Workload Like a Rising Tide... Expectations for Increased Line Prices

Continuous Orders Including Korea Shipbuilding & Offshore Engineering
Sharp Price Increase Centered on Container Ships

[Asia Economy Reporter Choi Dae-yeol] Korea's leading shipbuilders, including Korea Shipbuilding & Offshore Engineering, Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering, have secured two years' worth of orders through consecutive contract wins, raising expectations for ship price increases.

According to the industry on the 24th, the order backlog of the three Korea Shipbuilding & Offshore Engineering companies (Hyundai Heavy Industries, Hyundai Mipo Dockyard, Hyundai Samho Heavy Industries) was recorded at $22.9 billion (based on shipbuilding sector sales) as of last month. The order backlog was $16.4 billion in November last year, increasing by more than $6 billion in half a year. Considering that the company's shipbuilding sector sales last year were about 13 trillion won, it means they have secured about two years' worth of work.

Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries are in similar situations. As of last month, Daewoo Shipbuilding & Marine Engineering's order backlog was $19.1 billion, and Samsung Heavy Industries' was $25.8 billion (based on delivery), both securing about two years' worth of work. The order backlog is an indicator of how much work secured from clients remains. Generally, if a shipyard accumulates about two years and six months of work, it gains an advantageous position in price negotiations. If work is insufficient, contracts must be signed even at low prices, but if a certain amount is secured, the shipyard can be selective with client orders.

According to Clarkson Research, a shipbuilding and shipping market analysis firm, the newbuilding price index was around 136 last month, rising more than 10 points compared to the end of last year. Prices are sharply rising mainly for container ships, which are expected to see a surge in orders this year. The price of 15,000 to 16,000 TEU (1 TEU equals one 20ft container) class container ships has increased by more than 20% over the past six months.

Although Clarkson does not separately compile this, the LNG-powered ultra-large container ship ordered by Daewoo Shipbuilding on the 21st is estimated to be about $7 million more expensive compared to similar-sized container ships. Most major ship types, including small and medium-sized container ships used in coastal areas, ultra-large oil tankers, and bulk carriers, have been on an upward trend for several months.