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  Korea Report - October 2006
  Author : Hwang & Co     Date : 06-11-10 08:55     Hit : 40286    
Topics.
-Foreign Minister Ban Ki-moon was nominated as UN Secretary General.
-Muhammad Yunus awarded 2006 Seoul Peace Prize.
-Ruling Uri Party defeated in 3 consecutive by-election.
-NK declared its successful nuclear test. SKorea reconsiders its lenient policies towards NK. UN Security Council impose sanction on NK.
-SKorea and USA agreed to transfer wartime operational control to Korea during 2009-2012.
-Current account swung to a surplus in Sept.
-Hyundai Steel started its first blast furnace, challenging dominance of POSCO.
-HMC¡¯s profit tumbled in third quarter.
-KWon dropped below 945 against USDollar and broke 1:8 against JYen.
-Korean shipyard expect to win the order more than $40 bil this year.
-HHI starts to build VLGC on land.
-SHI contracted a drill ship worth $615 m, the single most expensive NB.
-John Frederiksen took 5.1% stake in STX yard.
-Frederiksen sold its 8.7% stake in Hanjin Shipping to Semi Ofer.

GOVERNMENT AND SOCIETY

The 192-member UN General Assembly nominated Korean Foreign Minister Ban Ki-moon as the successor to UN Secretary-General Kofi Annan whose 10 years term will expire on Dec 31. Ban was born to a farming family in 1944, joined foreign ministry in 1970 straight after he took a master's degree in public administration at Harvard University. He has held a number of posts, and was appointed foreign minister in Jan 2004. The most popular expressions used for him by the Korean media are "soft but strong," "approachable but charismatic," and "flexible but decisive."
 
President Roh Moo-hyun's most trusted point man on NK, Unification Minister Lee Jong-seok, resigned, bringing about a complete change in the foreign policy and security lineup, following the resignations of the foreign and the defense ministers. Foreign Minister Ban is moving to New York to be the next UN secretary-general, the Defense Minister and the head of the National Intelligence Service were stepped down. The government has been severely criticized for its policy of engagement towards the North after the communist regime's nuclear test on Oct 9.

An alliance between the ruling Uri Party and another political grouping may come sooner than expected, as Uri badly defeated in parliamentary and local by-elections on Oct 25. The Uri Party failed to win a single seat out of 9, 2 vacant seats in the National Assembly and 7 posts in local administration and councils, following its defeats in 3 consecutive by-elections since 2004. The main opposition Grand National Party scooped up 4 major seats. The GNP has 2 popular presidential hopefuls, former Seoul City Mayor Lee Myung-bak and former GNP Chairwoman Park Geun-hye, while Uri is desperately seeking a competent candidate for the election. President Roh and his party have suffered plunging popularity ratings at the 10% range amid public discontent over the government's economic policies and reform initiatives.

Muhammad Yunus, Bangladesh, 66, was awarded the 2006 Seoul Peace Prize, for his creation of the Grameen project in 1976, a program that lends money to anyone, focusing on the poor, to eradicate poverty through micro credit lending. The system grants small unsecured loans, as little as $100, to unemployed or underprivileged people and women to become more economically independent. The biennial award, which was established in 1990 after the successful Seoul Olympic, is presented to an individual or organization that makes a significant contribution in creating international peace and harmony. Yunus and his Grameen Bank micro credit system were also honored with the 2006 Nobel Peace Prize, after he received Seoul Prize. Previous recipients of the Seoul Peace Prize include UN Secretary-General Kofi Annan and former Czech Republic President Vaclav Hovel.
 
Korea received its first shipment of 9 tons of US beef imports from a Kansas-based slaughter house, after lifting a nearly three-year ban on Sept 8. Korea, once the world's third-largest importer of American beef, imposed the ban in Dec 2003 after a case of mad cow disease was confirmed in USA. Seoul decided to resume imports after all affected US meat-processing facilities met the Korean government's safety standards. Since major retailers are not racing to get a hold of the beef, the meat is expected to be sold initially at restaurants and neighborhood meat shops.
 
