Last Edited Jan. 9, 2024, 12:40 p.m. A previous version of this story incorrectly said that the company had decided to stop taking orders, which the company asserts is not true. The previous version of the story also said that the company is planning to reduce the number of its docks, which the company has also refuted. -- Ed.
Hanwha Ocean, the world’s third-largest shipbuilder, has decided to become more selective in the ship orders it takes.
According to the shipbuilding industry on Jan. 7, Hanwha Ocean has decided to change its ship ordering business strategy to be more selective as a management policy and has established a business plan for this year based on it. The change involves not only container ships powered by diesel engines, which have low added value, but also eco-friendly container ships equipped with relatively expensive methanol and LNG engines.
Container ships have been the main cash cow of Hanwha Ocean (founded in 1973 as Daewoo Shipbuilding & Marine Engineering, or DSME) but prices began to fall about a decade ago as Chinese companies, supported by the Chinese government, began to wage a price war, making Hanwha Ocean quickly become unprofitable. This explains why Hanwha Ocean, which won orders for 20 container ships in 2021, did not land any container ship orders in 2023.
China is the main culprit behind Hanwha Ocean’s decision to become more selective in its ship orders. The container ship market has been dominated by Chinese shipbuilders in recent years. In 2023, Chinese shipbuilders won 101 (57 percent) of the 178 container ships ordered by global carriers. The figure is more than South Korea (51) and Japan (24) combined. Most of China’s orders were for expensive container ships that were methanol- or liquefied natural gas-powered ships and hybrids that use both fuels. There were fewer diesel-powered vessels, which are usually low-priced ships.
“Container ship orders are being swept up by Chinese companies,” said a Korean shipbuilding industry insider. “These orders include those for expensive hybrid ships. Korean shipbuilders have no choice but to propose prices offered by Chinese shipbuilders to some extent to win orders.”
Hanwha Ocean’s supposed failure to turn to profitability last year is also blamed on its aggressive ordering of container ships three years ago. Due to inflation and rising labor costs, Hanwha Ocean reportedly lost around 10 billion won on each container ship it delivered clients in 2023.