The Korean shipbuilding industry which faced an order cliff is creating a mood to turn the tide by steadily receiving oil tanker orders thanks to low oil prices.
According to Clarkson, a shipbuilding and shipping analyzer in the UK on August 9, the Korean shipping industry won only one order to build a 20,000 CGT ship, last month. Korea’s remaining shipbuilding orders hit 23.87 million CGT, the lowest in 12 years and eight months since 23.51 million CGT at the end of 2003. But some industry experts opined that the slump of the Korean shipbuilding industry hit the bottom.
This is because continuing low oil prices are steadily fuelling oil tanker orders. On August 3, Hyundai Samho Heavy Industries received an order to build two 317,000DWT super tankers from Almi Tankers, a Greek shipping company. Daewoo Shipbuilding & Marine Engineering also was awarded an order to build two 318,000 DWT VLCCs from the BW Group in Singapore on July 29.
These circumstances are pushing up stock prices of shipbuilders. Hyundai Heavy Industries’ stock prices rose 24.0% over the past month while those of Samsung Heavy Industries and Hyundai Mipo Dockyard 4.1% and 15.8%, respectively.
Anticipation for the expansion of the LNG tanker market is also contributing to the rise in these stock prices. “The LNG export and import market will expand beginning in 2019,” said Drewry, an overseas professional consulting firm. “There will a need for more vessels than those whose orders have been put in so far.”
If the LNG tanker market expands as Drewry analyzed, Korea will benefit more than any other countries. This is because Korea outclasses Japan and China in competitiveness in building LNG vessels. According to Clarkson, Korea had 7.4 million CGTs, more than the half of all the world’s remaining orders of 11.8 CGTs as of the end of July. Japan and China had 2.6 million CGTs and 1 million CGTs, each. By company, Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy Industries and Samsung Heavy Industries had orders to build 50, 23 and 17 ships, respectively.
In addition, the development of an LNG cargo containment system is expected to create more profits for Korean shipbuilders in the LNG tanker sector. In the meantime, the Korean shipbuilding industry has paid technical fees to use an LGN cargo containment system to France’s GTT. This is because only GTT had patented technology on an LNG cargo containment system. About 10 billion won (US$8.69 million) per LNG tanker is paid to the French company as a technical user fee. Therefore, the three Korean shipbuilders set up a joint venture with KOGAS and developed KC-1, Korea’s first LNG cargo containment system.
At present, two LNG tankers are being built with the application of KC-1. If KC-1 proves good after the completion of the vessels, they will begin to compete with GTT to sell its LNG cargo containment system on a full scale.