Home Top News Chinese Shipbuilders Winning Orders for LNG Carriers

Chinese Shipbuilders Winning Orders for LNG Carriers

A dockyard of the China State Shipbuilding Corp. (CSSC)

Chinese shipbuilders are winning a growing number of orders in the liquefied natural gas (LNG) carrier market, the stronghold of Korean shipbuilders. Some say this is a temporary phenomenon resulting from the full booking of Korean dockyards. But this may cause an oversupply of LNG carriers around the world.

CMG, a Chinese state-run company, recently placed an order for four LNG carriers with CSSC of China. The vessels will be built by Dalian Shipbuilding, a shipyard affiliated with CSSC. Dalian Shipbuilding has mainly focused on the construction of container ships and bulk carriers, but plans to expand into high value-added ships such as LNG carriers in the future.

Another CSSC subsidiary, Hudong Zhonghua Shipbuilding, also signed a contract with a Japanese shipping company in April to produce six LNG carriers over eight years. In October, China’s Jiangsu Yangzi Xinfu Shipbuilding won an order for two LNG carriers.

China’s focus on LNG carriers is prompted by a global decarbonization trend and the Russian-Ukraine war, analysts say. These two factors have fueled demand for eco-friendly energy, so more shipowners are looking for LNG carriers. Although Korean shipbuilders occupy an unrivaled position in the LNG carrier market, Chinese shipbuilders are winning orders because Korean shipbuilders cannot take any more LNG carrier orders as their docks are fully booked.

However, there are concerns that LNG carrier supply by Chinese shipbuilders result in an oversupply. “Currently, orders for dozens of LNG carriers are being placed over a year by Qatar, but nobody knows whether demand for LNG carriers will be sustainable in the future,” said Woo Jong-hoon, a professor of shipbuilding and marine engineering at Seoul National University. “There is a risk of oversupply if orders for LNG carriers are placed in large quantities at the current speed.”

Analysts say that uncertainties will grow with regard to LNG carrier prices, which have been on an upward trend. “Ship prices have been solid due to a limited supply of LNG carriers, but the price index will be disturbed as Chinese shipbuilders will take increasingly more and more orders for LNG carriers,” said Lee Bong-jin, a researcher at Hanwha Investment & Securities.

However, some experts forecast that there will be no big impact on the LNG carrier market as environment-friendly moves will continue around the world. “Korean shipbuilders are second to none in LNG carrier construction technology, so even if demand decreases in the future, Chinese shipbuilders will feel the heat ahead of their Korean competitors,” an industry analyst said.

Source: BusinessKorea

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