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Korean Shipbuilders Sweep New Orders Worth US$13.9 Bil. in Q4 of 2020

Korean shipbuilders made an impressive comeback in the fourth quarter of 2020 by bagging new orders worth US$13.9 billion.

The large order intake represented a dramatic turnaround from the order drought that the shipbuilders had suffered until the end of the third quarter due to the COVID-19 pandemic. The value of the orders booked in the fourth quarter is double the cumulative total of the US$7 billion recorded in the first three quarters of 2020.

Korea Shipbuilding & Offshore Engineering (KOSE), a shipbuilding arm of Hyundai Heavy Industries Group, recorded US$5.5 billion in new order intake in the fourth quarter alone. The figure represented 55 percent of the total orders awarded to the shipbuilder in 2020.

Samsung Heavy Industries won orders worth US$4.5 billion in the fourth quarter, 82 percent of its total order intake of US$5.5 billion in 2020. Daewoo Shipbuilding & Marine Engineering (DSME) booked only US$1.5 billion in new orders until the end of the third quarter of 2020. But it posted US$3.9 billion in the fourth quarter alone, escaping from an order cliff.

The better-than-expected performance in the fourth quarter boosted the Korean shipbuilding trio’s combined order receipts to US$20.9 billion in 2020. Their combined order backlog amounted to US$63.2 billion as of the end of 2020. It is about US$10 billion less than the US$73 billion at the end of 2019, but they have secured enough work for 2022.

The shipbuilders’ strong performance in the fourth quarter was driven by orders for LNG carriers, which are high value-added vessels with a unit price of more than 200 billion won. They took more than 80 percent of the global orders for large LNG carriers in the January-November period of 2020, according to Clarkson Research, a shipbuilding and shipping research firm. Considering that many orders for LNG carriers were placed in December 2020, their annual market share is expected to top 90 percent.

It is also encouraging news to Korean shipbuilders that demand for container ships and very large crude carriers (VLCCs) as well as LNG carriers is steadily on the uptick. Korean shipbuilders are appealing to clients by attaching an LNG dual fuel propulsion system to these kinds of ships. With a dual fuel propulsion system, vessels can use not only diesel but bunker C oil and LNG as fuel. The advanced system is drawing much attention from shipping companies as the World Maritime Organization (IMO) and the European Union (EU) have toughened environmental regulations. The system also boosts vessels’ fuel efficiency 20 to 30 percent higher than other kinds of ships. Korean shipbuilders are technologically unrivaled in this field.

The biggest issue in the world shipbuilding industry in 2021 is the Qatar project. Industry sources predict that QP, Qatar’s state-run oil company, will place large-scale LNG carrier orders in 2021. Previously, the Korean shipbuilding trio had signed a slot contract with Qatar to secure docks before the main contract. “We expect Qatar to place orders for 40 to 60 ships during the second quarter of 2021,” said a researcher at NH Investment & Securities. Following the orders for LNG ships, those for bulk carriers and tankers are likely to be placed in the third quarter.

In late December 2020, the Korea Institute of Industrial Economics and Trade predicted that Korean shipbuilding exports will reach US$20.2 billion in 2021, up 2.2 percent from 2020. In particular, exports are expected to climb 6.7 percent in the first half of 2021 as delivery of ships was put off due to the COVID-19 crisis in 2020. As a result, the Korean shipbuilding industry’s output will record 9.67 million CGTs in 2021, up 10.8 percent from 8.73 million CGTs in 2020, shipbuilding market observers forecast.
Source: Business Korea

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