Steel and Shipbuilding Industries Focus on Jinju LNG Ships Amid Recession

LNG Ship Order Market to Grow to 130 Trillion Won in 5 Years
Korean Shipbuilding Industry Leads LNG Ship Orders with Superior Design Capabilities

[Asia Economy Reporter Hwang Yoon-joo] Following the COVID-19 pandemic, ship orders are expected to focus on LNG carriers, and an analysis suggests that the domestic shipbuilding industry will lead LNG ship orders over the next decade.

According to the steel and shipbuilding industries on the 2nd, demand for LNG-fueled ships is expected to reach 2,500 to 3,000 vessels over the next 10 years until 2029. The market size is also projected to grow from 20 trillion won in 2020 to 130 trillion won by 2025. Domestic construction of LNG-fueled ships started with more than 20 vessels annually after 2020 and is expected to surge in the short term, with about 200 vessels?approximately 60% of domestically built ships?being constructed by 2030.

The industry's expectation for the expansion of the LNG ship market is based on regulations from the International Maritime Organization (IMO) and the increase in LNG demand. Due to IMO regulations, from this year, ships must reduce sulfur content in fuel from 3.5% or less to 0.5% or less. Failure to comply with this regulation will result in ships being unable to enter ports of IMO member countries. Shipping companies are responding by using low-sulfur fuel oil (MGO), installing desulfurization equipment, or ordering environmentally friendly fuel-powered ships (LNG ships).

Separately, the global increase in LNG demand is also contributing to the expansion of the LNG ship market. In 2019, global LNG demand increased by 12.5% year-on-year to 359 million tons, and it is expected to reach 700 million tons by 2040. LNG is increasingly adopted due to greenhouse gas reduction, air pollution mitigation, and energy security. It emits almost no soot or sulfur dioxide, and above all, it has the advantage of being cheaper than oil.

Accordingly, Qatar and Australia are competitively expanding LNG production. Russia is also increasing production through new projects such as the Yamal Peninsula and Gydan Peninsula.

Currently, Korea leads the LNG shipbuilding market in design capabilities that apply changes in fuel and engines to ships. This is influenced by shipowners' growing interest in operating costs such as fuel efficiency alongside ship prices. In fact, in the charter market, charter rates for eco-friendly ships equipped with the latest engines with better fuel efficiency are 10-18% higher than those for used ships with lower fuel efficiency.

The industry expects expansion in order scope (large container ships, large tankers, large bulk carriers) and business areas related to equipment (liquefaction, reliquefaction, engines, gas storage, etc.) in the future.

POSCO Research Institute explained, "The Korean shipbuilding industry, which had a limited presence in large markets such as bulk carriers, may have a golden opportunity to pioneer the market in the era of LNG-fueled ships. However, since LNG ship orders are divided into three stages, the market conditions must remain favorable to complete the construction of all contracted ships."

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