S. Korean shipbuilders to benefit as steam turbine LNG
Why Old LNG Carriers Are Being Retired and What It Means for Shipping
The shipping industry is going through big changes. Older liquefied natural gas (LNG) ships, powered by steam turbines, are being retired faster than ever before. This is mainly because falling LNG shipping rates have made it hard for these older ships to stay competitive. In 2023 alone, 12 of these ships were scrapped, and more are expected to follow soon. South Korea’s shipbuilders are ready to take the lead as the industry switches to newer, more efficient LNG carriers.
Why Old LNG Ships Are Being Scrapped
Steam turbine LNG ships have been used for over 20 years, but now they are struggling to stay useful. Recently, SK Shipping sold four of its old LNG carriers, including SK Summit and SK Stellar, for scrap at around $13.8 million each. These ships were parked in Singapore because they couldn’t find new work after their old contracts ended.
Experts say these older ships are no longer efficient. They use marine diesel engines running on heavy bunker C oil, which is less fuel-efficient than newer technologies. This makes them expensive to operate.
Adding to the problem, LNG shipping rates have dropped sharply. Shorter routes, like transatlantic trips, now cost only $15,000 a day—40% less than before. Longer routes cost $21,000 a day, a 30% drop. For older steam turbine ships, the daily rate has fallen to just $7,000, which isn’t enough to cover operating costs.
The Future of LNG Shipping
The shift to modern LNG ships is already happening. Today, about 230 steam turbine LNG carriers are still in use, making up 30% of the global LNG fleet. However, experts from Clarksons Research predict that over 30 of these ships could be sold for scrap by the end of this year.
When long-term contracts for these ships expire, many will end up being dismantled. In fact, two to three of these vessels are expected to be scrapped every month in 2024.
In South Korea, some companies like H-LINE Shipping and Hyundai LNG Shipping still use these older ships, but others are moving away from them. Pan Ocean has already sold several low-performing LNG ships. HMM, another major company, no longer owns any LNG carriers at all.
This change shows a global trend: older ships can’t compete with modern ones. Falling freight rates are speeding up this process. As a result, newer and more efficient LNG ships are taking over.
South Korea’s Role in the Transition
South Korean shipbuilders are in a great position to benefit from these changes. Known for making advanced and efficient ships, they are ready to meet the demand for next-generation LNG carriers. This could make South Korea an even bigger player in the global shipping industry.
