Possibility of Russian Shipowners’ Contract Breach Rising
South Korean shipbuilders are facing a rise in thick plate price and Russia-related risks after a boom in the industry started last year. Qatar, in the meantime, is expected to place a number of LNG carrier orders starting from next month.
Between the steel and shipbuilding industries, an agreement has recently been made regarding a thick plate price rise of 100,000 won to 150,000 won per ton for the first half of this year. The price of the material, which accounts for 20 percent of the total building cost of a ship, rose 500,000 won per ton last year. This is one of the factors that caused Korea Shipbuilding & Offshore Engineering, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering to be in the red last year.
When it comes to the Russia-related risks, the possibility of contract breach on Russian shipowners’ part is rising with regard to the Ukraine invasion. At present, the three shipbuilders are building seven LNG carriers in contract with Russian clients.
The shipbuilders are planning to deal with the adverse conditions by making the most of the orders to be placed by Qatar. In June 2020, state-run Qatar Petroleum and the three shipbuilders signed slot contracts, that is, dock preoccupancy contracts for more than 100 LNG carriers. The size of the contracts amounts to US$19 billion.
Qatar is the world’s largest LNG producer and is planning to increase its LNG production capacity from 77 million tons to 120 million tons from this year to 2027, which means it is in need of lots of new LNG carriers. Qatar Petroleum already placed its order to Chinese company Hudong-Zhonghua Shipbuilding and Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering are likely to follow soon before Korea Shipbuilding & Offshore Engineering.