"Good Start" The Secret Behind the Order Winning Relay of the Three Joseon Companies Early This Year...

A ship under construction at the Hyundai Heavy Industries dock

[Asia Economy Reporter Choi Dae-yeol] Samsung Heavy Industries is reportedly discussing a construction contract for ultra-large crude carriers (VLCC) with the Greek shipping company Maran Tankers, according to foreign media. This shipping company is a subsidiary under the Angelicoussis Group and has traditionally placed many ship orders with domestic shipbuilders, especially Daewoo Shipbuilding & Marine Engineering. Although the specific order details have not been finalized, it is reported to involve two dual-fuel VLCCs with an additional option for two more vessels. Considering that ships of this size typically cost around 100 million USD each, if the contract is finalized, it is expected to result in a substantial order volume.

Daewoo Shipbuilding & Marine Engineering is also reported to be close to finalizing a contract with energy company Shell to build 10 dual-fuel VLCCs. This project has been under discussion since the end of last year and is expected to be completed by next month at the latest.

Conventional ships have commonly used a mixture of diesel and heavy fuel oil (bunker C) as fuel. Dual-fuel propulsion refers to a system that, in addition to these fuels, also uses liquefied natural gas (LNG) as a power source. Due to environmental regulations from the International Maritime Organization (IMO) and various countries, transportation with conventional ships is becoming difficult, leading to an anticipated increase in demand for eco-friendly ships within the industry. This is because ships that emit high levels of pollutants are no longer permitted.

Ship orders, which had slowed down last year, have surged since the beginning of the new year, raising expectations for orders in the domestic shipbuilding industry. Although ship orders typically do not follow seasonal or timing patterns, the severe decline caused by the COVID-19 pandemic last year has led many to expect a rebound this year. The recovery in the economy is increasing cargo volumes, which in turn drives the need for ships, while policy factors such as environmental regulations also play a role. According to a recent shipbuilding industry outlook report published by Senior Researcher Yang Jong-seo of the Export-Import Bank of Korea's Overseas Economic Research Institute, global ship orders this year are expected to exceed 30 million CGT (Compensated Gross Tonnage, a standardized unit converting shipbuilding work volume into standard cargo ship tonnage), representing an increase of more than 50% compared to last year.

A 13,000 TEU-class container ship built by Samsung Heavy Industries

Korean Shipbuilders, Daewoo Shipbuilding, and Samsung Heavy Industries Secure Orders One After Another in January
This Year’s Order Targets Raised by 40-50% Compared to Last Year

The current performance is strong. Korea Shipbuilding & Offshore Engineering secured orders for 14 vessels worth 1.42 billion USD in just the past month. These include six container ships, three petrochemical product carriers, and two vessels such as liquefied petroleum gas carriers and ultra-large crude carriers. Compared to January last year, when they secured about nine vessels worth 430 million USD, this represents more than a threefold increase in orders. Daewoo Shipbuilding also secured two ultra-large liquefied petroleum gas (LPG) carriers in mid-last month. Samsung Heavy Industries secured a total of five vessels, including four container ships, confirming contracts worth 600 million USD.

These three major shipbuilders, which failed to meet their order targets last year, have set aggressive order goals for this year. Hyundai Heavy Industries has raised its target by about 50% compared to last year’s order performance, while Daewoo Shipbuilding and Samsung Heavy Industries have increased theirs by about 40%. This is because if they fail to secure enough orders due to last year’s sluggish order performance, dock operations could become difficult.

Daewoo Shipbuilding & Marine Engineering completed a demonstration test of the Ship To Ship LNG Loading operation, which supplies liquefied natural gas (LNG) to LNG carriers under construction, in November of last year.
[Image source=Yonhap News]

There are concerns that this might lead to low-price orders, but the shipbuilding industry generally agrees that the current situation presents "conditions worth negotiating." According to market research firm Clarkson, the newbuilding price index, which had been declining monthly throughout last year, hit bottom in November and has been gradually rebounding since. Last month, it rose by about 1.5 points to 127.11 compared to the previous month. This indicates that shipbuilding prices are recovering, which is a positive signal for the industry that prices are unlikely to fall further.

Researcher Yang said, "The strengthened environmental regulations implemented last year are expected to impose stricter measures on older ships with severe pollution compared to previous regulations, creating substantial replacement pressure. This year will mark the point at which shipbuilders enter a normalization phase where they can secure the necessary orders."

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