LPG vessel orders are poised to take off! South Korean shipbuilders are seizing market opportunities.

With the increasing number of aging LPG carriers, the newbuilding order market for LPG carriers is poised for takeoff. Korean shipbuilders, possessing advanced dual-fuel LPG carrier technology, will seize this opportunity to expand their order share in this market segment and further gain a competitive edge.

The order structure for LPG carriers is changing.

According to a source at a Korean shipbuilding company, there are 46 mid-sized LPG carriers (20,000-45,000 cubic meters) over 15 years old this year. Although this number will slightly decrease to 40 next year, it is expected to increase year by year for the following three years, reaching 46 in 2022, 62 in 2023, and 77 in 2024. However, the number of newly built LPG carriers completed and delivered in the recent three years is only 3 in 2020, 7 in 2021, and 10 in 2022, which is insufficient to meet demand.

The situation is similar for very large gas carriers (VLGCs) of 65,000 cubic meters or more. The number of VLGCs over 15 years old will increase from 70 in 2020 to 79 in 2021, and is expected to reach 87 in 2022, 102 in 2023, and 113 in 2024. The number of newly built VLGCs completed and delivered in the recent three years is 24 in 2020, 26 in 2021, and 16 in 2022.

Currently, LPG carriers generally use marine fuel oil for navigation. Park Mu-hyun, a researcher at Hana Financial Investment Co., Ltd., said: "With the continuous strengthening of international maritime environmental regulations and considering the competition among major global shipping companies to improve fuel efficiency, the order structure of LPG carriers is changing. Bulk orders for dual-fuel LPG carriers using LPG as the main clean fuel will increase, which is worth looking forward to." He gave an example: "In the 20,000-45,000 cubic meter mid-sized LPG carrier segment, based on the total fuel cost over 20 years of operation, the cost for an old LPG carrier is 8.8 times higher than that of a newly built dual-fuel LPG carrier."

Korean shipbuilders are at the forefront of LPG-powered ship development.

With the recovery of the newbuilding order market for LPG carriers and dual-fuel LPG carriers, Korean shipbuilders such as Hyundai Heavy Industries Group and Daewoo Shipbuilding & Marine Engineering, which have already gained a market advantage, are expected to benefit.

In July and August last year, Hyundai Mipo Dockyard and Hyundai Samho Heavy Industries, subsidiaries of Hyundai Heavy Industries Group, respectively received orders for two dual-fuel VLGCs of 38,000 cubic meters and 90,000 cubic meters. The two first vessels will be delivered in June and July next year. These will be the world's first newly built mid-sized and large dual-fuel VLGCs to be delivered.

The Korean shipbuilding industry has been at the forefront of LPG-powered ship development worldwide. Hyundai Heavy Industries Group, in collaboration with Hyundai Globle Services and Lloyd's Register (LR), developed a dual-fuel VLGC and obtained an Approval in Principle (AiP) certificate from LR in 2018. In 2014, Daewoo Shipbuilding & Marine Engineering, in collaboration with DSEC, Exmar, MAN D&T, and DNV GL, conducted the world's first joint research project on LPG-powered ships, and its developed LPG-powered dual-fuel LPG carrier received basic certification from DNV GL.

It is reported that Hyundai Heavy Industries is converting an 84,000 cubic meter VLGC delivered in 2015 into a vessel equipped with an LPG dual-fuel engine, and successfully completed sea trials on November 10 this year. This vessel is the world's first LPG-powered dual-fuel VLGC, and compared to vessels that use marine fuel oil exclusively, it can reduce fuel consumption by 10% at maximum speed, and reduce carbon dioxide emissions by 20% and sulfide emissions by 97%.

It is expected that with the increase in the number of LPG-powered dual-fuel LPG carriers being converted and operated, major global shipping companies will significantly increase new orders for LPG-powered mid-sized LPG carriers and VLGCs.

To date, Korean shipbuilders have received a total of 37 orders for dual-fuel LPG carriers, with Hyundai Heavy Industries Group accounting for over 80% with 30 orders. Against this backdrop, Daewoo Shipbuilding & Marine Engineering, which previously focused on LPG carrier construction, will likely receive more orders for dual-fuel LPG carriers, especially dual-fuel VLGCs. In the medium to long term, LPG carriers can also be converted into ammonia-fueled vessels, and shipowners' interest in this is expected to increase.

Park Mu-hyun said: "In the shipbuilding and shipping industries, achieving the first delivery of a new type of vessel is very important. This is because it will become the technical standard for this type of new vessel and will attract the attention of shipowners."

Mass production of LPG dual-fuel engines officially begins.

Hyundai Heavy Industries Group recently announced that Hyundai Mipo Dockyard and Hyundai Samho Heavy Industries have started construction of a 38,000 cubic meter dual-fuel LPG carrier and a 90,000 cubic meter dual-fuel VLGC, respectively. To this end, its large engine factory in Ulsan has recently completed the assembly production line for LPG dual-fuel marine engines and has begun mass production.

In October last year, Hyundai Heavy Industries Group's engine factory received a production order for a 9700-horsepower LPG dual-fuel marine engine from Hyundai Mipo Dockyard and delivered it on September 14 this year.

A relevant person from Hyundai Heavy Industries Group said: "Currently, the dual-fuel LPG carrier being built by Hyundai Mipo Dockyard has been installed with gas trial operation equipment." The vessel is expected to be delivered in July 2021.

Unlike liquefied natural gas (LNG)-powered ships, LPG-powered ships can directly supply liquefied LPG as fuel for the marine engine, so they do not need to install additional gasification equipment and are easy to store.

Korean industry insiders say that LPG-powered ships are not only environmentally friendly but also easily obtain fuel from LPG bunkering facilities around the world, and therefore are considered to have high growth potential.

It is reported that with the development of clean energy power technology represented by natural gas, Hyundai Heavy Industries Group is actively developing various environmentally friendly ship projects. A relevant person from Hyundai Heavy Industries Group said: "Following LNG-powered ships, with the construction of LPG-powered ships, we will further expand our natural gas-powered ship business, which is becoming a new driving force for clean energy technology growth." (Wang Chu)