Third-round applications open Sept. 28 through Oct. 16

60% support threshold raised from 6 billion to 15 billion won this year

14 passenger and cargo vessels built with fund support since 2016

This image is unrelated to the article. [Getty Images Bank]
This image is unrelated to the article. [Getty Images Bank]

South Korea's coastal vessel modernization fund, which covers up to 60% of shipbuilding costs when aging passenger and cargo ships are replaced, is accepting a new round of applicants. Starting this year, the government raised the vessel-price thresholds used to determine support levels, reflecting rising construction costs and reducing the financial burden on shipping companies.

The Ministry of Oceans and Fisheries announced Sunday it will accept applications for the third round of the 2026 Coastal Vessel Modernization Fund from Sept. 28 through Oct. 16.

The fund helps shipping operators replace aging coastal passenger and cargo vessels by subsidizing a portion of construction costs. The ministry has operated the fund since 2016.

Coastal Vessel Modernization Fund [Ministry of Oceans and Fisheries]
Coastal Vessel Modernization Fund [Ministry of Oceans and Fisheries]

Shipping companies selected for support receive fund coverage of 30 to 60 percent of construction costs depending on vessel price, with the remainder financed through bank loans and the operator's own capital. Companies repay construction costs over 15 years — a three-year grace period followed by 12 years of installment payments — and take full ownership of the vessel upon completion.

This year the government raised the support thresholds to reflect higher shipbuilding costs. Under the previous structure, vessels priced at 6 billion won ($4.41 million) or less qualified for 60 percent coverage, those between 6 billion and 12 billion won for 50 percent, and those above 12 billion won for 30 percent.

The threshold for 60 percent coverage has been raised to vessels priced at 15 billion won or less. Vessels priced between 15 billion and 30 billion won now qualify for 50 percent support, while those above 30 billion won receive 30 percent. The price ceiling for the top support tier has expanded 2.5 times, from 6 billion won to 15 billion won.

The modernization fund has so far supported the construction of 14 vessels — nine coastal passenger ships and five coastal cargo ships. Of those, six passenger vessels, including the Silver Cloud and Korea Pride, have been completed and deployed on routes such as Jeju–Wando and Incheon–Baengnyeong Island.

The fund's scope has also broadened. The ministry extended eligibility to coastal cargo vessels in 2024, having previously covered only passenger ships. That same year, nine cargo vessels — including one operated by KHOS — were selected for support. The first coastal cargo vessel built with fund assistance, the KHOS Stella, began service in August.

Domestic coastal passenger and cargo transport operators wishing to apply may do so through the website of Segyero Ship Finance Co., the fund's entrusted management company. The ministry will evaluate applications based on the viability of business plans, bank loan arrangements, and the operator's overall financial condition before selecting recipients.

Kim Hye-jeong, director general of the ministry's maritime and logistics bureau, said the fund has helped strengthen the competitiveness of coastal logistics by supporting the replacement of aging vessels. "We will continue to ensure the modernization fund provides meaningful assistance to shipping companies building new vessels," she said.


adastra@heraldcorp.com