HD 174K LNG carrier built by Hyundai Heavy Industries
SEOUL, Oct. 9 (Korea Bizwire) –Orders for liquefied natural gas (LNG) carriers, an area where South Korea has long maintained a dominant position, have seen a significant decline this year.
Nevertheless, the Korean shipbuilding industry is expected to weather this downturn relatively unscathed, thanks in part to record-high LNG carrier prices and a substantial upcoming order from Qatar anticipated in the fourth quarter.
According to reports from the shipbuilding and shipping magazine, Tradewinds, only 44 LNG carriers were ordered in the first three quarters of this year, with a mere 10 of those ordered in the third quarter. This stands in stark contrast to the 168 vessels ordered in the previous year.
Of these LNG carriers ordered in the current year, South Korea’s “big three” shipbuilders – HD Korea Shipbuilding & Marine Engineering, Samsung Heavy Industries, and Hanwha Ocean – secured 31 orders, accounting for 70 percent of the total, while Chinese shipyards received the remaining orders.
Among these Korean shipbuilders, HD Korea Shipbuilding & Marine Engineering clinched the most contracts with 20 ships, followed by Samsung Heavy Industries with six and Hanwha Ocean with five.
Although the global shipbuilding industry is currently experiencing a supercycle, several factors have contributed to the slowdown in LNG carrier orders. One such factor is the rush of orders placed last year, allowing shipowners to secure LNG carriers with delivery scheduled four years in the future.
Additionally, limited dock space at shipyards has driven up prices, leading shipowners to hesitate in signing contracts.
For instance, Samsung Heavy Industries announced in June that it had won an order for two LNG carriers from a North American company, with an expected delivery date of 2028, five years from now. HD Korea Shipbuilding & Marine Engineering and Hanwha Ocean’s recent orders for LNG carriers also come with delivery dates of 2027.
Membrane type LNG carrier built by Samsung Heavy Industries
The soaring prices of these vessels have further compounded the situation. Clarkson Research indicates that the price of a 174,000 cubic meter LNG carrier was $200 million in October 2021, but it has risen by more than 25 percent in the past two years.
Recently, HD Korea Shipbuilding & Marine Engineering secured its highest-ever order for $265 million (approximately 357.5 billion won).
To mitigate the impact of declining orders on profitability, Korean shipbuilders have been strategically selling their remaining slots, taking profitability into account. Consequently, the industry foresees a limited impact on profitability.
Particularly noteworthy is Qatar Petroleum’s (QP) announcement that it has signed a memorandum of agreement with HD Korea Shipbuilding & Marine Engineering to construct 17 LNG carriers, totaling KRW 5 trillion.
This move is expected to lead to an increase in orders in the remaining quarters, driven by projects in Qatar. QP, the state-owned oil company of Qatar, had earlier signed slot contracts with the Korean Big Three for over 100 LNG carriers in June 2020 and has been placing orders since the end of the previous year.
As a result, it is highly likely that QP will finalize deals with Samsung Heavy Industries and Hanwha Ocean by the end of this year. A shipbuilding industry insider commented, “Despite the decrease in the number of LNG carrier orders, profitability is on the rise, and we anticipate improved performance as delivery dates draw near.
M. H. Lee (mhlee@koreabizwire.com)
