Expecting Orders for 18 LNG Carriers... Samsung Heavy Industries Aiming for 'Profit Turnaround'

[Asia Economy Reporter Park So-yeon] Despite the economic shock caused by the novel coronavirus disease (COVID-19), Samsung Heavy Industries has challenged itself to turn a profit this year through large-scale LNG (liquefied natural gas) ship orders.

According to industry sources on the 20th, Samsung Heavy Industries is actively conducting sales activities aiming to secure orders for 18 LNG carriers in the European region this year.

In particular, it is focusing on securing an additional 10 icebreaking LNG carriers to be used for transporting gas from the Russian state-owned energy company Novatek's 'ARCTIC LNG-2' gas field. Samsung Heavy Industries is known to have already secured 5 of the total 15 LNG carriers for Novatek's project last November.

LNG icebreaking carriers are about 1.5 times more expensive than regular LNG carriers, costing approximately 300 million dollars each. Only the Korean shipbuilding Big 3, including Samsung Heavy Industries, possess the design and construction technology for icebreaking vessels capable of breaking through ice up to 2.1 meters thick. Although Novatek officially placed orders for LNG icebreaking carriers with the Russian shipyard Zvezda, due to Zvezda's lack of technical capability, it signed an LNG ship design contract with Samsung Heavy Industries. There is growing speculation that Samsung Heavy Industries will secure the entire shipbuilding contract as an extension of this agreement.

There are also expectations that Samsung Heavy Industries will secure a large order of LNG carriers from the French energy company Total within the second quarter. Previously, Samsung Heavy Industries signed a Letter of Intent (LOI) for the construction of eight 170,000㎥ LNG carriers with Total. A Letter of Intent is a preliminary contract signed before the main contract, and barring any unforeseen circumstances, it leads to the main contract.

If all large-scale LNG ship orders are secured within this year, Samsung Heavy Industries can escape from long-term losses. Since recording an operating loss of 1.5019 trillion won in 2015, Samsung Heavy Industries has continued to operate at a loss for five consecutive years until last year. The variable factor is delays in planned schedules due to the COVID-19 outbreak. An industry insider said, "Although there is an impact from COVID-19, if orders for planned high value-added vessels proceed without disruption, a turnaround to profitability can be expected."

This content was produced with the assistance of AI translation services.