Filling Shipyard Docks Also Drives Up Shipping Costs

Korean Shipyards Rank 1st to 5th in Order Backlog
New Ship Prices Recover to January Last Year Levels

Ultra-large crude oil tanker built by Hyundai Heavy Industries

[Asia Economy Reporter Choi Dae-yeol] As of the end of last month, the global order backlog of shipyards increased by 3.29 million CGT (Compensated Gross Tonnage) from the previous month, reaching 74.29 million CGT. This marks the third consecutive month of growth this year, with about a 5% increase compared to the previous month. The order backlog is an indicator showing how much work remains at a shipyard and serves as a barometer of each shipbuilder's competitiveness. It is important both internally, for estimating how to allocate manpower, and externally, as it significantly influences price negotiations with shipping companies.

According to Clarkson Research, a UK-based shipbuilding and shipping market analysis firm, South Korea is the only country where the order backlog has increased compared to a year ago. The order backlog at Korean shipyards stood at 24.38 million CGT (as of the end of March), about 13% higher than the same period last year. This means that about one-third of all ships currently being built worldwide are in Korean shipyard docks.

Based on order backlog, China has slightly more at 27.17 million CGT, but recent trends are flat or declining. Although it increased by 6% compared to the previous month, it decreased by about 5% compared to the same period last year. Japan’s shipyard order backlog is 7.77 million CGT, down 36% from a year ago. This indicates that orders are not coming in on time relative to the speed of shipbuilding, resulting in reduced workloads. When looking at order backlog by individual shipyards, Korean shipyards occupy the top five spots. Samsung Heavy Industries leads with 7.05 million CGT, followed by Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, Hyundai Samho Heavy Industries, and Hyundai Mipo Dockyard.

A 13,000 TEU-class container ship built by Samsung Heavy Industries. Samsung Heavy Industries recently signed a contract to build 20 container ships of 15,000 TEU-class for 2.8099 trillion KRW. This is the largest single contract in history.

Having docks that are either empty or occupied affects a shipyard’s advantage in price negotiations. This is because they can selectively accept orders. Given that ship orders were halted last year due to COVID-19 and that environmental regulations will soon make it difficult to operate older ships, large shipping companies are compelled to order expensive ships equipped with eco-friendly technologies. This is why Korean shipbuilders, who are recognized for their advanced technological capabilities, are in the spotlight. The Clarkson Newbuilding Price Index rose by 2 points from the previous month to 130 points, recovering to the level of January last year before the COVID-19 outbreak.

From the end of last year to recently, Korean shipyards have shown strong order performance. In the first quarter of this year, Korea accounted for more than half (52%) of the orders with 5.32 million CGT, followed by China at 42% and Japan at 4%. Compared to the first quarter of last year, this is nearly a tenfold increase, marking the highest performance in 13 years since 2008.

There were many orders for relatively expensive ship types such as large container ships over 12,000 TEU, ultra-large crude carriers (VLGC), and large liquefied natural gas (LNG) carriers, areas where Korean shipyards are strong. Lee Dong-heon, a researcher at Daishin Securities, explained, "Due to the favorable order market, domestic shipbuilders simultaneously filled their docks, increasing their bargaining power in price negotiations. With the start of global infrastructure investment, orders and ship prices are expected to remain strong."

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