$500 million for two! Daewoo Shipbuilding wins the most expensive LNG ship order in history

With the continued growth in demand for the LNG market, newbuild prices for LNG carriers continue to hit record highs.

On October 21, Daewoo Shipbuilding & Marine Engineering (DSME) announced that it had signed a contract with a US shipowner for the construction of two 174,000 cubic meter LNG carriers. The total contract value is 710.3 billion won. Based on the exchange rate of 1420.6 won to 1 USD on the day of contract signing, the price per vessel has reached US\$250 million. These two LNG carriers will be delivered before the end of 2026. This is also the highest value since Clarksons released the newbuild price of large LNG carriers in October 2014.

Relevant personnel in the South Korean shipbuilding industry stated: “This is the first time that a single 174,000 cubic meter LNG carrier has reached a price of US\$250 million. According to Clarksons' statistics, there has been no precedent for a similar LNG carrier exceeding US\$250 million in price.”

It is understood that on July 23 this year, DSME had received orders for two large LNG carriers from a European shipowner, with a total contract price of 649.5 billion won (approximately US\$496 million at the time), and a price per vessel of US\$248 million. This exceeded the US\$240 million price per vessel for three LNG carriers that Hyundai Heavy Industries Group's shipbuilding subsidiary, Korea Shipbuilding & Offshore Engineering (KSOE), received from an Oceania shipowner on July 6, setting a new record for LNG carrier prices at the time. However, just over two months later, on September 30, DSME announced that it had cancelled the construction contract for these two LNG carriers because the shipowner failed to fulfill the contract conditions within the deadline.

In recent years, with the recovery of the global LNG shipping and shipbuilding market, the price of LNG carriers has been on an upward trend. In 2018, the price of a 174,000 cubic meter LNG carrier was approximately US\$186 million, and by the end of 2021, it had exceeded US\$200 million. Especially since the beginning of this year, the price of LNG carriers has skyrocketed. Driven by factors such as increased global LNG production, increased demand for upgrades due to strengthened IMO environmental regulations, and the increase in LNG sea transportation and storage demand due to the Russo-Ukrainian conflict, the LNG carrier construction market has become even hotter. At the same time, due to the tight capacity of shipbuilding enterprises and the significant increase in raw material and energy costs, the upward trend in LNG carrier prices continues. In July this year, the price of LNG carriers reached US\$233 million, exceeding US\$240 million in August, and rising to US\$244 million in September.

In addition, with the continued escalation of the Russo-Ukrainian conflict, the global energy supply and demand pattern is undergoing drastic changes, and the demand for LNG sea transportation has increased significantly. In particular, with the upcoming increase in winter heating demand, European countries need to import a large amount of LNG transported by sea, and the charter rate of LNG carriers has also increased significantly. On October 21, the charter rate of LNG carriers hit a new high, with the daily rate on the Baltic Exchange reaching US\$450,000 per day, and the fixed freight rate in the Atlantic reaching US\$425,000 per day, an increase of over US\$100,000 compared to the end of September.

Relevant personnel in the South Korean shipbuilding industry stated: “With the release of orders from Qatar's ‘100-ship plan’ since this year, and the surge in global LNG demand due to the Russo-Ukrainian conflict, the order market environment for LNG carriers continues to improve, and South Korean shipbuilders will seize the opportunity to undertake orders for environmentally friendly, high value-added vessels, including LNG carriers, to accelerate the improvement of profitability.”

According to International Ship Network, including the order for two LNG carriers signed this time, DSME has received orders for 44 new vessels and offshore equipment this year, with a total contract value of approximately US\$9.9 billion, reaching approximately 111% of its annual order target of US\$8.9 billion. This includes 36 LNG carriers, 6 container ships, 1 piece of offshore equipment, and 1 equipment base-level repair.

As of now, the three major South Korean shipbuilders have received orders for 106 LNG carriers this year. Among them, Korea Shipbuilding & Offshore Engineering (KSOE) has received 42 orders, ranking first among the three major shipbuilders; DSME ranks second with 36 orders; and Samsung Heavy Industries ranks third with 28 orders. (Wang Chu)