Mega Shipbuilding Orders Resume... Ship Prices Expected to Rise

Large-Scale Orders Focused on Korean LNG Carriers and Chinese Commercial Vessels
Contracts Concentrated Around 2029... Expectations for Rising Ship Prices

On August 26 (local time), the 'State of Maine' was afloat next to a crane at Hanwha Philly Shipyard in Philadelphia, USA, during its naming ceremony. Photo by Yonhap News Agency

Global large-scale shipowners are finalizing mega-order projects with Korean and Chinese shipbuilders. As major shipyards are running out of available slots, ship prices are expected to rise.

On December 22, NH Investment & Securities maintained its 'positive' outlook for the shipbuilding sector, citing these developments. The firm believes that as large-scale orders continue, the bottomed-out ship prices will turn upward next year.

Since November, inquiries for new ship orders have increased, and mega-order projects are being announced. Korean shipbuilders have secured large orders mainly for liquefied natural gas (LNG) carriers, while Chinese shipbuilders have focused on general commercial vessels.

On December 18, Hanwha Ocean announced that it had signed a contract with a European shipowner to build seven new LNG carriers. The contract is valued at 1.75 billion dollars (approximately 2.5891 trillion won), accounting for 24.0% of last year's total revenue. The actual ordering company is Norway's Knutsen OAS Shipping, and the project is reportedly aimed at securing long-term transportation contracts with companies such as Italy's Edison and Norway's state-owned energy company Equinor.

Jung Yeonseung, a researcher at NH Investment & Securities, stated, "The vessels are scheduled for sequential delivery by June 2029, and it appears that most of the 2028 delivery slots have already been filled. There is a growing consensus that LNG carrier prices have bottomed out, driven by rising spot (short-term contract) and charter rates in the fourth quarter, which is leading to an increase in new ship orders."

China's major shipowner COSCO Shipping also placed a large-scale newbuilding order with shipyards under the state-owned CSSC group. The total order is reported to be worth 7.07 billion dollars, including 40 bulk carriers, 20 container ships, and 20 tankers and energy-related vessels. MSC, the world's largest container shipping company by fleet capacity, is expected to order ten 11K container ships. As a result, it appears that Chinese shipyards have already filled more than half of their available slots through 2029.

Accordingly, there are projections that LNG carrier prices, which have hit bottom, will begin to rise from next year. Researcher Jung emphasized that the core business for Korean shipbuilders is commercial vessels. If commercial vessel orders are sluggish or prices fall, this cannot be offset by orders for special-purpose vessels or by expanding the US MASGA project, a Korea-US shipbuilding collaboration. Therefore, increased orders and rising prices in the mainstay commercial vessel segment are the most critical factors for shipbuilders' performance.

Among these, LNG carriers are the most profitable. LNG shipping companies such as Flex LNG and Golar LNG have forecasted an increase in LNG carrier orders and prices next year. Discussions on ship charter contracts between energy companies and shipowners have begun in preparation for LNG projects that will commence operations from 2028 to 2029. This suggests that there may not be enough vessels supplied between 2029 and 2030.

Researcher Jung predicted, "With multiple charter contracts being signed simultaneously, pressure to secure slots early will intensify. The price of a 174,000-cubic-meter LNG carrier, currently at 248 million dollars per vessel, is expected to rise to around 260 million dollars within the next 6 to 12 months, and could increase further depending on the pace at which slots are filled."