South Korea's Yoon Says Shipyard Strike Unacceptable, Signals Intervention

A strike by contract workers at Daewoo Shipbuilding & Marine Engineering (DSME) is unacceptable, South Korean President Yoon Suk-yeol said on Tuesday, raising the prospect that his government could use force to break it up.

Yoon's remarks come amid rising tension at the company's shipyard near the south coast city of Geoje, where about 100 sub-contractors launched the strike last month, occupying the shipyard's main dock, to demand a pay rise of 30%.

"The public no longer tolerates anyone resorting to illegal and threatening actions," Yoon, who is facing a second major industrial action since taking power in May, told a cabinet meeting.

The government had "waited long enough," he said earlier.

The strike was causing "tremendous damage" to the shipbuilding industry at a critical time on its path to recovery, as well as to the wider economy, Yoon added.

It was not immediately clear what action he planned against the striking workers, however.

South Korea's third-biggest shipbuilder has said the dispute cost it more than $400 million by mid-July and was likely to lead to delivery delays.

The workers' demands aim to make up for cuts in recent years, when shipbuilders struggled to survive a global slump in the shipping industry. Since then orders have gradually recovered, thanks to pent-up demand from the pandemic.

They want the right to directly negotiate with company management, rather than subcontracting firms, for fairer wages as the cost of living soars amid record-high inflation.

About 76,000 sub-contract shipyard workers were laid off between 2015 and 2020, they said in a statement.

"For those who stayed, their wages were slashed by 30%," they added.

Contract workers are paid an average of 60% less than direct hires by the company, said Jang Seok-won, an official of the Korean Metal Worker's Union who represents the strikers.

For years, labour activists have criticised shipbuilders for using layers of subcontracts to hire workers so as to cut costs in a strategy that gave them less protection than direct employees.

The strike comes just as the global shipbuilding industry is showing signs of a rebound, with orders flooding in as European countries rush to ramp up LNG imports to replace Russian gas supplies in the wake of the Ukraine crisis.

DSME said it had won orders for 18 liquified natural gas (LNG) carriers this year, adding that its order book was full for the next three years, which could help the loss-making shipbuilder turn to profit.

Its operating loss of 470 billion won for the year's first quarter to March more than doubled a loss of 213 billion won a year earlier, as costs of raw materials surged and the Ukraine conflict brought cuts in orders.

"There was a hope to turn to profit ... but as the dock, which is the heart of a shipyard, is shut down, production capacities will have to be adjusted," Chief Executive Park Doo-sun told a news conference this month.

A dramatic pay increase is not feasible and the company is considering hiring relatively unskilled and cheaper foreign workers instead, a DSME spokesperson has told Reuters.

The industry ministry forecasts the shipbuilding industry will run short of 9,500 workers in September. The workforce shrank to 92,000 in 2021 from 203,000 in 2014, industry data shows.

In June, the transport ministry struck a late-night deal for unionised truckers to return to the roads, ending a nationwide strike that had crippled ports and industrial hubs.

($1=1,316.9900 won)