'20 Trillion Won in Orders in Q1 Alone' Shipbuilding Industry Revival Faces Raw Material Cost Issues

Expectation of Achieving Order Targets
Raw Material Price Surge Due to Ukraine Crisis
Forecast of Difficulty in Price Adjustment

[Asia Economy Reporter Oh Hyung-gil] The shipbuilding industry's order volume in the first quarter has been estimated at $17 billion, nearly 20.6 trillion KRW. With a favorable tailwind returning after a long time, expectations are growing that the annual order target for this year will be exceeded. However, there are also voices cautioning about the burden caused by rising raw material prices despite the boom.

According to the industry on the 30th, Korea Shipbuilding & Offshore Engineering (KSOE) has secured a total of 59 vessels as of the end of March this year. The order amount reached $6.37 billion (7.7 trillion KRW), achieving about 36.5% of the annual order target of $17.44 billion. Last year, KSOE also set a record by securing 222 vessels worth $22.9 billion, exceeding the target of $14.9 billion by 154%.

Daewoo Shipbuilding & Marine Engineering (DSME) signed a contract last week for three LNG (liquefied natural gas) carriers worth $700 million, bringing its total order amount to $3.63 billion. This is a 102.6% increase compared to the $1.79 billion order volume in the first quarter of last year.

Samsung Heavy Industries also added five container ships last week, bringing its order amount close to $2 billion. Hyundai Samho Heavy Industries and Hyundai Heavy Industries each secured orders worth $2 billion in the first quarter alone, while Hyundai Mipo Dockyard recorded $1.1 billion.

[Image source=Yonhap News]

With the order march continuing centered on LNG carriers, the gap with China is widening. According to the UK shipping and shipbuilding market analysis firm Clarkson Research, all seven LNG carriers ordered worldwide last month were secured by domestic shipbuilders.

Domestic shipbuilders secured a total of 65 LNG carriers last year, and this year they have secured 24 vessels so far, filling 36.9% of last year's annual performance. If the current trend continues, there is a rosy outlook that about 100 vessels could be ordered by the end of the year.

It is particularly positive that contracts are being signed at prices higher than the market. The contract price for LNG carriers recently ordered by DSME is $236 million per vessel, exceeding the current market price of $220 million. Due to the Ukraine crisis and the surge in international oil prices, countries around the world are focusing on energy diversification, and an increase in demand for ships and offshore plants centered on LNG carriers is expected.

Interest in container ships is also rising amid global supply chain instability. The overseas shipping company ONE (Ocean Network Express) recently selected Hyundai Heavy Industries and Japan's Imabari Shipbuilding as shipyards for container ship construction and is expected to order up to 10 container ships of 13,000 TEU class. The scale is close to $1.6 billion.

However, the recent rise in raw material prices is a burden. Since the Ukraine crisis, nickel prices have surged sharply, significantly increasing shipbuilding costs for LNG and LPG carriers. Shipbuilders are struggling with price adjustments, and some ship quotation inquiries are being postponed.

An industry official said, "Except for China, it is difficult to find companies that can compete with domestic shipbuilders in LNG carriers," adding, "European countries are considering importing LNG by ship to replace Russian gas, so LNG carrier orders are expected to continue increasing."

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