New, Value Added, Eco-Friendly Ships. Shipbuilding exports are taking the lead in Korea’s exports in the first half of the year. During this span, Korea’s exports rose 11.9% year on year. The Korean shipbuilding industry secured four years’ worth of work through the end of the first half of this year. This is the largest order backlog in 12 years. The global ship price index is also at its highest since 2008.

The Korean Ministry of Trade, Industry and Energy (MOTIE) said Korea’s ship exports reached US$9.22 billion in the first half of this year, up 11.9% from the same period last year. Exports rose as increased orders from 2021 led to production and a ship price hike took effect. First-half orders to Korean shipbuilders accounted for 29% of total global orders. Korea shipbuilders kept its top spots in orders for high-value vessels and eco-friendly vessels in the world, accounting for 61% and 50% of their global orders, respectively. Korean shipbuilders’ order backlog is at a 12-year high of 38.80 million compensated gross tonnage (CGT), up from 39.88 million CGT in 2011. They now have four years’ worth of work. At 170.9, the ship index is at its highest level since 178.0 in 2008. The price of an LNG carrier in particular reached a record high of US$260 million.

The Korean shipbuilding industry landed 44% of the total global orders in July, overtaking the Chinese shipbuilding industry to become the world’s top monthly shipbuilding order taker for the first time in five months since February 2023. Including July’s results, Korean shipbuilders’ global market share is 30% in new shipbuilding orders, 59% in valued-added vessels, and more importantly, 51% in eco-friendly ships.

HD Hyundai secured orders for 43 methanol-powered container ships worldwide and stands at the forefront of the next-generation eco-friendly ship market. HD Hyundai is propelling the eco-friendly shipbuilding market forward with the world’s first 2,100 TEU-class methanol-powered container ship, Laura Maersk, built by Hyundai Mipo Dockyard, which has 10 large-scale drydocks and 9 huge Goliath Cranes. This vessel is a milestone as the first of 19 methanol-powered ships ordered by global shipping giant A.P. Moller-Maersk. It marks the world’s inaugural container ship using methanol as fuel as the next-generation ship fuel to LNG. Maersk, with a goal of carbon neutrality by 2040, introduces methanol-powered ships as its pivotal first step.

The 400-sq.-kilometer island of Geoje is home to shipyards run by Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering, the world’s third and fourth largest shipbuilders, alongside a number of subcontractors with construction know-how. It once boasted the highest gross regional product in South Korea around 10 years ago, during the industry’s boom. Samsung Heavy Industries is employing 80 Indonesian workers this year at its Geoje facility.

South Korean shipbuilders command nearly 90% global share in LNG tankers despite the high level of expertise needed to construct the vessels. But the industry does not have the workforce to meet the sudden jump in demand.

At every shipyard operated by the Big Three players – Samsung Heavy Industries, Daewoo Shipbuilding, and Hyundai Heavy Industries – construction schedules are fully packed through the end of 2025. The backlog reached a point where orders have been diverted to China, whose quest to transform itself into a shipbuilding power was boosted by the Ukraine war.

Orders for LNG tankers increased 2.3-fold last year, according to British market intelligence firm Clarksons Research. South Korean shipbuilders captured roughly 70% of that demand while the rest went to China, where the surge in business is furnishing shipbuilders with increased technological expertise. With Japanese shipbuilders having fallen behind the competition, South Korean firms remain the only players that can compete against the growing Chinese new builds.

If South Korea’s shipbuilding industry slowly loses its market share to China, expanding the workforce appears a crucial response if the sector is to avoid the same fate as Japan’s. 

References:

• Yoon Young-sil, Business Korea.
• Park Jae-hyuk, Korea Times.
• Kotaro Hosokawa, Nikkei.