Korea’s big-three shipbuilders — Korea Shipbuilding & Offshore Engineering (KSOE), Daewoo Shipbuilding & Marine Engineering (DSME) and Samsung Heavy Industries — have been landing orders for high-value-added vessels non-stop since the beginning of 2023. Their order intake exceeded 10 trillion won over just two months. Although global ship orders have slowed down since the beginning of this year due to an economic downturn, the Korean shipbuilders employed the strategy of selectively winning orders for eco-friendly high-value-added ships such as liquefied natural gas (LNG) carriers, and this strategy has paid off handsomely, analysts say.
According to sources in the Korean shipbuilding industry on March 5, the three major Korean shipbuilders have received a total of US$8.59 billion (about 10.87 trillion won) in ship orders so far this year, attaining more than one-quarter of this year’s order target (US$32 billion). KSOE has booked US$6.11 billion in orders so far this year, reaching 38.8 percent of its annual order target, while Samsung Heavy Industries orders worth US$2 billion, reaching 21 percent of its goal.
Of the 48 ships ordered from the shipbuilders so far this year, 11 are LNG carriers. LNG carriers are Korea’s specialty, and Korean shipbuilders account for 80 percent of global LNG carrier orders. As demand for LNG carriers has steadily grown this year, prices are on the rise. On March 2, KSOE signed a contract to build three LNG carriers with a North American company for 1.78 trillion won (US$1.37 million), the highest price ever.
Along with orders for LNG carriers to Korean shipbuilders, those for methanol-powered carriers are also on the uptick. Methanol-powered carriers are considered typical eco-friendly vessels. In February, KSOE received an order for seven vessels from HMM, a Korean shipbuilding company. All of the seven ships were eco-friendly ships using methanol as fuel. Methanol-powered ships are said to be 15 percent more expensive than ordinary ships.
The Korean shipbuilders’ strategy of focusing on winning orders for high-value-added vessels is expanding anticipation that the three major Korean shipbuilders will go back to profitability in 2023 for the first time in eight years. The effects of winning new orders in the shipbuilding industry usually begin to appear after two years. This year is the time when the effects of an order rally in 2021 two years ago will begin to show in earnest. According to sources in the Korean financial investment industry, KSOE, which lost 35.56 billion won (US$27.43 million) in 2022, is expected to turn profit of nearly 1 trillion won (US$771 million) this year. Samsung Heavy Industries is also expected to put an end to an eight-year surplus drought from 2015 to 2022.