HD Korea Shipbuilding & Offshore Engineering (HD KSOE) and Samsung Heavy Industries (SHI) are allegedly facing a three- to four-year delay on contracts for 14 LNG carriers worth around 3 trillion won (about $2.25 billion) that they signed four years ago, according to The Chosun Daily. This delay was caused by the circumstances surrounding the shipowners. The shipbuilders have already secured orders for the next 3-4 years, and their yards are fully occupied, so the recently rescheduled contracts have allowed them some breathing room in their building timelines. Furthermore, because new ship costs have almost reached record highs, they will find it easy to get new contracts at greater prices.
On May. 17, SHI revealed that the contract for eight LNG carriers (about 1.6267 trillion won, $1.19 billion), purchased by shipowners in Oceania and Africa had been postponed owing to the shipowners’ circumstances. Similarly, on May. 14, HD Korea Shipbuilding & Offshore Engineering said that the final contract for six LNG carriers (about 1.2097 trillion won, $887 million), secured by its subsidiary HD Hyundai Samho Heavy Industries (HD HSHI), had been postponed. The final contract dates, which were originally scheduled between this month and early next year, have been moved back to 2028-2029, almost three to four years later.
Although the two shipbuilders did not reveal the clients, the industry assumes the LNGCs are for the “Mozambique LNG Project,” which were awarded in 2020. This project, spearheaded by France’s TotalEnergies, is being delayed owing to the rising influence of local insurgents and the accompanying insecurity in Mozambique.
Despite the delay in trillions of winning contracts, the impact on the two corporations is beneficial. It is stated that they got a portion of the contract money in advance, making contract termination improbable. Even if the contracts were terminated, it would be easy to acquire new orders. The industry believes that “many shipowners are currently seeking quick deliveries of LNGCs or containerships, making it easy to secure new contracts.” Furthermore, if the contracts are resigned, the corporations might demand greater ship prices.”
On May 3, HD Korea Shipbuilding & Offshore Engineering received an order for two LNGCs for roughly 733.4 billion won (about $537.25), with each ship costing over 270 million dollars, the biggest in history.
The record-high ship prices benefit the shipbuilding sector. Clarksons Research’s “Newbuilding Price Index,” a major profitability indicator for the shipbuilding and shipping sectors, rose to 183.9 points in April, over 96% of its all-time high (191.6 points) set in September 2008. Maintaining high newbuilding pricing enables local shipbuilders to avoid low-cost competition from Chinese businesses while selectively accepting profitable projects.
Meanwhile, rising demand for containerships and LNG carriers is boosting the worldwide shipbuilding sector. Contrary to forecasts, shipping rates have risen, exceeding 2,500 points on May. 16. for the first time in 20 months, owing to the Red Sea impact. This has resulted in increasing demand for new containership orders.
In mid-May, prominent shipping corporations like France’s CMA CGM and China’s COSCO would purchase containerships for 7.5 billion dollars (about 10.226 trillion won). Some shipping companies are apparently contacting shipyards about the potential of obtaining containerships earlier than normal.