The Korean shipbuilding industry surpassed China and achieved the world’s first place in ship orders for three consecutive years. In the aftermath of the novel coronavirus infection (Corona 19), it suffered a severe order wins and drought in the first half, but succeeded in a dramatic reversal by bursting out successive orders at the end of the year. It is an analysis that it has proved that the technology gap is still large by winning orders for high value-added ships such as liquefied natural gas (LNG) ships and ultra-large crude oil carriers (VLCC).
This month, 17 LNG carriers have been cleaned up
According to the industry on the 27th, domestic’Shipbuilding Big 3’including Hyundai Heavy Industries Group, Daewoo Shipbuilding & Marine Engineering, and Samsung Heavy Industries has won orders for 85 vessels worth $11.3 billion (about 12.5 trillion won) in two months since last month. For a medium-sized car, it is equivalent to the export of about 400,000 units. During this period, more than 70% of global ship orders were swept away.
It also regained the world’s No. 1 position, which was given to China throughout the year. According to Clarkson Research, a global research institute, ship orders for this year were 72.3 million CGT in China (standard cargo ship equivalent tonnage), 6.61 million CGT in Korea, and 1.38 million CGT in Japan as of the 21st. The reversal will be certain when Korea has won at least 1.5 million CGT orders, including 17 LNG carriers, three days after the 21st. During the same period, China failed to win orders for a single LNG carrier.
The atmosphere in the shipbuilding industry in the first half of this year was gloomy. In the aftermath of the novel coronavirus infection (Corona 19), global ship orders reached a record low. It was less than during the 1997 financial crisis and the 2008 global financial crisis. There were also concerns that the lack of work in the shipbuilder’s dock would become a reality. China won an order of 3.15 million CGT in the first half of the year thanks to government support, more than doubled the gap with Korea (118 CGT). However, the situation changed when global shipping companies, who had delayed ship orders, poured out orders at once in the second half.
“I can’t believe in Chinese LNG carriers”
High value-added ships such as LNG carriers and VLCCs led the back heart of the three shipbuilders. Of the 63 LNG carriers ordered around the world this year, Hyundai Heavy Industries Group, Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering won 21, 19, and 6 orders, respectively, accounting for 73% of three domestic shipbuilders. China only won orders for 5 vessels. Japan has not won a single order. LNG carriers are expensive ships with a price of 186 million dollars (about 205 billion won) per ship. Although profitability is high, the domestic shipbuilding industry is evaluated as a market with unrivaled competitiveness due to the need for high construction technology. This year’s delayed construction of LNG-powered super-large container ships ordered by CMA CGM to China for more than a year further undermined global shipowners’ trust in Chinese LNG carriers. Experts explained, “Because of the nature of the LNG transaction, which contracts large quantities as futures, shipowners place priority on the stability of ships.”
VLCC has also emerged as a’filial son’. VLCC is classified as a high value-added ship along with LNG carriers with a price of 85 million dollars (about 93 billion won) per ship. A total of 42 VLCCs were ordered in the world this year, and Hyundai Heavy Industries Group and Daewoo Shipbuilding & Marine Engineering received 27 and 7 orders, respectively. Korea’s share reached 81%. China won orders for 5 vessels and Japan for 1 vessel.
It is also good news that the demand for VLCCs equipped with LNG propulsion engines, which domestic companies instead of bunker C oil, have strengths, is increasing due to the strengthened international maritime organization (IMO) environmental regulations from this year. As about 20% of VLCCs currently in operation are old ships over 15 years old, demand for replacement is also increasing. Daewoo Shipbuilding & Marine Engineering recently signed a letter of intent (LOI) to build 10 LNG dual-fuel VLCCs with European shipowners, predicting an order worth KRW 1 trillion.
Container ship orders are also pouring out
The container ship market is also warming up after a long time. With the Shanghai Container Freight Index (SCFI) breaking a record high for 9 consecutive weeks, orders for large container ships are continuing to resume due to the shipping boom. For container ships with more than 12,000TEU (1TEU = 1 container of 6m) this year, Korea won 18 orders, ahead of China (14).
Hyundai Heavy Industries Group, Daewoo Shipbuilding & Marine Engineering, and Samsung Heavy Industries achieved 91%, 75%, and 65% respectively. Compared to last year’s 82%, 82%, and 91%, it is not significantly lowered. In particular, Samsung Heavy Industries was able to win orders worth $4.4 billion (about 4.9 trillion won) in a month, raising the goal of achieving orders this year from 15% to 65%.
The industry predicts that about 100 large container ships will be placed around the world by the first half of next year. An official from the shipbuilding industry said, “Unlike last year, which relied solely on LNG carriers, orders for container ships and oil tankers are also increasing.”
Reporter Mansoo Choi [email protected]