Korea, No. 2 in shipbuilding order by volume, looks to spur sales with container

In May, South Korea secured the second-largest volume of shipbuilding orders globally, trailing only China, despite a significant decline in overall demand. Korean shipyards are intensifying their focus on high-value container ships and liquefied natural gas (LNG) carriers, aiming to capture a market traditionally dominated by Chinese competitors. This strategic shift comes as global ship orders plummeted by 55% year-on-year, highlighting the challenges faced by the industry.

Shifting Market Dynamics Favor Korean Builders

According to Clarkson Research, global ship orders in May totaled 1.66 million compensated gross tonnage (CGT) across 71 vessels. This represents a stark decline from previous years, with South Korea receiving orders for 250,000 CGT across eight ships, accounting for 15% of the global total. In contrast, China led the market with 640,000 CGT from 42 vessels, making up 39% of the total orders. However, Korean shipbuilders are achieving a higher average CGT per vessel—31,000 compared to China’s 15,000—indicating a trend towards more complex and higher-value contracts.

In response to the slowing demand, Korean shipyards are ramping up their bidding efforts. They are not only targeting LNG carriers but also container ships, a sector that has long been under the control of Chinese firms. Notably, HD Hyundai Heavy Industries is reportedly in the final stages of negotiations with Japan’s Ocean Network Express (ONE) for a $2.64 billion deal to supply container ships. This deal could significantly bolster Korea’s position in the container ship market, which saw Chinese builders holding an 86.6% market share last year.

S. Korean shipbuilders focus on ammonia-fueled ships amid China’s dominance in methanol

New Opportunities Amid Trade Policy Changes

The recent U.S. Trade Representative (USTR) measures imposing port fees on Chinese-built vessels have created new opportunities for Korean shipbuilders. Announced in April, these measures target Chinese shipping companies and vessels built in China, prompting a surge of new orders from French, Greek, and Taiwanese shipowners seeking alternatives. TradeWinds reports that HD Hyundai Heavy Industries is negotiating with ONE to construct up to 12 LNG dual-fuel container ships, each with a capacity of 16,000 twenty-foot equivalent units. The deal includes eight firm orders and four optional vessels, with each ship estimated to cost around $220 million.

Additionally, Hanwha Ocean is pursuing a 1.8 trillion won ($1.3 billion) order from Germany’s Hapag-Lloyd, while Korea’s top three shipbuilders are strong contenders for a 2.3 trillion won contract from Taiwan’s Yang Ming Marine Transport. Furthermore, India’s Oil and Natural Gas Corporation is in talks with Korean shipyards for three very large ethane carriers, reportedly excluding Chinese builders from the bidding process.

Despite the slower-than-expected pace of new orders this year, industry insiders remain optimistic. They anticipate that by focusing on high-value LNG carriers and premium container ships, which are increasingly recognized for their quality over Chinese counterparts, Korean shipbuilders will meet their annual order targets in the latter half of the year.