Chinese shipbuilders' large LNG carrier order shakes the South Korean shipbuilding industry
2020-05-13 09:00
The news that Hudong-Zhonghua won the large order for Qatar's LNG carriers has dealt a significant blow to the South Korean shipbuilding industry, shaking its confidence in its "monopoly" of the LNG carrier market and creating an unprecedented sense of crisis for South Korean shipbuilders.
On April 22, Qatar Petroleum signed its first orders with Hudong-Zhonghua, totaling over 20 billion RMB. Reports suggest that the order includes 16 LNG carriers. Qatar's LNG carrier construction project was officially launched last year, planning to order 60 to 120 LNG carriers, accounting for nearly 60% of the global LNG carrier construction capacity. The South Korean shipbuilding industry had high hopes for Qatar's orders, confident that the three major South Korean shipbuilders would "divide" the large Qatar order. However, Hudong-Zhonghua's winning of the order first took the South Korean shipbuilding industry by surprise.
At the end of April, Korea Shipbuilding & Offshore Engineering (KOSE), a second-tier subsidiary of Hyundai Heavy Industries Group responsible for shipbuilding, predicted that 40 to 80 LNG carriers in the Qatar LNG carrier order would be built by South Korean shipbuilders. This was a response to the impact of Hudong-Zhonghua's winning of the Qatar order. However, Korea Shipbuilding & Offshore Engineering did not provide specific evidence.
In recent years, South Korean shipbuilders have maintained an 80% to 90% market share in the LNG carrier market, virtually monopolizing the LNG carrier construction market. Since the beginning of this year, affected by the novel coronavirus pandemic, new ship orders have significantly decreased. The first batch of orders for the Qatar LNG carrier project, which was the only pillar, was also won by China, which undoubtedly dealt a major blow to the South Korean shipbuilding industry.
The South Korean shipbuilding industry originally believed that China's LNG carrier construction capacity was limited, so it was confident in securing the large LNG carrier order. The three major South Korean shipbuilders collaborated in the 2000s to complete
Qatar's massive new LNG carrier construction project, building 45 Q-Flex and Q-Max LNG carriers, which have become the backbone of Qatar's current LNG carrier fleet. This also increased
the optimism of the South Korean shipbuilding industry.
In the first quarter of this year, South Korean shipbuilders received a total of 360,000 CGT in orders, far behind the 1.51 million CGT of Chinese shipbuilders. In response, the South Korean shipbuilding industry predicted that once the LNG carrier order boom begins, South Korea will be able to reverse the situation and surpass China as it did last year.
In addition to the remaining 40 to 80 LNG carrier orders from Qatar, potential large LNG carrier order projects this year include 16 LNG carrier orders from Mozambique and 10 LNG carrier orders from Russia. The total value of these 106 LNG carriers in these three projects is estimated to be as high as US$21.2 billion.
South Korean analysts believe that the variable hindering the South Korean shipbuilding industry from monopolizing LNG carrier orders lies in China's strong LNG purchasing power, which supports Chinese shipbuilders in securing LNG carrier orders. China is one of the largest customers of Qatari LNG. In other LNG projects such as Russia, if China increases its purchasing power, the South Korean shipbuilding industry's monopoly advantage in the LNG carrier market may be broken.
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