"Samsung Heavy Industries' LNG Carrier Orders Signal Positive Outlook for Shipbuilding Industry" [Click e-Stock]

Expansion of Overseas LNG Carrier Orders
Concerns Over Price Decline Eased
Strong Demand Expected for 2029 Delivery Slots

Starting with Samsung Heavy Industries, a recovery in orders for liquefied natural gas (LNG) carriers by domestic shipbuilders is anticipated. As LNG carriers are among the most profitable vessel types, there are expectations that favorable conditions will continue for the industry as a whole in the second half of the year.

On August 20, NH Investment & Securities projected that LNG carriers and offshore plants would be the core drivers of domestic shipbuilders' orders in the second half of the year. LNG carriers are the most profitable vessel type, while additional offshore plant orders are needed to offset the declining order backlog.

In this context, Samsung Heavy Industries' order for six LNG carriers is seen as a positive development for the industry. Samsung Heavy Industries announced that it had secured an order for six LNG carriers worth a total of 2.1 trillion won from two shipowners in Oceania. These vessels are scheduled to be delivered sequentially by November 2028. With this contract, Samsung Heavy Industries has achieved 49% of its annual order target of $9.8 billion (approximately 13.56 trillion won).

Of the six vessels, two are option vessels from Danish shipowner Celsius Shipping, following an order placed in January, with each 180,000-cubic-meter LNG carrier priced at $255 million. Although this is 2% lower than the price of the vessels ordered in January, it is considered comparable, given that design costs were excluded for the option vessels.

The remaining four vessels are reportedly for Greek shipowner TMS Cardiff. Each vessel is priced at $259 million, and all six vessels are scheduled for delivery in 2028. It is analyzed that Samsung Heavy Industries secured the 2028 LNG carrier delivery slots, which had been subject to price decline concerns due to order uncertainty, at a better-than-expected price.

Notably, Celsius Shipping, which previously placed LNG carrier orders with Samsung Heavy Industries, diversified its orders by commissioning six LNG carriers from China's CMHI in 2022-2023. However, there is a trend of returning to domestic shipyards starting this year. Despite two of the vessels ordered from China remaining undelivered, the resumption of orders with Korean shipyards signals that Korean-built LNG carriers are necessary to secure charter contracts with global companies.

This is expected to lead to an expansion of orders in the second half of the year. The LNG carrier pipeline anticipated for the second half includes: 1) up to 12 vessels for Venture Global; 2) the formalization of 17 reserved LNG carrier orders following the resumption of Total's Mozambique LNG project (nine for Samsung Heavy Industries and eight for HD Hyundai Samho); and 3) additional U.S. LNG projects and fleet renewal orders for aging vessels. Taking these factors into account, demand for LNG carrier delivery slots for 2029 is expected to increase.

Jung Yeonseung, a researcher at NH Investment & Securities, stated, "Considering the unit price of Samsung Heavy Industries' LNG carrier orders, the current price decline is not significant," and added, "Given the potential increase in LNG carrier orders starting in the second half of the year, we maintain a positive outlook for the shipbuilding sector."