México

Guyana

Trinidad
& Tobago




Very usefull links



PW
Bookstore





News links

AP

AFP

Aljazeera

Dow Jones

Oil price

Reuters

Bloomberg

Views and News
from
Norway

 

 

 

South Korean shipbuilders' lock on LNG tanker market to hold for years

 

 


By Jane Chung and Yuka Obayashi / Reuters

SEOUL/TOKYO
Petroleumworld 11 21 2018

South Korean shipyards have boxed out their Japanese rivals from the market for building large ships carrying liquefied natural gas (LNG), winning all of the orders for the next three years worth more than $9 billion.

Three South Korean yards - Daewoo Shipbuilding & Marine Engineering (DSME), Hyundai Heavy Industries and Samsung Heavy Industries - have won the more than 50 orders placed for new large-scale LNG tankers for delivery in the next three years, according to data from the companies and two tanker brokers.

The bulging orderbook illustrates the dominance the South Korean yards have achieved over their competitors, especially in Japan. It is also sign of how the companies have rebounded from a sector-wide slump only two years ago and how they are positioned to command the sector in the future.

“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.”

Including floating LNG storage and support vessels, 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.

A set of data collected by another ship broker, who did not want to be identified, showed all of this year's orders for large LNG tankers went to South Korea, at a combined value of over $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.

The South Korean shipbuilders have outperformed their Japanese competitors this year with the equities for all three Korean firms rising while the Japanese builders are either flat or down.

KOREA RULES THE WAVES

With its dominance in new orders, this share will increase.

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.

DSME said it has received 12 orders for LNG tankers this year. Those orders are worth about $2.2 billion to the company, according to data from Daiwa Capital Markets.

LNG tanker orders this year have made up over half its business, DSME said, helping it recover from a near collapse in 2016/17, when its stocks were suspended amid one of the deepest shipping industry downturns on record.

An official at Samsung Heavy, who did not wish to be identified, said “market conditions are improving” and the firm has received 11 LNG tanker orders this year, around 40 percent of its total book.

Hyundai Heavy, which had its worst year ever in 2016, said LNG ship orders started rising in 2017.

This year, they will account for 21 percent of its new orders between January and September, up from 14 percent over the same period in 2017, company data showed.

Two-thirds of the global LNG vessels in service today were built in South Korea, according to Braemar, versus 22 percent from Japan, 7 percent from China, and the rest made in France, Spain and the United States.

MOSS TO MEMBRANE

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 also a factor in South Korea's success, with the country's shipyards building LNG carriers for as low as $175 million, according to data from Daiwa.

Japanese ships, however, are above $200 million, according a ship broker in Asia and a European shipping manager.

Further cementing South Korea's grip, the LNG industry has shifted away from the Moss tanker design, identified by the four or five spherical tanks holding the fuel and named for the company that designed them in 1973.

Instead, customers are demanding Membrane-type vessels that leave less dead space within the ship's hull. This efficiency allows a Q-Max vessel, the largest class of Membrane carrier, to load up to 260,000 cubic metres of LNG versus 182,000 cubic metres on the biggest Moss-type tanker.

“Ship designs are changing,” said Park Moo-hyun, an analyst at Hana Financial Investment in Seoul, with customers preferring the Membrane tankers.

“China and Japan are not well responding to the change... and this led to no orders (there)... and that's why European shipowners are placing orders to South Koreans,” he added.

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.

This year, 93 large LNG carriers using the Membrane design were ordered versus only eight Moss style, according to Braemar.

A spokesman for Japan's Mitsubishi Shipbuilding confirmed it has won no LNG carrier orders since 2015. A spokesman at Kawasaki Heavy Industries said the same. Japan Marine United last won an order in 2014.

UNFAIR SUPPORT?

Japan contends, however, that South Korea began unfairly supporting the shipyards during the 2016 downturn, when the South Korean government paid out subsidies and gave credit to keep the companies alive and their hundreds of thousands of workers employed.

The country plans to file a complaint over the issue with the World Trade Organization (WTO), Japan's Nikkei paper reported this month.

Whoever dominates this market is set to reap large benefits.

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.

Korea's shippers are confident they will be the ones to ship most of this gas.

“I see the current cycle lasting for at least 10 years and South Korea is expected to keep dominating the LNG market. Rival countries can't catch up in the short term given their engineering skills and proficiency,” said Hana Financial's Park.

 


________________________



Reporting by Jane Chung in SEOUL and Yuka Obayashi in TOKYO; additional reporting by Heekyong Yang in SEOUL and Aaron Sheldrick in TOKYO; Writing by Henning Gloystein; Editing by Christian Schmollinger from Reuters.

reuters.com
11 20 2018



Copyright© 1999-2018 Petroleumworld or respective author or news agency. All rights reserved.

We welcome the use of Petroleumworld™ (PW) stories by anyone provided it mentions Petroleumworld.com as the source.

Other stories you have to get authorization by its authors. Internet web links to http://www.petroleumworld.com are appreciated.

Petroleumworld welcomes your feedback and comments, share your thoughts on this article, your feedback is important to us!

We invite all our readers to share with us
their views and comments about this article.


Write to editor@petroleumworld.com

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels

Twitter: @petroleumworld1


 

 

 

 

TOP

Contact: editor@petroleumworld.com,

Editor & Publisher:Elio Ohep/
Contact Email: editor@petroleumworld.com

CopyRight © 1999-2016, Paul Ohep F. - All Rights Reserved. Legal Information

PW in Top 100 Energy Sites

CopyRight©1999-2017, Petroleumworld ™  / Elio Ohep - All rights reservedThis site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission fromPetroleumworld or the copyright owner of the material.