Holding orders exceeding USD 100 billion! South Korea's three major shipbuilders are scrambling for orders

Following the receipt of orders for two VLECs from INEOS, the world's largest ethane carrier operator, Hyundai Heavy Industries Group's order intake this year has reached 190 vessels totaling US$22.82 billion. This surpasses last year's full-year target and sets a new record for annual order intake since 2013. Meanwhile, South Korea's three major shipbuilding giants have all completed and exceeded their annual order targets, with a backlog exceeding US$100 billion, marking the best performance in the Korean shipbuilding industry in recent years.

On December 1, Korea Shipbuilding & Offshore Engineering (KSOE), the shipbuilding business holding company of Hyundai Heavy Industries Group, announced that it had signed a contract with an Asian shipowner for the construction of two large ethane carriers (VLECs), with a contract value of 399.9 billion won (approximately US$307 million). These two VLECs will be built by Hyundai Heavy Industries' Ulsan shipyard and are scheduled for delivery to the shipowner by the end of 2026.

Although KSOE did not disclose specific information about the shipowner, the order was confirmed to be from Japanese shipowner, Iino Lines. Iino Lines announced on November 30 that it had ordered two 99,000 cubic meter VLECs and signed a long-term charter contract with INEOS.

According to International Ship Network, the two new vessels will be equipped with dual-fuel engines that can use ethane as fuel, reducing carbon dioxide emissions. The vessels are expected to be delivered between October 2025 and January 2026, joining Iino Lines' existing fleet of 97 vessels.

Including this order, KSOE has received orders for 190 new vessels this year, with a total contract value of US$22.82 billion, reaching 130.8% of its annual target of US$17.44 billion. Notably, the average price per vessel is as high as US$120 million.

Since the beginning of 2022, KSOE has been securing new vessel orders at a faster pace than in 2021, when the shipbuilding industry's upturn began. On January 4, the company announced that it had signed contracts for a total of 10 new vessels with shipowners in Europe, Asia, and Oceania, with a total contract value of 1.67 trillion won (approximately US$1.4 billion), marking the start of this year's order spree. In January alone, the company received new vessel orders worth US$3.144 billion, representing 18% of its annual target; in the first two months of the year, the company received new vessel orders worth US$4.9 billion, representing 28% of its annual target.

According to statistics, in the first quarter of this year, KSOE received orders for 68 new vessels, with a contract value of US$7 billion, representing 40% of its annual target of US$17.44 billion. In the first half of the year, the company received orders for 123 new vessels, with a total contract value of US$14.34 billion, representing 82% of its annual target of US$17.44 billion. In the first three quarters of the year, the company received orders for 176 new vessels, with a total contract value of US$20.35 billion, reaching 116.6% of its annual target of US$17.44 billion.

The Korean industry indicates that the newbuilding market remains active this year, and newbuilding prices are also on an upward trend. At the end of October this year, the Clarkson Newbuilding Price Index was 161.96, down 0.31 points from 162.27 at the end of September, but still 9.68 points higher than at the end of October last year. South Korea's three major shipbuilders, led by KSOE, continue to receive orders, focusing on high value-added and environmentally friendly vessels such as large LNG carriers. To date, in addition to KSOE exceeding its annual order target, Daewoo Shipbuilding & Marine Engineering has received orders for 46 vessels totaling US$10.4 billion this year, reaching approximately 117% of its annual target of US$8.9 billion, exceeding US$10 billion for two consecutive years after 2021; Samsung Heavy Industries has received orders for 49 vessels totaling approximately US$9.45 billion this year, reaching 107% of its annual target of US$8.8 billion.

Relevant personnel in the Korean shipbuilding industry stated: "With the release of Qatar's '100-ship plan' orders this year and the surge in global LNG demand due to the Russia-Ukraine conflict, the LNG carrier ordering market environment has continued to improve, and the three major shipbuilders have smoothly achieved their order targets this year, laying a solid foundation for improving profitability."

According to statistics, the three major Korean shipbuilders have received orders for 113 LNG carriers this year, including 39 by KSOE, 38 by Daewoo Shipbuilding & Marine Engineering, and 38 by Samsung Heavy Industries. In addition, the total backlog of the three major shipbuilders has exceeded US$100 billion, securing work for the next four years. KSOE's backlog is US$45.1 billion (end of August), Daewoo Shipbuilding & Marine Engineering's is US$29.7 billion (end of September), and Samsung Heavy Industries' is US$28.2 billion (end of August). It is expected that as low-priced orders are gradually digested, steel costs decline, and the Korean won depreciates against the US dollar, the three major shipbuilders will accelerate their improvement in profitability.