S. Korean shipbuilders to retain edge in high-value vessels

South Korea’s shipbuilding industry is experiencing a significant shift. This year, the country’s share of global new ship orders is expected to dip below 20%. This marks the lowest level since the downturn in 2016. Despite this decline, South Korean shipbuilders are poised to maintain a competitive edge in high-value sectors, such as liquefied natural gas (LNG) carriers. Experts believe that by investing in smart and eco-friendly technologies, South Korean firms can counter China’s volume-driven approach to shipbuilding.

Declining Market Share Amidst Competitive Landscape

According to a report by ING Think, the economic research arm of Dutch financial firm ING, South Korea’s market share in the global shipbuilding industry has decreased over the past four years. From January to November of this year, South Korean shipbuilders secured 10.92 million compensated gross tonnage (CGT) out of a total of 60.33 million CGT in global new ship orders. This translates to 248 vessels, accounting for 18% of the market. This figure is the lowest since 2016, when South Korea held a 15.5% share.

In contrast, China’s market share surged to 69% during the same period, primarily driven by domestic orders. Following the 2008 global financial crisis, China restructured its shipbuilding industry. This allowed it to dominate low-cost orders for container ships and bulk carriers. Since 2012, China has consistently held the top spot in global new orders. Recently, it has also made strides in the LNG carrier market, which was once a stronghold for South Korea.

China’s competitive advantage stems from lower labor and raw material costs, along with substantial government support. Labor costs in China are about half those in South Korea and Japan, significantly impacting production expenses. Despite these challenges, South Korea’s shipbuilders have improved their efficiency and competitiveness. They continue to dominate the high-value LNG and liquefied petroleum gas (LPG) carrier markets, securing the majority of orders in these sectors.

Future Prospects and Technological Advancements

Despite the challenges, South Korea’s shipbuilding industry is not without hope. The country has the highest shipyard utilization rate among Asian nations, with 70.9 orders per shipyard. In comparison, China has 21.3 orders per shipyard, while Japan lags behind with just 13.3. This indicates that South Korean shipbuilders are focusing on profitable and reliable orders, filling their yards with high-demand projects.

Most of South Korea’s shipbuilding output is export-oriented, while a significant portion of China’s orders comes from domestic clients. Ship exports play a crucial role in South Korea’s overall export growth. With a current backlog of 3.5 years, South Korean ship exports are expected to rise for at least the next few years. This trend highlights the resilience of the industry, even in the face of declining market share.

Experts believe that while China is increasing its LNG carrier orders, it will take time for the country to match South Korea’s technological capabilities. In 2022, China secured LNG carrier orders that South Korean shipyards could not accommodate, with deliveries starting next year. As these ships become operational, the technological progress of China will become clearer.

To maintain its technological lead, South Korea is accelerating the development of next-generation ships. This includes ammonia and carbon dioxide carriers, fully autonomous vessels, and zero-emission engines. By focusing on innovation and sustainability, South Korea aims to secure its position in the global shipbuilding market for years to come.