S. Korean ‘Big 3′ shipbuilders thrive on high-value deals despite Chinese competition

HD HHI, Hanwha Ocean, and SHI set to surpass order targets with selective contracting

South Korea’s “Big 3″ shipbuilders, including Hanwha Ocean and Samsung Heavy Industries (SHI), are maintaining a selective approach to new orders, focusing on high-value vessels that keep their docks full. The shipbuilding industry believes Korean firms are enjoying such strong demand that forgoing low-cost, high-volume orders isn’t considered a significant loss.

On Sept 30., sources from the shipbuilding and shipping sectors reported that Germany’s Hapag-Lloyd recently placed an order for 24 dual-fueled liquefied natural gas (LNG) container ships, which are expected to be built by Chinese shipyards. Despite bids from HD Hyundai Heavy Industries (HD HHI) and Hanwha Ocean, Hapag-Lloyd awarded the contract to Chinese shipbuilders due to their competitive pricing. The total order value is estimated at $4.2 billion (about 5.58 trillion won).

174,000-CBM LNG carrier /Courtesy of HD Hyundai Heavy Industries

However, domestic industry insiders see no reason for concern. Hapag-Lloyd’s order includes 17,0000-TEU and 9,200-TEU container ships—lower-cost vessels that Korean shipyards, operating at near full capacity, find less appealing. High-volume orders like this limit yard space and prevent builders from taking on more profitable projects. The 17,000-TEU vessels are priced at approximately $200 million each, while the 9,200-TEU ships are about $140 million each.

An industry insider commented, “There’s talk of Chinese competition catching up to Korean shipbuilders, but that’s not the case here. It was more of a formality for Korean companies to participate in the bid. The order scale isn’t ideal for them, and given current market prices, it makes sense to pass on low-cost orders.”

A rendering of Hanwha Ocean's green ship LNG carrier featuring next-generation eco-friendly technology. /Courtesy of Hanwha Ocean

Korean shipbuilders continue to focus on high-value ships like LNG carriers, very large crude carriers (VLCCs), and ultra-large container ships between 220,000 and 240,000 TEU. As of August, LNG carriers were priced at $262 million, VLCCs at $129 million, and ultra-large container ships at $273 million.

Additionally, there is a growing demand for green vessels as Europe tightens environmental regulations. This has boosted the market for eco-friendly ships. The price for a 174,000-CBM LNG-powered carrier rose to $262 million (around 348.8 billion won) in August, an 11% increase compared to last year. According to Clarksons Research, as of late July, Korean shipbuilders held 252 out of the 355 global backorders for LNG carriers—about 70% of the total.

Korean companies also have solid order books. HD Korea Shipbuilding & Offshore Engineering has secured contracts for 160 vessels (including one offshore project) worth $17.78 billion (23.44 trillion won) so far this year, surpassing its annual target of $13.5 billion with 131.7% achievement. Hanwha Ocean, by the second quarter, had secured $5.33 billion (7 trillion won) in ship orders, exceeding last year’s total. SHI is also expected to surpass its annual order target of $9.7 billion.