The Strong in Building LNG Carriers
According to the shipbuilding industry and foreign media outlets on February 26, Hyundai Heavy Industries has been negotiating at the eleventh hour with French carrier CMA CGM about a deal to build 12 14,000TEU container ships including six optional units. The ship is highly likely to be loaded with a dual-fuel system that can use both bunker-C oil and LNG. With a dual-fuel engine, the price per unit is up to US$ 130 million so the total contract price will soar to about US$ 1.6 billion.
It is also a must-win contract for Hyundai Heavy Industries under the circumstances where Chinese shipbuilders which were putting a mounting pressure on Korean shipbuilders via low price bids, are increasing their technical competitiveness. Hyundai Heavy Industries lost its face as the shipbuilder lost orders for nine 22,000TEU container ships with dual fuel systems to China's shipyards in the second half of last year. Not only did Hyundai Heavy Industries miss out on an opportunity to win orders of up to 1.6 trillion won but the Korean shipbuilding industry was stunned to know that Chinese shipbuilders took over Korean shipbuilders in competition to win orders for large-sized and high-value-added vessels which Korean shipbuilders were proud of possessing unrivaled technology in.
This is why Hyundai Heavy Industries is bent on landing this contract. It is a good opportunity to inform that Korean shipbuilders still have comparative advantage in dual fuel technology. "It is not rare for foreign shipyards including those of China to purchase related equipment from Korea even though they won orders to build vessels with dual fuel systems," an industry official said. “It's a golden opportunity to show that Korean shipbuilders still have unrivaled technology in LNG-powered vessels with dual fuel systems."
If Hyundai Heavy Industries proves its differentiated technological prowess in the market once again, the company will land new orders smoothly. This is because in the shipbuilding market which hit the bottom, the market of ships with dual fuel systems is expected to grow rapidly due to regulations imposed by the International Maritime Organization (IMO). Prior to the implementation of the regulation two years from now, shipping companies should replace shipping fuels with low-sulfur ones, install scrubbers in existing vessels, or replace ships with LNG-powered ones.
"A scrubber is so large that it can reduce spaces in ships and the price of low-sulfur oil is high, giving rise to an increase in cost burdens," an industry official said. If Hyundai Heavy Industries wins this contract, it will give a positive impression to shipping companies considering replacing LNG tankers."
In the meantime, Daewoo Shipbuilding & Marine Engineering announced on February 27 that the company received an order for two LNG carriers from a shipowner in Oceania. The contract amounted to 394.3 billion won (US$354 million) equivalent to 3.1% of consolidated sales in 2016. The contract will run until September 30, 2020.