Abandoning LNG carriers?! Japanese shipbuilders explore alternative paths
2023-02-13 09:00
Following Japan's largest shipbuilding company, Imabari Shipbuilding, Japan's second largest shipbuilding company, Japan Marine United (JMU), is also focusing on LNG-powered vessels. In the face of increasingly fierce competition from Chinese and South Korean shipbuilders in the LNG vessel sector, Japanese shipbuilders have essentially abandoned the LNG vessel market, hoping to find a new path in the field of environmentally friendly vessels.
According to Japanese media reports, JMU will begin building LNG-powered vessels. To this end, the company will increase its equipment investment to around 7.5 billion yen (approximately 389 million RMB) from this fiscal year (April 2022-March 2023), a 20% to 30% increase compared to previous years. In recent years, due to sluggish performance, JMU's annual equipment investment has been only tens of billions of yen, mainly focused on upgrading old equipment.
According to the plan, JMU's Tsu Works in Mie Prefecture will be the first to start building LNG-powered vessels. This technology will then be extended to the Ariake Works in Kumamoto Prefecture and the Kure Works in Hiroshima Prefecture, ultimately enabling all three shipyards to have the capability to build LNG-powered vessels.
JMU's vessels have the advantage of excellent fuel efficiency, achieved by combining a hull design that reduces water resistance with a high-efficiency engine. JMU President Kotaro Chiba said: "JMU's vessels have received very high praise, and fuel efficiency is perhaps more important than ever before, which will be our advantage."
Apart from LNG carriers, JMU has no experience in building LNG-powered vessels. In 2021, JMU received an order from the Japan Agency for Marine-Earth Science and Technology (JAMSTEC) to build an LNG dual-fuel Arctic research vessel, Japan's first icebreaker research vessel.
In the previous fiscal year (ending March 2022), JMU's consolidated sales decreased by 4% year-on-year to 227.4 billion yen, with a net profit of 5 billion yen, successfully turning a profit. Thanks to its cooperation with Imabari Shipbuilding, JMU's order intake increased by more than 70%. Despite this, there is still a huge gap in sales compared to China Shipbuilding Group, the world's largest shipbuilding group. In terms of cost competitiveness and financial status, JMU lags far behind major Chinese and South Korean shipbuilders.
Although JMU has built 160,000-cubic-meter large LNG carriers in the past, the Japanese shipbuilding industry received almost no orders during last year's record-breaking surge in LNG vessel orders. According to Clarkson, global new orders for LNG vessels totaled 182 last year, more than double the peak of 83 in 2021. However, only Mitsubishi Shipbuilding received an order for one 3,500-cubic-meter LNG bunkering vessel from Japanese shipbuilders, while the remaining 181 were all undertaken by Chinese and South Korean shipbuilders.
In fact, since 2016, the disadvantaged Japanese shipbuilding industry has not received a single order for a large LNG carrier for seven consecutive years. Against this backdrop, Japanese shipbuilders, led by JMU, have chosen to focus on LNG-powered vessels, because even though China and South Korea have a significant lead in order volume, Japanese shipbuilders still have market space in the development of environmentally friendly ship types.
Last year, Yukinari Higaki, president of Imabari Shipbuilding, also publicly stated that he would first focus on building LNG-powered vessels. Imabari Shipbuilding will invest billions of yen to promote the independent manufacturing of LNG fuel tanks and stabilize the procurement of core components, thereby expanding production. Mitsubishi Shipbuilding delivered Japan's first LNG-powered passenger-roll-on/roll-off ferry, the "Sunflower Kurenai," built for Mitsui O.S.K. Lines in January this year, and is currently building a second vessel of the same type.
In recent years, with the acceleration of the decarbonization process in the shipping industry, new orders for alternative fuel vessels such as LNG-powered vessels have increased rapidly. According to DNV's statistics, the total number of new orders for alternative fuel vessels globally in 2022 was 275, with LNG-powered vessels leading the way at 222, accounting for 81% of the total orders. Currently, there are 876 LNG-powered vessels in operation and on order.
In its previously released 2022 LNG-powered vessel order trend report, the industry alliance SEA-LNG stated that 2022 was another strong year for LNG-powered vessel orders. Despite the high price of LNG, the number of new orders for LNG-powered vessels last year was almost the same as the record-breaking 2021; if the current growth trend continues, it is expected that 2000-4000 LNG-powered vessels will be in operation by 2030.
LNG is a transitional fuel, so it is also crucial to develop next-generation fuel vessels to achieve zero emissions. JMU plans to use the cash from selling LNG-powered vessels to build investment capacity. Through a joint venture with Imabari Shipbuilding, JMU hopes to quickly develop ammonia-fueled vessels. Ammonia does not emit carbon dioxide when burned and is expected to become a new generation of zero-carbon fuel.
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