Clouds of labor disputes and strikes are gathering over South Korea's steel and shipbuilding industries. With China raising its global market share on the strength of both price and technological competitiveness, concerns are mounting that the walkouts could directly weaken the country's manufacturing base and erode its export competitiveness. The union at POSCO, which already staged two partial strikes last month, has given notice of an indefinite strike starting on Nov. 2. The union escalated its industrial action after failing to narrow differences with management over its demands, which include a 7.1% increase in base pay and incentive payments equal to 600% of monthly wages.
Demanding better treatment is a union's rightful prerogative. But insisting on excessive wage increases when earnings and business conditions have deteriorated only complicates matters further. POSCO's revenue fell 6.8% from a year earlier last year amid intensifying competition. Meanwhile, China has pushed its global share above 50% on the back of a low-price volume offensive, sweeping up overseas orders. The United States and the European Union have also played the import-control card, imposing high tariffs on foreign steel. The obstacles are piling up one after another.
Shipbuilders are going through their own labor turmoil. The union at HD Hyundai Heavy Industries, which has continued partial strikes, holds a vote on the 27th on a second tentative agreement after members rejected the first one last week. If it is voted down, the possibility of renewed strikes cannot be ruled out. At Hanwha Ocean, the union representing permanent employees is at odds with the company over profit sharing, while subcontracted workers are staging a high-altitude sit-in to demand direct bargaining with the prime contractor. Chinese shipbuilders, by contrast, are cementing their dominance in the global market. Backed by government support and solid supply chains, Chinese companies took 81% of new shipbuilding orders in the first nine months of this year. South Korea's share was in the 10% range.
Steel and shipbuilding are pillars that support South Korean manufacturing. Both industries have more partner and subcontracting firms than other sectors and generate larger upstream and downstream ripple effects. If labor disputes and strikes disrupt production, worsening earnings and weaker export competitiveness will be unavoidable. The priority is to find common ground, with unions refraining from one-sided wage demands and companies offering reasonable alternatives. Both sides should keep in mind that Chinese companies are smiling behind their backs as they watch the standoff.