French police in France have arrested a French couple, Jean-Louis Courjault, 40, and his 39-year-old wife Veronique after positively identifying them as the parents of 2 baby boys found dead in the freezer of their home in southern Seoul in July, by contesting the results of DNA tests conducted by Korean authority. A summons was issued by the Korean government last month, asking the French authorities to return the couple to Korea, but was refused. A French criminal act states that the murderer of a victim younger than 15 years old can be sentenced up to 30 years in jail or receive a life sentence. The freezer babies case first broke on July 23 when Jean-Louis Courjault reported to the police in Seoul that he had discovered 2 infants in the freezer of his house in southern Seoul. Veronique Courjault confessed that she killed a total of 3 babies, a baby by burning it to death before coming to Korea in 2002 and strangled the 2 babies until they died. However, she remained consistent in saying that her husband was in no way involved. French police arrested.

The number of foreign students studying in Korea has risen to 32,557 in 2006, up a 45% on year, attributing the increase to a growing international interest in Korean pop culture, "hallyu", and the economic competitiveness of the nation. Foreign students are now staying in Korea longer and 69.5% are studying for degrees at Korean universities. 89% of the students were from China and other Asian countries, while 5% were from North America. About 80% were studying in Korea at their own expense and 12% were invited by local colleges.
Korea is rapidly moving toward an ¡°aged society¡± with the percentage of people aged 65 years or more expected to reach 9.5% this year and is expected to become an aged society in 2018 with the ratio topping 14%.
Cremations outnumbered burials last year for the first time. The cremation ratio hit 52.6% in 2005, expecting to exceed 70% by 2010, and marking a more than fivefold increase since 1970, when cremation was used in only 10.7% of funerals.

