Amid global order decline, domestic firms target high-value LNG vessels as rivals restructure

Last year, South Korea’s shipbuilding industry was stirred by the favorable news of the “MASGA (Make American Shipbuilding Great Again)” project. However, concerns grew on another front. Global ship orders plummeted 27% to 5,643,000 CGT (compensated gross tons) compared to 2024. Many questioned whether the so-called “supercycle” (boom) that began in 2021 was already ending.

Orders worth US$35.93 billion in the global market last year

Amid this, the three major domestic shipbuilders—HD Korea Shipbuilding & Offshore Engineering, Hanwha Ocean, and Samsung Heavy Industries—secured orders worth US$35.93 billion (approximately 51.97 trillion Korean won) in the global market last year. Despite the sharp decline in global ship orders, they managed to reduce their order intake by only about 1% compared to 2024. This was the result of a strategy focused on selective orders for high-profit eco-friendly vessels. They also benefited from a rebound effect as Chinese shipbuilders shrank due to the aftermath of U.S.-China tensions.

South Korea holds a dominant first-place position in LNG carriers.

This year, South Korean shipbuilders face an unavoidable showdown. Expectations are rising that orders for high-value LNG (liquefied natural gas) carriers, which shrank last year, will resume in large numbers. South Korea holds a dominant first-place position in LNG carriers. These ships, which transport natural gas in a supercooled liquid state at minus 162 degrees Celsius, require advanced technology and are expensive, making them highly profitable. As of the end of the third quarter last year, the three companies' order backlogs stood at 135 trillion Korean won, with work secured until 2028. However, given the ongoing decline in new ship orders, they must widen the gap in LNG carriers this year to maintain profitability over the next 3–4 years.

HD Hyundai Heavy Industries 

HD Hyundai Heavy Industries may post operating profit above 3 trillion won for the first time since 2010, with consensus pointing to 3.3891 trillion won ($2.35 billion) on revenue of 21.6079 trillion won ($15 billion) and a margin of about 15%. The company has raised its shipbuilding and offshore project order target for 2026 by 82% to $17.745 billion.

Samsung Heavy Industries

Samsung Heavy Industries is forecast by the market to lift operating profit by 66% to 1.4424 trillion won ($1 billion).Hanwha Ocean is expected to generate 1.7776 trillion won ($1.23 billion), up 35% from the previous year.  Market participants link the stronger outlook to high yard utilization and a shift in order books toward more profitable vessels, particularly LNG carriers, deliveries of which are increasingly being reflected in revenue. All three companies hold order backlogs that secure yard utilization for more than three years and in recent years have focused on high-margin vessels, including LNG carriers and special-purpose ships.

 South Korea’s Shipbuilding Industry Holds Its Ground

Meanwhile the sharp decline in global ship orders last year was due to reduced demand for new ships as vessels ordered in large quantities from 2021 to 2023 began entering service. Additionally, the trade war triggered by U.S.-China tensions contributed to the contraction. Geopolitical uncertainties led to a general shrinkage in trade. Amid this, South Korean shipbuilders managed to perform well by actively entering the container ship market.

Container ships were originally the domain of China

Container ships were originally the domain of China, which leveraged low-cost labor. However, recent strengthened environmental regulations have increased container ship prices. As expensive eco-friendly equipment, such as dual-fuel systems capable of using LNG and ammonia, began to be installed in container ships, profitability improved. South Korean shipbuilders aggressively pursued orders. Last year, the three domestic shipbuilders secured LNG carrier orders worth US$8.63 billion, but their container ship orders reached US$15.71 billion—nearly double that amount.

This Year’s Battlefield: LNG Carriers

This year, LNG carriers are the key battleground. There are expectations that large-scale LNG power generation projects will begin, particularly in the United States. LNG is seen as a bridge in the transition from fossil fuels like coal and oil to renewable energy, and demand has been growing rapidly. Within the shipbuilding industry, there are forecasts that global LNG carrier orders could reach around 80–100 vessels this year. Already, on the 6th, HD Korea Shipbuilding & Offshore Engineering secured its first order of the year by winning a contract to build four LNG carriers worth 1.5 trillion Korean won, ordered by a U.S. shipping company.

Restructuring their shipbuilding industries to rebound.

However, competing countries are also restructuring their shipbuilding industries to rebound. In Japan, the original shipbuilding powerhouse, the largest shipbuilder, Imabari Shipbuilding, announced on the 5th that it had completed the process of making the second-largest shipbuilder, Japan Marine United (JMU), a wholly owned subsidiary. This marks the emergence of a global top-four shipbuilder. The company’s president, Yukito Higaki, stated, “We will further strengthen our competitiveness and accelerate LNG carrier construction.” Earlier, in September last year, CSSC (China State Shipbuilding Corporation) and CSIC (China Shipbuilding Industry Corporation), China’s top two shipbuilders, also completed their merger. Chinese shipbuilders, who account for 60–70% of the global shipbuilding market, could intensify their price and volume offensives.

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Source : The chosun daily + Others

#Yukito Higaki #LNG carriers #U.S.-China tensions #Samsung Heavy Industries # Hanwha Ocean # South Korea’s shipbuilding #MASGA #Global ships #Chinese shipbuilders,