Order target achievement of Korea’s ‘Big 3’ shipbuilding companies slows down
The achievement pace of order targets for South Korea’s “Big 3” shipbuilders has shown a slowdown compared to previous years, according to BusinessKorea. This development is attributed to a decrease in orders compared to last year and the impact of selective orders due to limited dockyard capacity.
According to shipbuilding industry sources on Sept. 3, HD Korea Shipbuilding & Offshore Engineering, the largest among the Big 3, has achieved 98.2 percent of its annual order target of US$15.74 billion (20.8 trillion won) by securing a total of 118 vessels, including offshore facilities, worth US$15.47 billion so far this year. The company is likely to surpass its annual order target this month. However, the achievement timing has been delayed by approximately two months compared to the previous year.
HD Korea Shipbuilding & Offshore Engineering exceeded its annual target of US$17.44 billion by securing orders for a total of 140 vessels worth US$17.52 billion, thanks in part to a contract signed in early July last year for the construction of three petroleum and chemical carriers (PC ships). This achievement translated to fulfilling a year’s worth of targets in just six months. Recently, Singaporean shipping company EPS placed an order with HD Korea Shipbuilding & Offshore Engineering for four very large gas carriers (VLGCs) worth approximately US$440 million in total. It is anticipated that the per-ship price will reach around US$110 million, marking a record high in the company’s history.
The order target achievement rates for the other Big 3 shipbuilders, Samsung Heavy Industries and Hanwha Ocean, formerly known as Daewoo Shipbuilding & Marine Engineering, are lower than this. Samsung Heavy Industries has secured US$6.3 billion in orders, which is 66 percent of its annual target of US$9.5 billion. Anticipating a merger and acquisition this year, Hanwha Ocean set a reduced order target of US$6.98 billion, down by 22 percent from the previous year. However, it has only achieved US$1.47 billion, or 21 percent, of that target so far.
During the same period last year, Samsung Heavy Industries achieved 82 percent of its annual target of US$8.8 billion, while Hanwha Ocean reached 92 percent of its US$8.9 billion annual target.
The slowdown in order achievement rates among the Big 3 has been attributed to a decrease in order volumes compared to the previous year and selective order placements. According to Clarkson Research, an analysis firm in the shipbuilding and shipping industry, global cumulative orders from January to July this year amounted to 23.12 million compensated gross tonnage (CGT), equivalent to 858 vessels. This represents a 25 percent drop compared to the same period last year. The trend of selective order placements also appears to have influenced the pace of order achievements. The Big 3 have already secured four years’ worth of orders through 2027 and have been focusing on high-value vessels in recent times.
As a result, the order of LNG carriers in the latter half of this year is expected to determine whether the Big 3 will achieve their annual targets and when they will do so. South Korea holds an 87 percent share of the global order volume for LNG carriers. According to specialized shipbuilding and shipping publication TradeWinds, Qatar, where significant offshore natural gas discoveries have been made, is reportedly in negotiations with South Korea’s Big 3 shipbuilders and others to place orders for approximately 40 LNG carriers in the latter half of this year. Qatar Petroleum (QP), a state-owned oil company in Qatar, had signed slot reservation contracts with the Big 3 in June 2020 for over 100 LNG carriers, and it has been placing orders since the end of last year. Additionally, Mozambique is also expected to order 17 LNG carriers by the end of this year.
