Rebound in ship orders seen as start of major upswing
The number of contracts for ship purchases so far this year has surged as the global economy starts to recover and demand for eco-friendly ships increases.
The three major domestic shipbuilders – Korea Shipbuilding & Offshore Engineering (KSOE), Daewoo Shipbuilding & Marine Engineering (DSME), Samsung Heavy Industries – signed $14.51 billion worth of contracts so far this year from January through April. This is around seven times the $2.17 billion during the same period last year.
KSOE signed contracts to build 86 ships worth $7.2 billion – six times the $1.29 billion during the same period last year. DSME signed contracts worth $2.21 billion, up 6 times from the same period a year ago, and Samsung Heavy Industries $5.1 billion, up 10-fold.
The number of orders is high even considering that the shipbuilding industry struggled last year due to the Covid-19 outbreak.
The increase in demand for container transportation in line with the global economic recovery and eco-friendly vessels powered by liquefied natural gas are seen as major reasons behind the surge in ship orders.
Eco-friendly ships built by domestic shipbuilders are mostly equipped with dual fuel engines, and demand for such ships was high.
Of the 24 vessel for which DSME secured contracts, 20 of them have dual fuel engines.
“Just like in the past, the number of orders for ships rise following an economic recession,” said Choi Jin-myung, an analyst at NH Investment & Securities. “Orders for container ships rose particularly high in the first half of the year. Contracts for LNG vessels will start to be sealed from Qatar LNG project in the second half of the year. At least 40 to 60 ships will be signed to be built, and therefore, the trend in rising demand won’t easily reverse.”
Korea’s three major shipyards signed deals with Qatar Petroleum to reserve their LNG ship construction capacity for Qatar Petroleum through 2027. The deals are worth around $19 billion.
The price of an LNG ships was unchanged through early this year, but started to move up two to three months ago.
The price of a 174,000-square-meter (1.87 million square feet) LNG vessel inched up 1 percent on year from $188 million in April compared $186 million in January last year.
KSOE “has secured stable level of orders through 2023,” said a company spokesperson during the company’s conference call on April 29. “The situation is similar to early 2003, right before the beginning of a super cycle. Though uncertainties remain from the speed of Covid-19 recovery, we carefully forecast the cycle could return.”
Source: Korea JoongAng Daily