Did Shanghai lockdown affect Chinese shipbuilders' orders? South Korean shipbuilding industry takes the lead again

The competition for orders between South Korean and Chinese shipbuilding industries is intensifying. Thanks to LNG carrier orders, South Korean shipbuilders regained the lead in May, reclaiming the top spot in monthly order intake from China, which they had lost in April, and further expanding their lead. Their cumulative order intake for the first five months surpassed that of China for the first time in four years.

According to data released by Clarksons on June 5, global new ship orders in May totaled 57 vessels and 2.5 million corrected gross tons (CGT), a 17% decrease from April. South Korea secured 20 vessels and 1.2 million CGT, accounting for approximately 48% of the global market and ranking first. Affected by Shanghai's lockdown measures due to a surge in COVID-19 cases, China only secured 22 vessels and 840,000 CGT, accounting for approximately 34% of the global market and ranking second.

Statistics show that in the first five months of this year, global cumulative new ship orders reached 16.25 million CGT. South Korea secured 148 vessels and 7.34 million CGT, accounting for 45.2% of the global market, an increase of 9.5 percentage points year-on-year, ranking first. China secured 247 vessels and 7.16 million CGT, accounting for 44.1% of the global market, a decrease of 3.2 percentage points year-on-year, ranking second. Japan's market share was 6.0%, down 6.6 percentage points year-on-year, ranking third. This is the first time since 2018 that South Korea's share of global new ship orders in the first five months has exceeded China's. Last year, the shares of South Korea and China were 36% and 47%, respectively, a difference of 10 percentage points.

As of the end of May this year, the global backlog of new ship orders stood at 98.53 million CGT. China held 41.58 million CGT, maintaining its first place. South Korea held 33.65 million CGT, ranking second, and Japan held 9.65 million CGT, ranking third.

Since the beginning of the year, the shipbuilding industries of China and South Korea have been engaged in a close contest for orders. In January, China secured 1.47 million CGT of new ship orders, with a market share of 48%, while South Korea secured 1.38 million CGT, with a market share of 45%, giving China a slight 3% advantage. In February, South Korea secured 860,000 CGT of new ship orders, with a market share of 67%, while China secured 340,000 CGT, with a market share of 26%, giving South Korea a decisive 41% advantage. In March, South Korea secured 233 CGT of new ship orders, with a market share of 48%, while China secured 204.5 CGT, with a market share of 42%, giving South Korea a 6% advantage. In April, China secured 1.54 million CGT of new ship orders, with a market share of 61.35%, ranking first globally, while South Korea secured 820,000 CGT, with a market share of 32.67%, ranking second.

The South Korean industry stated that although China surpassed South Korea in April to regain the top spot in global new ship order intake, from January to April, South Korea still held a slight 0.1% advantage over China, reaching 5.81 million CGT (120 vessels), with a market share of 45.9%, an 11% increase year-on-year. China's cumulative new ship order intake in the first four months was 5.80 million CGT (197 vessels), with a market share of 45.8%, down 2% year-on-year. In May, South Korea's lead widened, with its cumulative global market share exceeding China's by 1.1 percentage points.

Analysts believe that South Korea's recent surge in high-value-added liquefied natural gas (LNG) carrier orders is the reason for its regaining the championship. South Korean industry insiders stated that while South Korea ultimately lost to China in the order battle last year, it regained the top spot in the first five months of this year mainly due to increased global demand for LNG carriers, particularly the recent surge in global LNG prices due to geopolitical risks and rising oil prices, leading ship owners to significantly increase orders for LNG carriers.

The Clarksons Newbuilding Price Index in May was 160.07, continuing its upward trend for 18 consecutive months and reaching its highest level since February 2009. The price of LNG carriers of 174,000 cubic meters or more rose from US\$224 million to US\$227 million, with prices rising across all new vessel types.

As of the end of May this year, the global order volume for large LNG carriers of 174,000 cubic meters or more has increased more than fourfold compared to the same period last year, reaching 61 vessels. South Korea's three major shipbuilders secured 39 vessels, including 17 by Hyundai Heavy Industries, 12 by Daewoo Shipbuilding & Marine Engineering, and 10 by Samsung Heavy Industries. China secured 22 vessels. The transaction price of new 174,000 cubic meter LNG carriers averaged US\$227 million in May, an increase of US\$3 million compared to US\$224 million in April.

However, excluding large LNG carriers of 140,000 cubic meters or more, global new ship orders have decreased significantly in the first five months of this year. Orders for large container ships of 12,000 TEU or more, tankers, and bulk carriers—the three major vessel types—decreased by 23.4%, 84%, and 71.3%, respectively, compared to the same period last year.

Lee Eun-chang, a research fellow at the Korea Institute for Industrial Economics & Trade, predicts: "Unlike the three major vessel types, the number of LNG carrier orders is generally not very large, but due to changes in the international energy structure and requirements of new maritime environmental regulations, demand will continue in the short term."

Lee Eun-chang also expressed concern about the severe shortage of human resources currently facing the South Korean shipbuilding industry. He stated: "The order intake of the three major shipbuilders has exceeded their current production capacity. Some believe that if ship owners order new ships now, they will not receive them until 2026, so the order intake of shipbuilders in the second half of this year may be adjusted downward."

Professor Baek Jeom-gi of the Department of Naval Architecture and Ocean Engineering at Pusan National University stated: "There is indeed a shortage of human resources in South Korean shipbuilders at present. The shipbuilding industry is largely a cyclical industry, so shipyards should develop relevant plans to seize opportunities to increase profits and raise funds during periods of prosperity, and to conduct more labor training and reserve talent during periods of downturn." He predicts: "Despite these concerns, the shipbuilding industry remains optimistic about the second half of this year. Since LNG is the most effective way to achieve zero carbon emissions, the demand for LNG carriers will continue to increase." (Wang Chu)