24 Trillion Won LNG Ship Project...Securities Firms Expect Shipbuilding and Shipping Boom

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] As domestic shipbuilders have begun securing orders for liquefied natural gas (LNG) carriers worth $19 billion (approximately 24 trillion KRW), securities analysts predict that the domestic shipbuilding and shipping industries will benefit.

According to industry sources on the 12th, Daewoo Shipbuilding & Marine Engineering (DSME) announced on the 7th that it had secured orders for four LNG carriers from a Korean consortium consisting of H Line Shipping, Pan Ocean, and SK Shipping. The total contract amount reaches 1.0734 trillion KRW. Korea Shipbuilding & Offshore Engineering also announced on the same day that it had secured orders for two LNG carriers from a European shipping company for a total of 537.5 billion KRW.

This is estimated to be part of the 'Qatar Project' orders. Qatar, the world's largest LNG producer, is currently expanding its LNG production capacity from about 77 million tons to 126 million tons by 2027. Qatar Petroleum (QP), the state-owned company of Qatar, signed contracts in June 2020 with the domestic Big 3 shipbuilders for over 100 LNG carrier construction slots (shipyard dock reservations) to align with this expansion plan.

However, there were concerns that orders placed at the construction prices of 2020 might result in losses. This is because construction prices have risen over the past two years due to increases in raw material costs after the slot contracts. Nevertheless, securities analysts evaluate that the average price per LNG carrier contracted by DSME is 270 billion KRW, which is not significantly different from the current average ship price of 285.5 billion KRW.

Securities firms unanimously gave a positive assessment of the shipbuilding industry. Kwangsik Choi, a researcher at Daol Investment & Securities, said, "The confirmation of the new ship price of $215 million (approximately 270 billion KRW) is a positive development that resolves risks," adding, "As LNG purchase contracts increase, the slots for LNG carriers from 2026 onwards are scarce, which will further enhance price negotiation power," recommending an increased weighting in the shipbuilding sector.

The shipping industry is also expected to benefit. Dongheon Lee, a researcher at Shinhan Financial Investment, pointed out, "Among the recent orders, the four LNG carriers from DSME will be operated by a Korean consortium consisting of domestic shipping companies H Line Shipping, Pan Ocean, and SK Shipping," noting, "The major domestic and international LNG carrier operating shipping companies are also continuing to perform well."

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