Big Orders Expected in Second Half
South Korean shipbuilders’ performance in the first half of this year is not up to the mark. The amount of new shipbuilding orders they won in the first six months of the year fell short of half of their yearly goals.
The poor performance is attributed to a drop in the amount of new shipbuilding orders. Global shipbuilding orders totaled 10.26 million CGTs in the first half, down as much as 42 percent from a year ago, according to data from Clarkson Research, a U.K. analyst of the shipbuilding industry. Shippers tended to postpone placing orders for new ships on concerns over a lower cargo volume due to the trade dispute between the United States and China.
However, the top three Korean shipbuilders are expected to post an improvement in performance in the second half as a considerable number of orders for liquefied natural gas (LNG) carriers and ultra large container ships are likely to be placed on them.
Hyundai Heavy Industries Group, including Hyundai Heavy Industries Co., Hyundai Mipo Dockyard Co. and Hyundai Samho Heavy Industries Co., received orders for five container vessels, 11 oil tankers and five LNG carriers until the end of June, according to the shipbuilding industry on July 17. This accounts for only 17 percent of its yearly new order goal of US$17.81 billion (21.03 trillion won). Daewoo Shipbuilding & Marine Engineering Co. (DSME) obtained orders for a total of 16 ships, including six LNG carriers, seven ultra large crude oil carriers and three submarines. They are worth US$2.78 billion (3.28 trillion won), amounting to only 33.2 percent of this year’s goal of US$8.37 billion (9.89 trillion won).
Samsung Heavy Industries Co. put up a relatively better show. The company won orders for 14 vessels, including 10 LNG carriers, two crude oil carriers, one special ship and one floating production, storage and offloading (FPSO) facility, in the first half of the year, achieving 41 percent, or US$3.20 billion (3.78 trillion won), of this year’s goal of US$7.80 billion (9.21 trillion won).
Industry analysts believe that the three shipbuilders will be able to easily obtain their goals as Qatar’s state-run oil firm Qatar Petroleum Co. (QP) is planning to place a big order for LNG carriers, which is expected to be the largest single deal in the shipbuilding industry, in the second half. The three Korean shipbuilders participated in QP’s tender and submitted a bid for 40 LNG carriers each. Considering the fact that an LNG carrier normally costs 200 billion won (US$169 million), the size of the deal will be worth 24 trillion won (US$20.28 billion). Japanese shipbuilders, including Mitsui E&S Shipbuilding Co., did not participate in the tender.
Industry watchers say that the three domestic shipbuilders will win the entire orders from QP. This is because the three South Korean shipbuilders are the only ones that can produce the membrane-type LNG carriers demanded by QP. Furthermore, QP demands that the vessels be delivered between 2023 and 2026. The three firms submitted their plans to deliver 10 vessels a year each over the next four years.
There is also the possibility of Qatar placing an additional order as the country is expected to raise its annual LNG production capacity from 77 million tons to 110 million tons by expanding its North Field by 2024.
In addition, orders for LNG carriers are expected to come from U.S. energy firm Anadarko Petroleum Corp. (APC), which is carrying out the Mozambique LNG Project, Russia's largest independent natural gas producer and LNG operator Novatek Co., and U.S. oil and gas firm ExxonMobil Corp. Taiwanese shipping company Evergreen Marine Corp. is also projected to award an order for up to 11 23,000-TEU ultra large container vessels. Industry watchers said that large deals are concentrated in the second half of the year, rather than the first half. “The three Korean shipbuilders will be able to attain this year’s goal if they win big orders in the second half as expected.”