NORTH KOREA AND NATIONAL DEFENSE

NK declared its successful conduct of a nuclear test. The underground nuclear test is considered a highly symbolic for NK to celebrate the ninth anniversary of Kim Jong-il's inauguration and the 61st anniversary of the launch of the Korean Workers' Party. NK has become the ninth country presumed to possess nuclear weapons, overturning the 1992 Denuclearization Declaration which both Koreas agreed to.
SKorea's seismological institute estimated that the magnitude of the explosion was equivalent to 800 tons of TNT with the record of a 3.58-magnitude tremor from NK. France's Atomic Energy Commission made a similar estimate, saying NKorean blast was around 1 kiloton or less, suggesting that the weak explosion could be due to a failure in the test. Russian Defense Minister said the explosion was equivalent to 5-15 kilotons of TNT, expressing "no doubt" that NK detonated a nuclear test. A US intelligence official questioned whether the blast was in fact a nuclear explosion, as a successful nuclear test is ranged between 10-60 kilotons.
SKorean military estimates that NK possesses up to 50 kg of weapons-grade plutonium, enough to make upto 7 nuclear weapons, assessing the North is now studying ways to reduce the size of its nuclear warheads so they can be deployed on ballistic missiles. They believed NK to have 1-2 devices using plutonium which had been extracted in the early 1990s.
UN Security Council voted unanimously to impose sanctions on NK including ship searches for banned weapons, calling Pyongyang's claimed nuclear test "a clear threat to international peace and security." The resolution approved the demands that NK abandons its nuclear weapons program immediately. It also orders nations to freeze assets of people or businesses connected to these programs, and ban the individuals from traveling. The resolution calls on all countries to inspect cargo leaving and arriving in NK to prevent any illegal trafficking in unconventional weapons or ballistic missiles. NK's UN Ambassador walked out and countered by blaming America's "threat, sanctions and pressure" had forced NK to "prove its possession of nukes to protect its sovereignty and right to existence from the daily increasing danger of war from USA."
Seoul started to reconsider its lenient policies toward Pyongyang, as the nuclear test is seen as a betrayal of its tolerant policy which included efforts to revive the paralyzed six-party talks, humanitarian assistance, and investments in the Mt Geumgang tour resort and Gaeseong industrial complex. SKorean government suspended a shipment of flood aid to the North. The joint business ventures in Mt Geumgang and Gaeseong, along with the family reunion program, which has joined many lost family members together, are likely to be affected. Authorities in Seoul and Gyeonggi Province took the initiative in ending aid and cooperation projects with NK. The Seoul city has accumulated a budget of KW20 bil since 2004 for cooperation with NK. Gyeonggi Province decided not to go forward with the modernization project of NK's rural regions, such as repaving roads, and constructing rice-polishing mills and new schools by 2008. Busan Metropolitan City also decided to indefinitely defer the establishment of an agreement on the cooperation on many issues. Jeju Province expects to discontinue shipping 10,000 tons worth of mandarins, along with other goods and medicine, totaling KW10 bil to NK.
Korean government has welcomed the UN's latest resolution. SKorea has been working with China and Russia for the UN resolution to exclude military measures that could prompt an outbreak of hostilities on the Korean peninsula. The USA led Proliferation Security Initiative became a key issue for SKorea. PSI is conceived by Washington in 2003 to build an international network of forces to monitor NKorean ships and aircrafts, with authority to intercept and inspect suspicious cargoes. The initiative is supported by about 70 countries. USA urged SKorea's full participation in the PSI, while SKorea and China have remained hesitant to join the move due to concerns that any attempt to intercept NKorean vessel could lead to a physical skirmish.
US ambassador to SKorea told reporters that all economic aid programs for NK should be reconsidered, indicating Mt Geumgang tourism and Gaesung Industrial Complex. Hyundai Asan has remitted $451 mil to NK from Mt Geumgang since tours began in late 1998. The Gaeseong industrial park, where thousands of NKoreans work for SKorean firms, earns nearly $700,000 a month from salaries, rent and other sources.
China, Pyongyang's closest ally in the region, strongly demanded NK to undertake its commitments to the non-nuclearization of the Korean Peninsula, and stop all actions that can lead to the deterioration of the situation. President Roh and Chinese leader Hu agreed to work together to peacefully resolve the NKorean nuclear crisis and get the communist regime back to six-party talks. Along with Russia, SKorea and China, 2 countries with the biggest potential sway over NK, have supported stepping up sanctions against Pyongyang, but are against military action on the grounds that it could further upset the North. Last year, trade with SKorea and China accounted for more than two-thirds of the NKorean economy. China also ranked as Pyongyang's largest aid donor and trade partner. Customs inspectors in China were examining cargo trucks bound for the North more closely after the UNSC approved sanctions on the North. A Chinese bank in the border city of Dandong also stopped traders from remitting money to NK.
Japan decided to close the country's ports to NKorean ships and ban trade with NK in the toughest response yet by any nation. Japan¡¯s cabinet approved the sanctions, which also include a six-month ban on travel to Japan by all NKorean government officials.

SKorea and USA agreed to transfer wartime operational control sometime between 2009 and 2012, from USA to SKorea. A 14-point communique came after the 38th annual Security Consultative Meeting between SKorean Defense Minister and his US counterpart, agreeing to immediately begin work on developing a detailed joint implementation plan within the first half of 2007. GNP opposition members accused the Korea-USA agreement on the transfer of wartime operational control between, as it weakens national security and the nation's alliance with Washington amid heightening threat from NK. In line with the change of command structure, the current Korea-US Combined Forces Command will be dismantled and replaced by a consultative body between 2 separate national commands. The ruling Uri Party hailed it as an opportunity to develop the alliance to a "future-oriented" one.
A senior Pentagon official indicated that USA will have to cut its military capabilities in SKorea if Seoul is not willing to bear more of the cost of keeping US troops on the Korean peninsula. The funding debate has sharpened as Washington and Seoul implement a big change in their 53-year old alliance that will see SKorea recover wartime command of its troops from USA and a downsized US force assume a supporting role in deterring an attack from NK.
 
SKorea has successfully tested its first precision guided cruise missile with a 1,000-km range, even though the missile is still years away from actual deployment. The state-run agency is also developing an upgraded version with a range of more than 1,500 km. SKorea is allowed to develop ballistic missiles with a range of less than 300 kilometers and able to carry a warhead of less than 500 kilograms under a missile control agreement signed in 2001 with USA, but the range limit does not apply to cruise missiles. The Defense Ministry currently plans to produce 100 ship-to-ship cruise missiles by 2010, which will be mounted on patrol combat corvettes and other warships.

