Samsung bets high on LNG carriers

A large-sized, liquefied natural gas (LNG) carrier is under construction at a dry dock belonging to Samsung Heavy Industries (SHI) in Geoje, in this file photo. / Courtesy of Samsung Heavy Industries

By Park Ji-won

GEOJE, South Gyeongsang Province ― A group of workers are busily painting the top of a huge liquefied natural gas (LNG) carrier in the sprawling southeastern shipyard of Samsung Heavy Industries.

There are eight docks on this island and the yards can produce between 50 to 70 ships including 12 LNG ships per year. Currently, no dockyards are empty.

Korean shipbuilders have suffered a prolonged business slump because Chinese rivals are taking a bigger bite out of the global shipbuilding market.

As part of steps to shake off growing challenges from its competitors, Samsung Heavy is putting greater focus on building LNG carriers. It has won some 30 LNG ship contracts which are due for delivery over the next few years.

On this island, some 30,000 employees, including subcontracted workers, work laboriously to meet deadlines for ship deliveries which run as far ahead as 20 months on average.

Employees are working day and night on shifts to meet recent rising orders for LNG ships amid increasing attention on new energy source, shale gas. The United States government is loosening regulations on exports of shale gas.

Thanks to this rise in demand and for this new energy source, Korean shipbuilders are enjoying growing orders for LNG carriers.

Samsung Heavy won a 664 billion won ($622 million) order to build three carriers from an Asian shipper on Oct. 13.

It posted a net profit of 17.2 billion won in the third quarter, up 2.2 percent year-on-year.

Samsung and two other major Korean shipbuilders account for about 70 percent of LNG ship orders in the world, according to analysts. Samsung has some 29 percent shares, while Daewoo Heavy and Hyundai Heavy have 27 and 14 percent respectively.

Samsung Heavy is pinning its hopes on LNG carriers as the main vehicle to tide over growing challenges from Chinese and Japanese shipbuilders.

“Our LNG carriers are high value-added products which can differentiate us from them,” said Samsung Heavy Industries Vice President at Project Management 7 Kim Nicholas.

“We are going to increase LNG-related projects and expand investment in software and research to strike a balance between shipbuilding and the offshore plant business.”

Kim, who previously worked at Samsung Heavy’s China branch for about five years, found it difficult to compete with China on prices because they receive support from their government.

“We should stay ahead of them in terms of technology and product quality,” he said.

Kim said that his company is more competitive than other companies in terms of being able to flexibly build vessels according to the demands of shipping line owners.

The shipbuilder has invested about 1 percent of its sales into research.

He is positive that the company can overcome current difficulties stemming from fierce commercial competition among global shipbuilders. “We are going to target a niche market and expand investment in LNG projects then we will be able to remain competitive,” said Kim.