Three South Korean shipyards, Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy Industries, and Samsung Heavy Industries have won all of the more than fifty orders placed for new large-scale liquefied natural gas (LNG) tankers for delivery in the next three years. The shipyards beat out Japanese rivals for the orders, which are worth more than USD $9 billion. The new ships will increase the global LNG fleet by around 10 percent. Dominating this segment is key for shipyards, as gas consumption outgrows that of other fuels such as oil or coal.
Global LNG demand is surging from new users in emerging markets and because of a huge gasification program in China. The fuel is set to become important for marine transport as the International Maritime Organization (IMO) will require shippers to use cleaner fuels from 2020. The rising thirst is being met by new production projects, especially in North America and Australia, which will require more ships to transport LNG to its customers.
South Korea has expanded their shipyard dominance following a rebound from a sector-wide slump two years ago and are positioned to command the sector in the future, outperforming Japanese competitors this year with the equities for all three Korean firms rising while the Japanese builders are either flat or down. “The demand for LNG carriers surged followed by increased global demand of LNG,” said Park Hyung-gun, vice president of DSME. “There is a bright outlook ahead for LNG demand and South Korean shipbuilders will be able to excel in the LNG market.”
Ship brokerage Braemar estimates South Korean yards have bagged 78 percent of all LNG-related orders this year, with just 14 percent and 8 percent going to Japan and China, respectively, including floating LNG storage and support vessels. According to Braemar, two-thirds of the global LNG vessels in service today were built in South Korea versus 22 percent from Japan, 7 percent from China, and the remaining made in France, Spain, and the United States. Virtually all the LNG from new projects in the Russian Arctic, Papua New Guinea, Australia, the United States, East Africa or Qatar will be delivered on South Korean ships made near the cities of Busan and Ulsan on the country’s southern coast.
South Korea’s edge comes from its technological and service standards as well as investment into research and development. DSME developed the world’s first ice-breaking LNG tankers and the company will deliver the eighth such ship, the Georgiy Brusilov, to Russia’s Arctic LNG producer Novatek this month. Another six are under construction. Price is a factor in South Korea’s success, as well as the LNG industry shifting away from the Moss tanker design to a Membrane-type vessels that leave less dead space within the ship’s hull. Braemar estimates 71 percent of the global LNG tanker fleet is made up of Membrane carriers, versus 22 percent Moss tankers, and 7 percent using other systems.