ECONOMY AND POLICY

Despite a weaker-than-expected growth in private spending, the economy expanded 0.9% in the third quarter on quarter, fueled by brisk corporate investment and exports. Finance Minister expects that the Korean economy is to grow 5% this year, but the GNI is estimated to be limited to 1.5%, showing that the economy is in a virtual recession by uncertainty deepened by NK nuclear issue. The finance ministry forecasted Korea¡¯s economy will grow 4.6% next year. IMF cut its 2007 growth estimate for Korea to 4.25% from the previous 4.3% made in Sept this year.
 
Korea's exports rose 11.5% in Oct on year to $28.3 bil, despite the loss of a number of production days due to the Chuseok holiday. The exports growth remains steady, attributing the double-digit gain for the ninth straight month to strong demand for key items such as LCDs, ships, computer memory chips, petrochemical products, steel and cars. The exports are projected to increase more than 12.5% this year, surpassing an earlier forecast of 11.8%, or $318 bil. Imports rose 13.6% on year, putting the trade surplus at $2.5 bil in Oct.
Korea's industrial output jumped 16.3% on year and 2.9% on month in Sept on the back of brisk exports and resilient consumer spending. Service output in Korea grew at the fastest pace in 7 months to 6% in Sept on year, after a 4.5% increase in Aug, due to the recovery in wholesale and retail sales which expanded 7.6% on year, far above the less than 4% growth in Aug. The current account swung to a surplus of $1.37 bil in Sept, the biggest surplus in 10 months, a turnaround from a deficit of $630 mil in Aug, due to brisk overseas shipments and a reduction in the service account deficit. The service account deficit in Sept was reduced to $1.66 bil from a record $2.1 bil in Aug.
 
The net profit of Kookmin Bank, the nation's largest lender, has been dropped for the first time in almost 2 years, down 28% to KW678.1 bil in the third quarter, from KW938.6 bil from a year earlier, due to more loan loss provision.
Woori Bank is seeking approval from the Russian regulator to begin operations in Moscow from June next year. Woori will be the only Korean commercial bank operating in Russia after approval. Chohung Bank opened a branch in Feb 1998 but had to shut it down in the wake of the Asian financial crisis. Economic policymakers have urged local financial institutions to shift their attention to overseas markets away from the already saturated home market.
 
Korea¡¯s national wealth, which combines the value of land, homes, office building, financial savings and other assets subject to taxation, has doubled KW5,201 tril as of the end of 2005 since 1997, when the country was hit by an unprecedented financial meltdown. It was KW2,600 tril in 1997.
Individual bankruptcies in Seoul are expected to more than double this year amid an ongoing economic slowdown and relaxation of rules for bankruptcy applications. About 27,300 personal bankruptcy cases were filed during the first 8 months of this year, compared with 17,700 cases recorded for the whole of last year. The personal bankruptcy system, that was launched in Sept 2004, allows credit defaulters, with debts of less than KW1.5 bil, to pay off an agreed portion of their debts for 3-5 years and have the remaining debt written off.

CHAEBOL

Samsung Electronics (SEC) and rival LG Electronics (LGE) saw their shares in the domestic small laptop computer market jump to 60.8% in the second quarter from 46.3% in the previous quarter of this year, as their wide-screen displays successfully attracted customers.
SEC has developed the world's first 1-gigabit DDR2 DRAM chip based on 50-nanometer technology, which increases production efficiency by 55% compared to the recently developed 60-nano technology; or 200 percent compared to the widely used 80-nano technology. It plans to mass-produce the 1-gigabit 50-nano DRAM chips in the first half of 2008. The global DRAM market is estimated to be worth $35 bil next year and $40 bil in 2009. SEC is to invest $5.758 bil for the facilities next year, and ranked the top investor among highest 25 firms, keeping 4 years consecutive No 1 position.
 
