[Super Gap K Shipbuilding] Korea's Top 3 Shipbuilders, Technology Gamble Against China

(Part 1) Research and Development of Eco-Friendly Ships in the Carbon Neutral Era
Korea Shipbuilding & Offshore Engineering Likely to Exceed 100 Billion KRW in R&D Expenses
Daewoo Shipbuilding & Marine Engineering's Orders Last Year All Dual-Fuel

Editor's NoteThe world's 'money' and political consensus are converging on carbon neutrality. The shipbuilding industry, which belongs to the high carbon-emitting sectors, cannot escape this trend. Major shipowners in Europe and elsewhere are demanding eco-friendly vessels. The breakthrough technology needed to surpass China, which has already overtaken Korea, is eco-friendly ships with a super-gap advantage. This is why domestic shipbuilders have established dedicated sustainability committees on their boards and are fully committed to developing eco-friendly ship technologies. Together with the government, they have formed the 'Shipbuilding Industry Carbon Neutrality Committee' to devise core technology development strategies for ecosystem greening. As orders boom centered on high value-added and eco-friendly ships, expectations for a return to profitability are growing. We take an in-depth look at the current status and future of domestic shipbuilders preparing for the carbon-neutral era.

[Asia Economy Reporter Oh Hyung-gil] 'China 2082 vs Korea 1627'

Last year, out of the global ship order volume of 42.78 million CGT, China and Korea shared 87%, or 37.09 million CGT. This clearly shows the influence the two countries currently hold in the global shipbuilding industry. Notably, the order volume gap between the two countries narrowed to 455 CGT, about half of the previous year's 833 CGT. The secret behind Korea's shipbuilding industry's ability to catch up despite being overwhelmed by China's low-price orders and volume offensive was precisely 'technology.'

This is clearly evident when looking at new ship prices. The new ship price for LNG carriers, which Korea mostly secures orders for, was $248 million as of December last year, whereas the container ships dominated by China were priced at only $215 million.

Although the Korean shipbuilding industry lost the lead to China, it is focusing on securing a super-gap advantage with its advanced technology. By introducing new technologies that reduce carbon emissions while maintaining economic efficiency in line with the carbon-neutral era, it is satisfying shipowners' demands.

Korea Shipbuilding & Offshore Engineering expects its R&D expenditure to exceed 100 billion KRW for the first time last year. It spent 77.7 billion KRW up to the third quarter, a 42% increase compared to the same period last year. R&D expenses have steadily increased from 85.1 billion KRW in 2020 to 92.4 billion KRW in 2021.

Korea Shipbuilding & Offshore Engineering operates the Ulsan Comprehensive Research Institute and the Mechanical and Electrical Research Institute, as well as affiliated companies' research centers such as Hyundai Heavy Industries Corporate Research Institute, Hyundai Samho Heavy Industries Automation Innovation Center, and Hyundai Mipo Dockyard System Development Research Institute, conducting research and development from welding, the heart of shipyards, to future ship technologies.

Since establishing Avikus, a specialized company for autonomous ship navigation solutions in 2020, it has been implementing autonomous navigation technology. Korea Shipbuilding & Offshore Engineering plans to demonstrate the world's first integrated safety management system and engine automation system on actual ships by 2024 in collaboration with the American Bureau of Shipping.

It is also introducing new concept technologies such as the Hi-Rotor, an independent model of the rotor sail which is a wind-assisted propulsion device for ships, and the lashing-free container ship that requires no container securing work.

Jung Ki-sun, CEO of HD Hyundai, declared at 'CES 2023' held earlier this month, "Korea Shipbuilding & Offshore Engineering is becoming a technology-centered company. Two directions: R&D and M&A. We are becoming a company that makes money through technology. The first step is to secure proprietary technology in key areas."

Daewoo Shipbuilding & Marine Engineering has been recording consecutive orders since successfully commercializing dual-fuel propulsion ship technology. All 44 ships ordered last year were dual-fuel propulsion vessels. Dual-fuel propulsion ships use liquefied natural gas (LNG) or liquefied petroleum gas (LPG) together with conventional bunker C fuel oil.

By equipping the independently developed high-pressure dual-fuel propulsion engine with a re-liquefaction system, methane gas emissions, a major greenhouse gas culprit, can be significantly reduced. This has been highly praised for effectively responding to greenhouse gas emission regulations.

Additionally, it focuses on improving fuel efficiency and reducing carbon dioxide and sulfur oxide emissions by applying energy-saving devices such as shaft generators and air lubrication systems during operation.

Samsung Heavy Industries also realized autonomous navigation technology by successfully demonstrating an autonomous collision avoidance system domestically in November last year. It applied a large number of ICT technologies including radar, cameras, engine and rudder automatic control systems, and around-view monitoring. It is also promoting the development of next-generation ships such as liquefied hydrogen fuel cell systems for ships and liquefied hydrogen and liquefied carbon dioxide carriers.

Lee Dong-heon, a researcher at Shinhan Investment Corp., said, "A new era where technology determines value in shipbuilding has opened. As environmental regulations increase, shipowners diversify fuels and digitize control systems to respond and optimize efficiency. Shipbuilders that reduce related collaborations will find survival difficult."

[Image source=Yonhap News]