S. Korean ‘Big 3′ shipbuilders thrive on high-value deals despite Chinese competition

South Korea’s “Big 3″ shipbuilders, including Hanwha Ocean and Samsung Heavy Industries (SHI), are maintaining a selective approach to new orders, focusing on high-value vessels that keep their docks full. The shipbuilding industry believes Korean firms are enjoying such strong demand that forgoing low-cost, high-volume orders isn’t considered a significant loss.

On Sept 30., sources from the shipbuilding and shipping sectors reported that Germany’s Hapag-Lloyd recently placed an order for 24 dual-fueled liquefied natural gas (LNG) container ships, which are expected to be built by Chinese shipyards. Despite bids from HD Hyundai Heavy Industries (HD HHI) and Hanwha Ocean, Hapag-Lloyd awarded the contract to Chinese shipbuilders due to their competitive pricing. The total order value is estimated at $4.2 billion (about 5.58 trillion won).

However, domestic industry insiders see no reason for concern. Hapag-Lloyd’s order includes 17,0000-TEU and 9,200-TEU container ships—lower-cost vessels that Korean shipyards, operating at near full capacity, find less appealing. High-volume orders like this limit yard space and prevent builders from taking on more profitable projects. The 17,000-TEU vessels are priced at approximately $200 million each, while the 9,200-TEU ships are about $140 million each.

An industry insider commented, “There’s talk of Chinese competition catching up to Korean shipbuilders, but that’s not the case here. It was more of a formality for Korean companies to participate in the bid. The order scale isn’t ideal for them, and given current market prices, it makes sense to pass on low-cost orders.”

Korean shipbuilders continue to focus on high-value ships like LNG carriers, very large crude carriers (VLCCs), and ultra-large container ships between 220,000 and 240,000 TEU. As of August, LNG carriers were priced at $262 million, VLCCs at $129 million, and ultra-large container ships at $273 million.

Additionally, there is a growing demand for green vessels as Europe tightens environmental regulations. This has boosted the market for eco-friendly ships. The price for a 174,000-CBM LNG-powered carrier rose to $262 million (around 348.8 billion won) in August, an 11% increase compared to last year. According to Clarksons Research, as of late July, Korean shipbuilders held 252 out of the 355 global backorders for LNG carriers—about 70% of the total.

Korean companies also have solid order books. HD Korea Shipbuilding & Offshore Engineering has secured contracts for 160 vessels (including one offshore project) worth $17.78 billion (23.44 trillion won) so far this year, surpassing its annual target of $13.5 billion with 131.7% achievement. Hanwha Ocean, by the second quarter, had secured $5.33 billion (7 trillion won) in ship orders, exceeding last year’s total. SHI is also expected to surpass its annual order target of $9.7 billion.
Source: The Chosun Daily