It should not be surprising that South Korean shipbuilders overtook China regarding ship order intake in February 2024 and reached the number one spot globally. According to Clarkson Research, a British shipbuilding and shipping market analysis firm, global ship orders totalled 3.4 million Compensated Gross Tonnage [CGT] (100 ships) in February 2024, of which South Korea won 1.71 million CGT (28 ships). A similar trend was observed in the order rally of South Korea’s three major shipbuilders. Amidst rising ship prices, HD Korea Shipbuilding & Offshore Engineering (KSOE) won orders for four Liquefied Natural Gas (LNG) carriers, two automobile carriers, two mammoth-sized crude carriers, two medium-sized liquefied petroleum gas (LPG) carriers and four petrochemical carriers. The total order value of these vessels alone is worth 2.7218 trillion won (US$ 2.0535 billion). There is fierce competition in the shipbuilding business, with China and South Korea jostling for the top spot in the global market.
China has the advantage of labour, while South Korea has the lead in terms of technology. The lack of labour disadvantages South Korea but can still pose a significant challenge to China, and it occasionally gets more orders than China. Notably, South Korea last had the leadership in new orders in February 2023. At that point, South Korea’s overall order book remained second to China's total size. China holds 47% of the global total of 117.77 million GT, with orders for 55.35 million tons. South Korean industry has a backlog of 39.26 million tons, which accounts for a third of the global orderbook. South Korea and China have been locked in a battle for industry dominance in shipbuilding. South Korea believes the industry's future is eco-friendly technology and automation, while China’s advantage remains in price and volume.
Clarkson Research also shows South Korea won the largest share of new orders in July 2023. South Korean industry won 44% of the new orders versus the 34% awarded to Chinese shipbuilders. Clarkson reported that South Korea won orders for 29 vessels in June 2023, giving it 1.46 million CGT out of 3.33 million CGT. China received orders for more ships, 48, but totalled only 1.13 million CGT. In July last year, when South Korea’s shipbuilding industry had edged out its Chinese rivals, analysts also questioned if the shipbuilding industry was entering a new decline after having peaked in 2022.
Japan’s Nomura Securities then speculated that the global shipping industry, specifically orders for HD Hyundai, peaked in 2022. They forecast an overall decline of at least 20% in new orders, saying they did not believe a surge in tanker orders could help offset declines in the other sectors for South Korean shipbuilders. In its July 2023 report, Clarkson said orders were down by a quarter in 2023 versus 2022. Industry observers agreed that overall orders would be down in 2023 and 2024 versus the peaks of 2022. HD Hyundai, however, disputed Nomura’s forecast, noting that it had booked nearly US$ 7.3 billion in orders in 2023, like its orders in the same period in 2022, with South Korea’s shipbuilding industry claiming that its capacity was booked for the next three-and-a-half years. The expectation is that the push for decarbonisation and introducing new technologies will drive future orders. China and South Korea increased their orders in 2023 despite the global slowdown in shipbuilding orders versus the record pace of 2021 and 2022. China continued to receive orders for bulkers and containerships, while South Korea highlighted its leadership with gas carriers and dual-fuel vessels. In 2023, South Korea’s shipbuilders had three-quarters of all the orders for new LNG carriers or 255 vessels.
In 2023, China solidified its position as a dominant player in the shipbuilding industry by accounting for 50.2 per cent of the world’s completed volume, 66.6 per cent of new orders, and 55 per cent of backlogged orders, pushing the nation’s market share to a historic high. According to Clarkson Research, China overtook South Korea as the top receiver of global shipbuilding orders in 2021 regarding annual volumes. However, China still lagged behind Korean firms in terms of advanced technologies, designs and standards-setting. South Korea has a commanding lead in high-value-added orders, such as for liquefied natural gas (LNG) carriers. Despite three consecutive years of dominating total orders by volume, China’s monthly figures still fluctuate to the point that it still finds itself in a neck-and-neck race with South Korea, which received more shipbuilding orders.
The three major South Korean shipbuilders are expected to enjoy a boom in new orders this year as shipping companies seek to replace superannuated vessels and face tougher environmental regulations. The LNG carrier orders, mainly targeted by South Korean shipbuilders, rose 6% year-on-year to US$ 265 million. In comparison, prices of Very Large Crude Carriers VLCCs and ultra-large container ships rose 6.6% and 10.2%, respectively. In 2024, Samsung Heavy Industries focused on obtaining more profitable orders, winning a US$ 3.5 billion order for fifteen 173,000-cubic-meter LNG carriers on 6 February and an order for a shuttle tanker from Qatar on 4 March. Earlier, Hanwha Ocean had also won orders for two VLCCs and two very large ammonia carriers. The orders totalled about US$ 510 million for two months. The two VLCCs hit the highest order amount in 16 years. A steady rise in ship prices is also expected to boost the three major Korean shipbuilders’ profitability. In fact, Clarkson Research’s New Shipbuilding Index recorded 181.45 points, up 11.0 points from the same month of 2023.
It is interesting that last year, the industry was speculating that South Korea would also book a major order from Qatar tied to building slots reserved in 2020 for LNG carriers. As early as September 2023, there was speculation that the three big shipbuilders, HD Hyundai Heavy Industries, Hanwha Ocean, and Samsung Heavy Industries, could book orders worth more than US$ 9 billion for as many as 40 ships tied to Qatar’s LNG expansion program. Analysts also pointed to the new LNG export terminals approved in the United States and the growth of international LNG imports by ships, saying this will positively affect shipbuilding.
In February 2024, South Korean firms received new orders for 28 ships, with a total value of 1.71 million compensated gross tonnage (CGT) – an indicator of how much work is needed to build a specific type of ship – accounting for 50 per cent of all global orders. In comparison, China secured orders totalling 1.41 million CGT, accounting for 41 per cent of global orders. Meanwhile, South Korea has also set out plans to expand its advantage in its pillar shipbuilding industry as it similarly seeks to contend with mounting challenges from China. Seoul has announced a five-year investment plan, valued at 9 trillion Korean won (US$ 6.75 billion), with three major Korean ship makers to secure a “superior gap” in the nation’s shipbuilding technologies.
At a global level, South Korea has become one of the topmost players in this industry due to its large shipbuilding capacity, R&D initiatives, and technological advancements. The production of high-value-added ships like gas carriers and container ships has given South Korea a competitive edge over other countries. Pertinently, shipbuilding contributed US$ 9.22 billion to the country’s exports in the first half of 2023, signifying an 11.9% year-on-year increase. This was primarily due to a sharp climb in demand for LNG tankers, partly due to the Russia-Ukraine war and the eased visa requirements for overseas workers. South Korea needs to keep ahead of China in this sphere of economic activity as it has a global impact.
