Shipbuilders see rally as orders swell at year-end
An LNG carrier built by Samsung Heavy Industries / Courtesy of Samsung Heavy Industries
By Nam Hyun-woo
Korean shipbuilders have secured a series of lucrative orders for LNG carriers and other vessels this week, casting a rosy outlook on their efforts to meet annual targets.
Korea's top three shipbuilders ― Korea Shipbuilding & Offshore Engineering (KSOE), Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering (DSME) ― said they have clinched orders worth nearly 5 trillion won ($4.53 billion) in just three days from Monday to Wednesday.
During the period, KSOE, which is the holding firm of Hyundai Heavy Industries and other shipbuilding affiliates, won orders for 13 vessels ― four container vessels and nine LNG carriers ― with a combined worth reaching 2.27 trillion won. The orders were mostly from shippers in Panama.
Samsung Heavy also bagged sizable orders during the same period. After winning a 408.2 billion won order for two LNG vessels on Monday, the company added two more LNG carriers worth 403.5 billion won on Tuesday and added four more worth 815 billion. The combined value reaches 1.63 trillion won.
The two shipbuilders winning orders for LNG carriers is interpreted as the outcome of a large-scale LNG project in Mozambique, spearheaded by French energy giant Total. Reportedly, shippers ordered 17 LNG carriers for the project with KSOE and Samsung Heavy, with the two companies taking orders for nine and eight vessels respectively.
Along with the two firms, DSME announced Wednesday that it received an order from a European shipper for building six LNG-propelled container vessels worth 1.08 trillion won.
Following the three-day spree, KSOE's accumulated orders won this year reached $10 billion, which accounts for 91 percent of the company's year-end target of $11 billion. Samsung Heavy's accumulated orders this year reached 65 percent of its annual goal of $8.4 billion and that of DSME reached 75 percent.
Given the global economy and trade have been heavily affected by the COVID-19 pandemic, the numbers are encouraging, industry officials said, adding the companies' expertise and experience in building LNG vessels are coming as a boon for this upcycle.
“In a medium-term perspective, the global LNG orders will hover over 50 vessels annually for the next five years, reaching a peak by then,” DB Financial Investment analyst Kim Hong-gyun said.
“And there are a limited number of shipbuilders that have expertise and experience in building LNG vessels. Currently, only six shipbuilders have LNG carriers of over 170,000 cubic meters in their order backlogs and four Korean shipbuilders are enjoying near-monopolistic status.”
So far this year, there have been 63 orders for large LNG carriers and icebreaking LNG carriers globally, and Korean shipbuilders have claimed either 46 of them, or 73 percent.
However, questions remain whether the orders will properly improve the shipbuilders' profitability, because of a price downtrend.
The Clarkson Newbuilding Price Index, which shows the price trend of newly built ships, stood at 130 points in January this year, but continued to decline to 127 points in May and 126 points in June. It remained at 127 points from August to October, but again fell to 126 points last month.
The index compares the current shipbuilding price by setting that of January 1988 as 100. A higher number means a higher shipbuilding price.