Hanwha Ocean, one of the three largest shipbuilding groups in South Korea, has announced that it has won a contract for the construction of six 15,000 TEU LNG dual-fuel containerships valued at about US$1.25 billion from a European shipowner. It is understood that the owner of the order is Maersk, the contract also includes four options. This is the second order for containerships received by Hanwha Ocean after two years and nine months, breaking rumors that the shipbuilder had withdrawn from the containership market.
According to Korean media reports, there were rumors that the Korean shipbuilding industry would “stop the container ship business”, but with the changes in the global market, containership sector is once again receiving attention.
Compared with other ship types, containerships are used to transport a large number of containerized cargo, which is not a field with high technical barriers in the shipbuilding industry. According to the Korean media, Chinese shipbuilders have gradually dominated this market by virtue of the advantages of “low-priced orders” and “mass production”. This year, the world’s new orders of about 3 million TEU container ships, of which Chinese shipbuilders accounted for 80% of the market share.
South Korean shipbuilders claimed to adopt a “high value-added ships screening strategy ”, will mainly undertake LNG carriers and other high value-added ships, to avoid competition with Chinese shipbuilders in the containership market.
However, a 90 percent increase in containership prices over the past four years, coupled with massive orders placed by major global liner companies, has forced Korean shipbuilders to look squarely at the market again. The global containership market is expected to reach $45.7 billion this year.
South Korean shipbuilders believe they are in an “international leading position” in environmentally friendly dual-fuel engine technology, allowing them to re-enter competition with Chinese shipbuilders that are mass-producing ultra-large containerships.
At the same time, Chinese shipbuilders are increasing the proportion of green and environmentally friendly ships in the containership market. Earlier this month, Hapag-Lloyd signed an order for 10+5 17,000TEU LNG dual-fuel containerships with Yangzijiang Shipbuilding, with a total value of about US$3.15 billion; and signed an order for 10+5 9,200TEU LNG dual-fuel powered containerships with New Times Shipbuilding, with a total value of about US$2.1 billion. The total value of the 30 new ships reached US$5.25 billion (about RMB 37 billion).
The shipbuilding plan attracted many Chinese and Korean shipbuilders to participate. In the end, two Chinese private shipbuilders, New Times Shipbuilding and Yangzijiang Shipbuilding, won the bid with competitive prices.
Regarding the failure of the competition, the Korean media said, “The Korean shipbuilders that bid do not need to regret it.” They believe that “the ship specifications ordered by Hapag-Lloyd are 17000TEU and 9200TEU. The Korean shipbuilding industry classifies them as small and low-cost ships. At the same time, due to the limited production capacity of the shipyard, if a large number of orders are signed at one time, more orders for other high-value-added ships will not be obtained. This is unacceptable to Korean shipbuilders.”
As the International Maritime Organization (IMO) strengthens carbon emission regulations, containerships are beginning to transition to LNG and methanol fuels. Chinese shipbuilders offer lower prices while meeting environmental requirements, which gives them a competitive advantage. A Korean industry insider said: “As far as I know, Chinese shipbuilders offer lower prices than Korean shipbuilders, and Chinese shipbuilders are expanding their infrastructure to cope with new orders for environmentally friendly ships.”
For example, Yangzijiang Shipbuilding plans to invest 3 billion yuan to build the Yangzi Hongyuan Green High-tech Clean Energy Shipbuilding Base. The base has a coastline length of about 1,320 meters and covers an area of about 1,300 acres. It plans to build a 300,000-ton shipbuilding dock, a 200,000-ton outfitting wharf, and a 100,000-ton port basin, with an annual production capacity of about 800,000 deadweight tons. It is expected to be completed and put into production by the end of 2026.
New Times Shipbuilding plans to invest 5 billion yuan to develop a new energy ship intelligent manufacturing project. The first phase of the project plans to build new intelligent manufacturing workshops and other factory buildings, add large gantry cranes, and build a new dock and inland wharf. The new dock is 700 meters long and can build two VLCCs side by side, and can accommodate two VLCC half-ship sections side by side. After completion, New Times Shipbuilding will have four dry docks.
Chinese shipbuilders are also accelerating the development of the world’s largest containership of more than 24,000 TEU. In September this year, the 27,500 TEU LNG dual-fuel containership developed by the Shanghai Ship Research and Design Institute (SDARI) was awarded the DNV Approval in Principle (AIP) certificate. In addition, China is upgrading its ports to accommodate large ships of 32,000 TEU, which will further consolidate China’s position in the global containership market.
As liner companies have accumulated sufficient funds in the hot market in recent years, they are ordering new ships in large quantities to update their fleets and maintain scale advantages. Although Korean shipyards have always claimed that they will focus on high-value ships such as LNG carriers, they are obviously unwilling to give up the so-called “low-end” containership market.
It turns out that Korean shipyards are still willing to accept containership orders.
In addition to the 6+4 dual-fuel containerships undertaken by Hanwha Ocean mentioned at the beginning of this article, in September this year, HD Hyundai Samho undertook a contract to build 4 containerships from Wan Hai Lines in Taiwan, China (with a total value of US$510 million), and HD Hyundai Mipo undertook a contract to build 6 medium-sized containerships from a European shipowner (with a total value of US$300 million).
Earlier in July, HD Hyundai Heavy Industries and HD Hyundai Samho jointly accepted an order for 12 LNG dual-fuel containerships from France’s CMA CGM, with a total value of approximately US$2.66 billion, which are expected to be delivered before June 2028. It is reported that the order price is higher than the offer from the Chinese shipbuilder.
From next year, Chinese shipbuilders will deliver 40 to 50 LNG dual-fuel containerships per year, compared to the previous peak of only about 10 per year. In terms of how to deal with Chinese competition, Korean industry experts said, “Dual-fuel engine technology will be the key to competing with Chinese shipbuilders.”
It is said that Korean companies have a technological and production advantage in LNG dual-fuel and methanol dual-fuel engines. The world’s first LNG dual-fuel engine and methanol dual-fuel engine were both produced by Korean companies. Major shipbuilding companies such as HD Hyundai and Hanwha Ocean have priority access to engines developed and produced in Korea.
However, the Korean industry also acknowledges that China is continuously increasing the market size of LNG marine engines. At the same time, Chinese companies are advancing the technological breakthroughs of methanol and ammonia fuel marine engines and are committed to forming comprehensive methanol and ammonia fuel engine development capabilities. Korean media said, “This will pose a new challenge to Korean shipbuilders.”