Hynix Semiconductor began pilot production of 66-nano DRAM, preceding SEC, for the first time in the micro circuit technology. SEC has led the DRAM manufacturing process by introducing the 100-nano technology in 2001, 90-nano in 2002, 80-nano in 2004 and 70-nano in Oct last year. However, it has yet to develop the 60-nano technology.
WUXI, China - Hynix completed a fabrication plant for producing 300 mm diameter wafers in Wuxi, Jiangsu Province The plant will be completed at a time when Hynix, in a joint venture with STMicroelectronics, began mass production of 200 and 300 mm wafers. The new plant has the capacity to produce 50,000 x 200 mm wafers using 110 and 90 nano technologies and 18,000 x 300 mm wafers based on 80 nano technology per month, which will be used to make DRAM chips. Hynix leads the Chinese DRAM market with around 47% share as of the second quarter of this year. Beside the Wuxi plant, Hynix has production bases in Eugene in USA, Icheon and Cheongju in Korea.

LGE and Germany's Schneider Kreuznach, a manufacturer of photographic and industrial optics, signed a contract to cooperate in branding, technology approval and development of lens for mobile and digital cameras. LG first applied Schneider-made camera lenses to its newly released "Shine" mobile-phone model and will use Schneider's for premium handsets in local and overseas markets.
LS-Nikko Copper, 50:50 joint venture with Japan's Nikko, targets to nearly double its electrolytic copper output to 1 mil tons by 2015 via global expansion. The nation's only copper smelter, with an annual production capacity of 570,000 tons, plans to increase production at its domestic refineries and produce 400,000 tons of electrolytic copper overseas. The world's second largest copper smelter is taking part in the Marcona copper project in Peru with a 15% stake along with Korea Resources Corp and Canada's Chariot Resources. LS-Nikko has secured annual copper concentrates supply of 50,000 tons from the Peruvian mine. LS-Nikko imports about 1.4 mil tons of copper ore a year and supplies more than 60% of Korea's demand for electrolytic copper.
GS Group, which was separated from LG Group in March last year, has grown into Korea's sixth-largest conglomerate with KW21.8 tril in assets. Focusing on energy, retail and construction businesses, GS marked a successful first year in 2005 with combined sales and net profit surging 20% to KW27.6 tril and 18% to KW1.59 tril, respectively. In order to attain the goal to achieve a net profit of KW2 tril by 2010, the group increased its investment by a 122% to KW2 tril this year.

Hyundai Motor (HMC) announced its third-quarter net profit tumbled 47.1% to KW282.8 bil as production dwindled during the recent strike while the Korean currency strengthened. Kia Motors was hit harder by unfavorable currency exchange rates as it depends more on exports, with its first net loss in 8 years despite an 8.3% increase in sales to KW3.5 tril. HMC sold 264,014 units in Sept, surpassing 200,000 barrier for the first time in its history. 56,093 were for domestic and 207,921 for export.
Hyundai Steel's first blast furnace broke ground in the western coastal city of Dangjin. The company will spend KW5.24 tril in building 2 blast furnaces by 2011, challenging POSCO's dominance in the market. The furnaces, with an annual production capacity of 7 mil tons, are expected to ease supply shortage at home as the nation imports about 10 mil tons of steel per year. The steelmaker, owned by HMC Group, plans to invest another KW2.26 tril by 2015 to expand the Dangjin facility to reach an annual output of 12 mil tons. The company currently makes up to 10.5 mil tons of steel for general use from scrap metal at its electric furnace. HMC Group is to invite 5-6 Korean and about 3 Japanese shipping companies for the bidding of 4 ships to transport of the iron ore between Australia and Korea. It plans to construct the quay for the unloading of 250K size ore carriers.
 
