LNG carriers built by Hyundai Heavy Industries. Photo Korea Shipbuilding & Marine Engineering
The Korean shipbuilding industry opened a “order jackpot” in the fourth quarter of last year and stretched for a rebound.
The Korean shipbuilding industry, which took the lead in the shipbuilding Big 3 (Korea Shipbuilding & Marine Engineering, Daewoo Shipbuilding & Marine Engineering, Samsung Heavy Industries), is expanding orders to crude oil carriers and container ships by leveraging its global competitiveness in manufacturing liquefied natural gas (LNG) propulsion ships. Plan. The Korean shipbuilding industry rebounded after experiencing extreme difficulties in the 2010s due to declining global demand and intensifying competition, but last year drew a downward curve due to the aftermath of the novel coronavirus infection (Corona 19).
According to the industry on the 1st, the three shipbuilders won orders of $13.9 billion (about 15 trillion won) in the fourth quarter of last year. It is a dramatic reversal considering that it suffered a drought for orders until the third quarter due to the aftermath of Corona 19 and the like. The amount of orders received for three months in the fourth quarter is twice the cumulative amount ($7 billion) until the third quarter of last year.
4Q Shipbuilding Big 3 orders. Graphic = Younghee Kim [email protected]
Korea Shipbuilding & Marine Engineering, the shipbuilding holding company of Hyundai Heavy Industries Group, won orders worth $5.5 billion (about 6 trillion won) in the last quarter alone. This is 55% of the total order received last year. In addition, Samsung Heavy Industries won orders of $4.5 billion (about 5 trillion won), 82% of the total order amount ($5.5 billion) last year. Daewoo Shipbuilding & Marine Engineering also reached $1.5 billion until the third quarter of last year, but won $3.9 billion (approximately 4 trillion won) in the fourth quarter alone, breaking off the cliff of orders.
4Q Shipbuilding Big 3 orders. Graphic = Younghee Kim [email protected]
The three companies won a total of 20.9 billion dollars (about 23 trillion won) last year, thanks to the positive results exceeding expectations in the fourth quarter. The order balance amounted to 63.2 billion dollars (about 70 trillion won as of the end of 2020). Looking at the order balance alone, it was reduced by about 10 billion dollars from the end of 2019 (73 billion dollars), but at least we have secured work for next year.
90% sweeping of high value-added LNG carriers
LNG carriers are the driving force behind a strong performance in 4Q. The LNG carrier, which is a high value-added ship with a unit cost of more than 200 billion won per ship, is the same as Korea’s stand alone. According to Clarkson Research, a shipbuilding and shipping research institute, Korea took more than 80% of the large LNG carriers ordered from around the world last year (January to November). Considering the fact that LNG carrier orders were plentiful last month, the annual market share is expected to be over 90%.
It is also encouraging that orders not only for LNG carriers, but also for container ships and ultra-large crude oil carriers (VLCC) are steadily increasing. The Korean shipbuilding industry is jumping into orders with LNG dual fuel propulsion systems on these ships. With a dual fuel propulsion system, not only diesel, but also bunker C oil and LNG can be used in parallel. This year, as environmental regulations such as the World Maritime Organization (IMO) and the European Union (EU) are strengthening, it is a device that is attracting the attention of shipping companies. Fuel efficiency is also 20~30% higher than that of existing ships. Korean shipbuilders are evaluated as having the highest related technology. Daewoo Shipbuilding & Marine Engineering also signed a letter of intent (LOI) to build 10 LNG dual-fuel ultra-large crude oil carriers (VLCCs) with European shipping companies last month.
The biggest issue for the shipbuilding industry this year is the main contract for the Qatar project. In the industry, QP, a state-run oil company in Qatar, expects to order large-scale LNG carriers this year. Previously, Korea’s Joseon Big 3 had signed a’slot (secure dock)’ contract with Qatar before the main contract. NH Investment & Securities researcher Choi Jin-myung said, “In the second quarter of this year, orders for 40 to 60 ships are expected.”
At the end of last month, the Korea Institute of Industry predicted that Korea’s shipbuilding exports this year will increase by 2.2% from last year to reach 20.2 billion dollars (approximately 22 trillion won) through the ‘Outlook for Key Industries in 2021. In particular, shipments delayed due to Corona 19 last year are concentrated in the first half, and exports in the first half of this year are expected to increase by 6.7%. Thanks to that, the shipbuilding industry’s total output this year is expected to increase by 10.8% from last year (873 million CGT) to 9.76 million CGT (standard cargo equivalent t).
Reporter Kim Young-joo [email protected]