expand Hyundai's research and development center in Yangjae-dong, where Seoul city had earlier prohibited any new construction work. The body of a former director-general of the housing division at Seoul City was found dead in a lake, in an apparent suicide, after he was questioned by the prosecution in connection with a corruption scandal at HMC Group.
To minimize the fallout, Hyundai's overseas employees started a petition to support Chung, from 11 countries including USA, China, Turky, Africa, Middle East and India.
HMC posted its first-quarter net income of KW318.8 bil, down 38%, and operating profit of KW335.3 bil, slipped 4.9% on year, hurt by the rising costs linked to the strong KWon.

The Seoul Central District Court sentenced Kim Woo-choong, 69, the founder of the now-defunct Daewoo Group, to 10 years in prison and a KW21 tril fine over charges of accounting fraud and embezzlement of company funds. Prosecutors previously sought a 15-year prison sentence and a KW23.35 tril fine for Kim, asserting he was responsible for the collapse of the conglomerate in 1999, which also severely damaged the nation's economy, forcing the taxpayers to spend KW30 tril to save Daewoo group companies.

Hyundai Construction won the deals worth a total of $279 mil to build 3 power transmission lines and a transformer substation in Saudi Arabia. Under the contracts with Saudi Electricity Co, Hyundai will build power lines stretching 450 kilometers by July 2008 and a substation by Aug 2009, expecting to receive another power transmission line order worth $30 mil in Kuwait, and a large-scale construction order in Libya.
Hyundai Construction plans to issue $100 mil bonds on 3 years maturity with Libo + 0.6bp by June 27, for the capital to carry out Mid East project.
Korea Exchange Bank, Main creditor of Hyundai Construction completed the refinancing procedure, letting the company graduate from the Workout program in 62 months.

Korea¡¯s listed companies saw their earnings deteriorated as a result of KWon¡¯s ascent in the first quarter. The combined net profit of 552 listed companies reached KW12.3 tril, down 5.2% on quarter. Their combined operating income declined 8.3% to KW12.5 tril, while sales climbed 6.5% to KW163.4 tril.
The recurring profit ratio of the 4,738 companies to their total sales came to 6.2% last year, down 0.8% on year. It was the first time that local companies posted a drop in their recurring profit ratio since the 1997-98 financial crisis.

Shinsegae, the country's third-ranked department store operator,  agreed to buy Wal-Mart Korea for KW825 bil, solidifying its leading position in discount retailing with the addition of Wal-Mart's 16 stores, raising its total number of outlets to 95 nationwide and 102 including the 7 E-Mart stores in China. Wal-Mart's move follows the decision of Carrefour SA to exit Korean economy, because of underperformance stemming from the failure to win the hearts of local consumers. Shinsegae plans to have a total of 150 stores by 2010, with 30 outlets in China. Second-ranked Samsung Tesco aims to expand to 102 outlets by 2009 from the current 43, and third-ranked Lotte Mart aims to have a total of 100 stores by 2010.

The nation's top refiner SK Corp is seeking to buy several coal mines in China's northwestern provinces, hoping 2-3 mines to be under its management by next year. SK also plans to double its Chinese operations over the next 5 years by further localizing its oil and petrochemical businesses. SKC is aiming for KW5 tril in revenue from China in 2010 from KW2.3 tril in 2005, saying that "Since the Korean market is nearly saturated, we have no choice but to advance into China." SK took over Korea's fourth largest local refiner, Inchon Oil Refinery, last year and plans to ship the entire output from the acquired plant to the energy-guzzling Chinese economy.

Micro Soft decided to invest $30 mil into Innovation Centre which was established last year in Korea in addition to its initial capital of $30 mil. The investment will make the firm enable to support about 60 companies, including Home Net Work, Digital Contents and Telematics.
E1, ex LG-Caltex Gas, LPG trader, concluded the contract to acquire Kukje Corp for KW855 bil, aiming to establish nationwide logistic network.

MONETARY AND ECONOMIC INDICES

KOSPI again was on the roller coaster through out the month. It started at 1434, soared to 1464, the highest in the Korean bourse history, then continued to slip below 1300 to 1295, the lowest since last Nov on foreigners¡¯ continuous selling and ended the month at 1323.
The exchange rate of Kwon against USDollar has been comparatively stable. It started at 940, fallen to 929, the lowest point since Oct 1997, then kept the level of 950 to end the month at 945.
Korea¡¯s forex reserve marked $224.69 bil as end of May, increased by $1.8 bil from the end of April.
BOK froze the bench mark interest rate at 4.0% for 3 months, increasing the gap with US Federal Reserve¡¯s rate to 1%. The yield on 3 years corporate bond kept in the box of 4.99-5.09% through the month.    Korea¡¯s jobless rate remained unchanged in April from a month ago at 3.5%.