POSCO, the world's third-largest steel maker, plans to build a $361 mil plant in Vung Tau, Vietnam, to start production of cold-rolled steel in late 2009 with the annual production of 700,000 tons cold-rolled coil for commercial vehicles, motor bikes and other steel for construction. The POSCO also decided a $262 mil investment for the continuous galvanizing line in Mexico to process 400,000 tons of steel sheets to be used in cars in June 2009 aiming US carmakers producing 2.2 mil cars every year. It also plans to bolster ties with Nippon Steel, with the agreement to supply steel slabs for each other when they repair furnaces between 2007 and 2011, and increase cross shareholding. Nippon will buy a 2% stake in POSCO in addition to the 3.32% it already owns, while POSCO plans to acquire Nippon's shares of the same value.
Overseas plant orders received by Korean companies surpassed the $20 bil mark for the first time this year on strong demand from oil-producing countries. Korean firms won $20.9 bil in the first 9 months of the year, twice the amount recorded in the same period a year earlier. Hyundai Engineering & Construction has secured order backlog of KW29.7 tril, good for 5 years, anticipating further increasing volume of orders.
 
Kumho Tires, Korea's second-largest tire maker, broke ground for a tire plant in Ho Chi Minh City, Vietnam, investing $155 mil by early 2008. The company plans to increase its annual output by 3.15 mil units through the investment. Kumho has a total global capacity of 51 mil units. The company completed a plant capable of producing 5.25 mil units in Tianjin, China, in July, and started constructing a new factory in Changchun in May. Kumho Engineering & Construction also launched a building project in downtown Ho Chi Minh City with a total of $260 mil investment on a 21-story hotel and 32-story residential complex, which will be named Kumho Asiana Plaza.
 
Hyosung Group made M&A abroad in series this year, expanding its business scope to the world. It became the preferred bidder for Spandex factory in China, for which Dongkook Trade invested $38 mil in 2004, for annual production of 6,000 spandex. It also acquired Nantong Woobang Transformer, one of 3 major transformer supplier in China, and purchased the stake in Agfa Film of Germany.

MONETARY AND ECONOMIC INDICES

KOSPI started the month at 1374, crashed to 1319 on the news of NK¡¯s nuclear test and recovered to 1364 at the end of the month by a strong rally in US stock market. While the major global bourses keep renewal of their new high, led by Dow Jones industrial average encouraged by lower oil prices and the possible soft landing of US economy, Korean stock market is excluded from the rally, severely undermining both foreign and local investor sentiment, by geopolitical circumstances.
The exchange rate of KWon against USDollar at the beginning of the month was 947, but surged above 960, for the first time in a month, to 963 on the expectations that KWon-denominated assets will decrease in value, and ended the month breaking 945 barrier to 943. A record-breaking drop by JYen against KWon, below 1;8 for the first time in 9 years, stoked new concerns that Korean products are no more competitive against their Japanese rivals in overseas markets and the trade deficit against Japan will be snowballed to an unlimited level, which has been kept in the range of $10 bil in 2002-2003, but jumped to $24 bil in 2004-2005 and reached $16,6 bil by the end of Aug this year, showing no sign of improvement.
Korea¡¯s foreign exchange reserve gained for 4 consecutive months in Oct by interest payments. The reserve increased by $1.2 bil to $229.5 bil.
Bank of Korea kept its Oct target for the call rate unchanged at 4.5% for the second straight month, because of the geopolitical risk stemming from NK's nuclear test and a slower-than-expected rebound in private spending. The yield for 3 years corporate bonds raised from 4.91% to 5.01% through the month. The nation's consumer prices pulled down by 0.2% in Sept on month by the recent decline in oil prices, rising to 2.4% on year, lower than the government's inflation target of 3% for this year.
Korea's jobless rate remained unchanged at 3.5% in Sept from July as the ongoing economic slowdown continued to dampen the job market.
Dubai crude prices have been softened through the month from $58.1 to $56 level per barrel, bolstering optimism regarding individual consumption and inflation.

SHIPBUILDING AND SHIPPING

Korean shipyards received a record $12.4 bil worth of orders in the third quarter, thanks to increased demand for containers, crude and product carriers. The orders are more than doubled from a year earlier to 5.97 mil CGT. All of Big 3 yards in Korea have already topped $10 bil in new building order this year, expecting total order volume exceeds $40 bil by the end of this year. HHI achieved $11.47 bil and DSME and SHI got same amount of $10.2 bil, respectively.
 
