Vessel Prices on the Rise
Korean shipbuilders swept 90 percent of the new vessel construction orders awarded in February. Amid an upward trend in vessel prices, the average price of LNG tankers jumped by US$1 million per vessel in February, benefiting Korean shipbuilders.
Korea received orders amounting to 630,000 CGTs (eight vessels or 90 percent) out of the 700,000 CGTs (15 vessels) placed worldwide in February, said Clarkson Research, a U.K. shipbuilding market analysis agency on March 11. China had only 20,000 CGTs (one vessel), followed by Japan with 10,000 CGTs (one vessel). In the first two months of 2019, Chinese shipbuilders won orders totaling 1.24 million CGTs (65 vessels or 41 percent), followed by Korean shipbuilders with 1.21 million CGTs (20 vessels or 40 percent), Italian shipbuilders with 240,000 CGTs (three vessels or 8 percent) and apanese shipbuilders with 230,000 CGTs (six vessels or 8 percent).
However, global shipbuilding orders are on the decline. Orders placed in February contracted 70 percent from 2.31 million CGTs (86 vessels) in January. Total orders in the first two months of 2019 also slid year on year. They stood at 1.03 million CGTs, compared with 7.07 million CGTs in the same span of 2018. Shibuilding orders more than halved year on year in January and February of 2018.
As a result, at the end of February, total global order backlog reached 80.5 million CGTs, down by 1.01 million CGTs from the end of January. However, Korean shipbuilders' backlog ticked up. Compared with January, Korea's order backlog swelled by 220,000 CGTs while that of China dipped by 210,000 CGTs and that of Japan shrank by 540,000 CGTs. Order backlog by country were China with 29.13 million CGTs (36 percent), followed by Korea with 21.17 million CGTs (27 percent) and Japan with 14.52 million CGTs (18 percent).
Ship prices also rose. The Clarkson Newbuilding Price Index (NPI) in February marked 131 points, up one point from 130 points in January. Observing shipbuilding prices by ship types, very large crude oil carriers (VLCCs) and container ships (13,000 TEUs to 14,000 TEUs) were priced for US$93 million and US$115 million per unit, respectively, showing no change in their prices.
The unit price of LNG tankers rose by US$1 million from January to US$185 million, up 3 percent from a record low of US$180 million in February 2018.
However, some shipbuilding industry watchers say that the rise in prices of LNG carriers dominated by Korean shipbuilders may have a negative impact on evaluations of Hyundai Heavy Industries Group and Daewoo Shipbuilding & Marine Engineering (DSME) in terms of monopoly and oligopoly while the two are waiting for the results of a review of their merger in each country. "If the review is based on the Herfindahl–Hirschman Index which is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them," said Hong In-sun, a researcher at the Korea Institute for Industrial Economics and Trade. "If the reviewers check ship types such as bulk carriers and container ships, there will be no concern over the merged company being called a monopolist or an oligopolist. If LNG carriers are included, the index will rise to a level of concern."