SHIPBUILDING AND SHIPPING

Korean shipyards dominated global shipbuilding industry, being ranked No.1 through No.7 in terms of order backlogs as of end of April, namely HHI with 11.44 mil CGT, SHI 8.34 mil, DSME 7.63 mil, HMD  4.24 mil, Samho 2.99 mil, STX 2.39 mil and Hanjin 2.12 mil CGT.
Namura was reported to signed the contract for 2 x 300K VLCC, first VLCC in its yard for $98m, against a current Korean price of around $120-125 m and $100-105 mil in China. There may be its own reason, but it will be interesting to watch the development of the price movement in coming months.
HHI¡¯s sales for the first quarter were up over 18% on year to KW 2.85 tril, with the net profit at KW22.9 bil, from KW88.9 bil loss in the first 3 months of 2005, as ships now being turned out were ordered at considerably higher prices. SHI also posted net profit for the first quarter at KW15.3 bil, compared to a loss of KW4.5 bil a year ago, on the revenues of KW1.47 tril, up from KW1.26 tril in last year. On the contrary, DSME widened net loss at KW45.04 bil, a drop of almost 44% from the loss of KW31.38 bil last year, as vessels ordered from 2003 are still delivered with rising steel prices, currency fluctuations and increasing labour costs. Sales was KW1.184 tril, up 14% on year.

HHI won the project from Petredec for 22.5K LPG-carrier, Zodiac 4 x 8600 teu container and Solvang 1 x 75K cbm VLGC. HMD secured order from Grieg Shipping for 4+2 x 49K pc.
DSME received order from Exmar for further 2 x 159K LNG-RV and Gulf Marine 2 x 83K cbm VLGC. SHI contracted with Ferncliff Drilling of Norway for the world¡¯s largest drillship, Stena Drilling a drillship and Thomas Schulte 4 x 4250 teu container carrier.
Hanjin got the order from NSC Schiffahstgesellschaft for 4 x 4,300 teu and Maersk 4 x 3100 teu container vessel.
STX promoted Chung Guang-suk to president CEO of the yard, and newly appointed Kim Kang-soo, ex COO of DSME, as president of STX Corporation.  STX secured order from MISC Berhard for 4 x 38K pc and Prisco 2 x 52K pc.
SPP won the order from Transmed Shipping for 9 x MR pc and Hellenic Star Shipping 2+2 x 50K pc. Sungdong started to build the bigger ship by agreeing with Enterprise to construct 8 x 172K bulker. 21st Century got Eitzen for 4 x 13K chemical tanker, and Nokbong with Donglim Shipping for 1 x 8K chemical carrier.

A power struggle among Hyundai Group companies has ended up  adding substantial wealth to already wealthy shipping tycoon John Fredriksen, who walked away from his investment in HMM roughly $100m profit after HHI bought out his stake in HMM.
HHI claims that it bought the shares to prevent hostile takeover by Fredeiriksen, but with no prior notice to HMM, who has been desperate to defend its management from possible hostile M&A by Frederiksen. Hyundai Group requested HHI to sell 10% out of 26.68% to them, otherwise, HMM declared it would be HHI¡¯s hostile takeover attempt.
HMM sold its 30 mil new shares against a possible takeover threats from HHI. A fifth of new shares will be distributed to employees who have cleared entire shares allocated for them at the price lower-than-expected KW14,000 per share. HMM¡¯s friendly stake thus gained 4.6%, help HMM defend its management control. HMM¡¯s friendly shareholders  account for 34.74% - including Hyundai Elevator¡¯s 17.16%, Hong Kong-based Cape Fortune 10%, Hyun Chung-eun and members of her family 3.69% and its employees 3.89%. Possible threats counts 32.94%, including HHI¡¯s 26.68% and KCC¡¯s 3.89%. HHI plans to hold a board  meeting after June 9 to decide whether it will take part in HMM's new share offering. If HHI does not buy new shares, its stake will be lowered to 20.67%.

Korea Line Corp placed order with Namura Shipyard for 2 x 105.5K tanker, exploring a new field of business line. KLC posted the sale of KW272.5 bil, down 4.38% on year, with net profit of KW41.5 bil, down 27.69% in first quarter.
Norway¡¯s Skagen Funds has taken a 5.2% stake in Korea Line, where  Golar LNG already held 21.09%. Since Skagen Funds is considered as ¡±an affiliate¡± of Golar LNG, the combined stake held by Fredriksen becomes more substantial to 26.29%. KLC secured its friendly shares account for nearly 40%, including 31.66% owned by the controlling shareholder and 7.56% held by DSME. Frederiksen Group also hold a significant amount of shares in several domestic shippers 6.44% stake in Hanjin and 6.67% in Heung-A Shipping. Foreign ownership in Hanjin Shipping rose rapidly from 13% in 2002 to more than 33%. Hyundai Group has criticized HHI for paying excessive premium to the Norwegian investors, giving them too much spare cash.