HHI entered KW10 tril club in capitalization as of Feb 2, when its share price rose to KW136.500 making total capitalization of KW10.376 tril. HHI leapt to 12th in chaebol ranking this year from 24th at the end of 2005. HHI agreed with Japanese steel mill, after 2.5 months¡¯ tug of war, on the supply of thick plates at $600-610 for first quarter 2007. HHI requires 3.2 mil tons of steel, of which 700,000 tons are from China and 800,000 from Japan. HHI opened new era for the construction of VLGC on land. By using 1500 ton of Goliath crane, it will reduce the number of blocks from 84 to 30 by increasing the size, and deliver 8 VLGC by 2008. HHI plans to increase its industrial robot production by more than five-fold to 10,000 units per year by 2010, focusing on improvement of the performance of welding robots used in car manufacturing. HHI plans to bolster exports, including the market in China, Europe and North America. HHI supplied a $30 mil worth manufacturing system consisting of 324 robots to assemble the cars in Kia Motors Slovakian plant. HHI secured the orders from Kristen Navigation for 2 x 159K tankers, SK Shipping 1 x 317K VLCC and AMPTC 2 x 82K VLGC. Hyundai Samho won the project from Metrostar for 3 x 165K suezmax tankers.
 
DSME got the order from Taiwan¡¯s TMT for 1 x LNG and Brave 3 x LPG. DSME expects its annual revenues to reach KW15 tril by 2011, compared to the figure in 2005 at KW4.7 tril, concentrating on high-value ship and offshore facilities, as well as branching out into the energy and logistics businesses. It plans to expand facilities to produce 75 vessels worth KW8 tril and 5 offshore platforms worth KW3 tril every year within the next 5 years. DSME will add production bases and logistics centers overseas and invest in new operations through M&A.
SHI signed the contract with a European operator for 1 x drillship worth $615 m, the single most expensive newbuilding contract in Korean history, and Orient Overseas 4 x 8,063 teu box ships.
STX got the project from Formosa Plastic Marine for 3+2 x 54K chemical carrier and SCI 6 x 72.4K pc. Fearnleyfonds, subsidiary of John Fredrikson, acquired 5.1% stake in STX yard.
Dae Sun contracted with Qatar National Navigation&Transport for 3+1 x 1,020-teu boxships and Mokpo Shipyard with Woolim Shipping for 3 x 6.5K IMO II chemical. Nokbong for Woolim 2 x 8K chemical and HeungA 2 x 12K chemical carrier. SLS, ex ShinA, signed with Stolt Nielsen for 4+4 x 44K partial stst chemical carriers.
 
Busan maintained its ranking as world¡¯s fifth largest container harbor for the second consecutive year despite aggressive expansion of Chinese ports. It handled 11.84 mil teu last year, up 3% on year. Singapore became No 1 with 23.19 mil teu, and Hongkong, Shanghai and Shenzen followed.
CMA CGM is teamed up with Zim, Korea Marine Transport and others to build and operate the $534 m terminal, adding 4 berths in Busan New Port to handle an extra 800,000 teu by 2011. They have formed Busan New Port Container Terminal to run the facility until 2040, and will increase capacity to 1.6m teu in 2016.
 
Fredriksen confirmed Geveran Trading had disposed of its holding in Hanjin Shipping to Ofer. Citigroup had bought 6.24 mil shares, or 8.7% of the company, on behalf of a client. Ofer has been an existing shareholder with about 3% stake in Hanjin. It was reported Ofer had paid KW154.5 bil for the stake. 11.7% stake is already higher than the holding by Cho Soo-ho by more than 5%, raising the fear of hostile M&A, but the source of the buyer described the decision as a ¡®purely financial investment¡¯.
 
HMM plans to sell KW300 bil of new shares to fund the take over of Hyundai Engineering & Construction, which was once the flagship of the group. HMM sold 2 VLCCs and one LR2 tanker to pave the way for acquiring HE&C, which was placed under the control of creditors in 2001. Its main creditor, Korea Exchange Bank, Korea Development Bank and Woori Bank, are to sell the company, which restore its original shape by the construction boom. HE&C is estimated to be worth around KW7 tril.