HJSC activates shipbuilding industry through blockchain-based ship finance

HJ Shipbuilding & Construction announced on Oct. 28 that it proposes the new direction to activate the shipbuilding industry under the theme “Collaboration of the shipbuilding industry and blockchain technology” at the BWB Conference 2022 (Blockchain Week in Busan). organized by the Busan Metropolitan Government.

BWB 2022 is the global blockchain event taking place at BEXCO for 3 days from October 27-29 after NFT Busan 2021 held last year. NFT Busan 2021 was a great success with more than 10,000 visitors last year.

The presentation will be given by Vice President Yoo Sang-cheol of HJ Shipbuilding & Construction (HJSC). Vice President Yoo, Executive Director Leading Management and Planning at HJ Shipbuilding and Construction, successfully completed the financing by establishing the ship fund for the first time in Korea. Therefore, Vice President Yoo is recognized as an experienced expert in both the field of shipbuilding and ship financing.

While the shipbuilding industry ranked fifth among export industries in Korea with an export of US$29.1 billion in 2021, HJSC proposes the new direction of the shipbuilding industry in Korea in the era of the block chain that focuses on the current state of the shipbuilding industry in Korea that is facing various kinds of difficulties. Practical approach to financing ship financing using blockchain-based Security Token Offering (STO) and the effects of innovation influencing a wide range of front and rear industries.

STO is a digital token that is issued on the basis of traditional assets including businesses, real estate, art, or securities. As the discussion about the introduction of STO using blockchain technology has recently accelerated, STO is highlighted in the aspect that individuals or organizations can divide the ownership of a ship by tokenizing the rights to the ships or other assets.

While the ships were ordered from a shipbuilder using an owner’s assets and a loan from the finance industry, blockchain-based STO allows for small-scale diversified investment and the means of financing are diversified.

Although the shipbuilding industry has to spend more than 90% of the financing required for shipbuilding but obtains the balance equal to 60% of the cost of a ship even after the delivery of a ship so far, it could not avoid difficulties financial until the delivery of a ship.

When investment in ships using STO kicks in in the near future, a shipbuilder can build a ship without financial hardship and strengthen its competitiveness by securing shipbuilding cost. In addition, STO will substantially contribute to the development of relevant industries by increasing jobs in Korean shipyards and securing a shipowner’s cargo volumes.

For Busan, which promotes the global blockchain city and the special marine finance center, speeding up the establishment of digital asset exchange using the STO platform and relevant systems will be good news.

In reality, everyone has been implementing STOs for a wide range of assets, including various types of art, securities, and real estate. In particular, it has been continuously proposed to activate the ship financing ecosystem that allows for diversified investment by the private sector because the participation of mainstream financial institutions, including banks, has been declining since the 2008 financial crisis.

An HJSC official noted that the STO for ship financing could create a new opportunity for the shipbuilding industry and the shipping industry in general by ensuring convenient and secure transactions through diversified small-scale investments. The official also estimated that the new territory would open up for the Korean shipbuilding industry when the supply of jobs stabilizes through the development of financial instruments and a blockchain-based digital business model.

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