45 ships! A 10-fold increase in 5 years! China's shipbuilding industry is rising strongly

China's LNG carrier order intake has reached a record high this year, increasing from 10 vessels in 2018 to 45 this year. The order value has increased more than tenfold in five years. The booming LNG carrier market has led to the rapid rise of China's shipbuilding industry in the LNG carrier construction market, creating a new atmosphere where five shipyards are now participating in international competition, compared to only Hudong-Zhonghua in the past.

45 vessels, $9.8 billion! China's LNG carrier order intake hits a record high this year.

According to Clarksons' data, the global new LNG carrier order volume has reached 163 vessels so far this year, exceeding last year's 86 vessels and setting a new historical record. Among them, Chinese shipbuilders won 45 LNG carrier orders, accounting for nearly 30%, with a contract value of approximately $9.8 billion, about five times the order value in 2021.

As of late November, Chinese shipbuilders' backlog of LNG carriers reached 66 vessels, accounting for 21% of the global backlog of 312 vessels. In contrast, among the existing global fleet of 710 LNG carriers, only 65 were built by Chinese shipbuilders, accounting for 9%.

Data from VesselsValue shows that the number of LNG carrier orders won by Chinese shipbuilders in the past five years has increased from 10 in 2018 to 32 in the first three quarters of this year, and the total order value has also increased tenfold, from $563 million in 2018 to $5.966 billion (approximately RMB 42.452 billion) this year.

It is worth mentioning that in 2018, all 10 LNG carrier orders received by China's shipbuilding industry were for small and medium-sized LNG carriers, with no orders for large LNG carriers. The average value of a single vessel was only $56 million, while the construction cost of a large LNG carrier at that time exceeded $180 million. In contrast, the average value of a single vessel in the 32 LNG carrier orders received by Chinese shipbuilders in the first three quarters of this year is approximately $186 million.

Along with the surge in orders, LNG carrier prices have also risen. The construction cost of a 174,000-cubic-meter large LNG carrier has increased from approximately $205 million per vessel a year ago to approximately $248 million. VesselsValue data shows that the global order value for LNG carriers has been climbing quarter by quarter since the first quarter of 2021. Last year, the global order value for LNG carriers reached $17.53 billion; in the first three quarters of this year alone, the order value has reached $28.706 billion, exceeding last year's total by $10 billion.

Currently, Hudong-Zhonghua remains the main player in the construction of large LNG carriers in China, having received orders for 33 large LNG carriers this year. At the same time, Jiangnan Shipyard, CSSC, and Yangzijiang Shipbuilding have successively entered this market. In March this year, Jiangnan Shipyard signed its first contract with ADNOC L&S, a subsidiary of ADNOC, for the construction of two 175,000-cubic-meter LNG carriers. This is also China's first order for large LNG carriers in the purely international market, pioneering direct cooperation between Chinese shipbuilders and leading international oil and gas companies in the construction of large LNG carriers.

In March this year, CSSC signed a contract with COSCO SHIPPING for the construction of 2+2 175,000-cubic-meter large LNG carriers, becoming the third Chinese shipyard to receive orders for large LNG carriers after Hudong-Zhonghua and Jiangnan Shipyard. In October, Yangzijiang Shipbuilding signed a contract with a European shipowner for the construction of two 175,000-cubic-meter LNG carriers, becoming the fourth domestic shipyard and the first domestic private shipyard to enter the large LNG carrier construction market.

Meanwhile, COSCO SHIPPING Heavy Industry has also obtained GTT certification in October, obtaining a "pass" to enter the large LNG carrier construction market. It is understood that COSCO SHIPPING Heavy Industry has completed various technical preparations and plans to sign orders and start construction of 175,000-cubic-meter and 180,000-cubic-meter LNG carriers as soon as the end of this year.

South Korean shipyards have limited dock resources, leading more overseas shipowners to order LNG carriers from China.

A major factor driving the increase in new LNG carrier orders this year is the Russo-Ukrainian War. Europe once relied on Russia for about 40% of its natural gas, but since the outbreak of the war, European countries have been reducing their imports of Russian natural gas through pipelines, turning to LNG imports from the United States, West Africa, and the Middle East, significantly increasing the demand for LNG carriers.

Another important factor is QatarEnergy's "100-ship plan." To support the expansion of its gas fields, QatarEnergy is expanding its LNG carrier fleet and has reserved berths for about 150 LNG carriers at the three major South Korean shipyards and Hudong-Zhonghua. Since the beginning of this year, 66 orders from Qatar's "100-ship plan" have been placed, with 54 going to the three major South Korean shipyards and 12 to Hudong-Zhonghua. Qatar's orders account for more than half of the three major South Korean shipyards' 107 LNG carrier orders this year.

For a long time, the South Korean shipbuilding industry has held a monopoly in the high-tech, high-value-added large LNG carrier market, with the three major South Korean shipyards accounting for more than 90% of new ship orders. However, in recent years, China's shipbuilding industry has developed rapidly, and its market share has increased year by year. Last year, Chinese shipbuilders accounted for only 10% of the new LNG carrier market, but this year it has expanded to nearly 30%.

Regarding the significant increase in the market share of Chinese shipbuilders in the LNG carrier market, South Korean shipbuilding industry insiders pointed out that the three major South Korean shipyards have received more than 100 LNG carrier orders this year, and their dock resources are already fully booked until 2026, resulting in order overflow, which has created opportunities for Chinese shipbuilders to win LNG carrier orders.

However, South Korean shipbuilding industry insiders said that foreign shipowners seem to have a more positive view of South Korean shipbuilders, stating that South Korean shipbuilders can "achieve the designs shipowners want, are capable of meeting delivery deadlines, and ensure problem-free ship operation."

Despite this, 19 of the LNG carrier orders received by Chinese shipbuilders this year are from overseas shipowners. Robert Songer, an analyst at ICIS, a bulk commodity consulting firm, said that considering the large backlog of orders from South Korean shipbuilders and increasing costs, Chinese shipbuilders have become more attractive. It is expected that Chinese shipbuilders will receive more overseas LNG carrier orders in the future.

Previously, there were reports that COSCO SHIPPING Heavy Industry had signed a letter of intent with Danish shipowner Celsius Tankers for the construction of 4+8 180,000-cubic-meter LNG carriers. This is the first time Celsius Tankers has cooperated with a Chinese shipyard. Since entering the LNG carrier market in 2018, all 13 of the company's 180,000-cubic-meter LNG carriers have been built by Samsung Heavy Industries in South Korea.

In addition to the 19 overseas orders, the 26 domestic LNG carrier orders received by Chinese shipbuilders this year were shared by Hudong-Zhonghua, CSSC, and Jiangnan Shipyard. This number is also much higher than in previous years; in the past two years, domestic shipowners have only ordered 9 LNG carriers from Hudong-Zhonghua.

Robert Songer, an analyst at ICIS, said that China's demand for LNG carriers stems from the need to transport 20 million tons of natural gas from the United States each year. Sia Energy, a consulting firm, predicts that China will need about 80 LNG carriers to transport imported LNG from the United States.

This also means that Chinese shipbuilders are expected to receive more LNG carrier orders in the future.