France’s CMA-CGM to Order 12 LNG Dual-fuel Container Ships

Korean and Chinese shipbuilders are engaged in a fierce battle over 12 container ships worth approximately 4 trillion won to be ordered by France. With global orders for liquefied natural gas (LNG) carriers declining this year, container ships are filling the order backlogs of major shipyards, intensifying the competition between Korea and China. As the construction price of container ships surpasses that of LNG carriers, the container ship market is expected to see increasingly fierce competition between Korea and China.

According to the global shipbuilding and shipping industry on Aug 4, CMA-CGM, the world’s third-largest shipping company based in France, is pursuing an order for 12 LNG dual-fuel container ships with a capacity of 21,000 to 24,000 TEU (1 TEU equals one 20-foot container). The estimated price per ship is $250 million (about 346 billion won), bringing the total order value to approximately 4.152 trillion won. The contract is said to include the construction of six ships with an option for an additional six.

The bidding process reportedly involves Korea’s three major shipbuilders — HD Hyundai Heavy Industries, Hanwha Ocean, and Samsung Heavy Industries — along with Chinese companies including China State Shipbuilding Corp. (CSSC), Hudong-Zhonghua Shipbuilding, and Jiangnan Shipyard. China currently has an edge in price competitiveness. While the Korean side maintains that a 21,000 TEU container ship should cost at least $250 million to build, the Chinese side argues that $230 million is sufficient. Some industry insiders suggest that Hudong-Zhonghua Shipbuilding has proposed an ultra-low price of $207 million (about 290 billion won). This represents a significant price disruption, considering that the current market price for container ships of 20,000 TEU or larger is at least $220 million.

Korean shipbuilders are emphasizing their superior dual-fuel vessel construction technology and higher on-time delivery rates compared to China. They also benefit from the United States’ efforts to check China’s shipbuilding and shipping industries. The U.S. Trump administration plans to impose port entry fees on ships built in China or operated by Chinese companies starting in October. Chinese-flagged vessels will be charged $50 per ton, while ships built in China will incur a fee of $18 per ton, with these fees set to increase gradually until 2028. Shipping companies with frequent U.S. routes are likely to be reluctant to commission ship construction from Chinese shipyards.

HD Hyundai Heavy Industries, in particular, secured a contract earlier this year from CMA-CGM to build 12 LNG dual-fuel container ships with a capacity of 15,500 TEU, worth $2.57 billion (approximately 3.7 trillion won). As CMA-CGM is now ordering larger container ships as an extension of this contract, HD Hyundai Heavy Industries is considered to be in an advantageous position in the bidding process. However, it is worth noting that CMA-CGM currently operates about 30% of its fleet with ships made in China, indicating a preference for Chinese vessels. In 2023, the company also ordered 10 LNG dual-fuel container ships with a capacity of 24,000 TEU from Jiangnan Shipyard.

According to Clarksons Research, China dominated the container ship market with an 86.6% market share as of last year. However, with the U.S. checking China’s shipbuilding industry and Korean shipbuilders actively pursuing container ship orders to compensate for the decrease in LNG carrier orders, the market share gap narrowed significantly in the first five months of this year, with China at 51.2% and Korea at 38.2%. Nevertheless, the balance has recently tipped back towards China after MSC, the world’s largest container shipping company based in Switzerland, commissioned the construction of 20 container ships with a capacity of 20,000 TEU to five Chinese shipyards last month, despite pressure from the Trump administration.

Container ships have surpassed LNG carriers in construction costs since last year, emerging as the main battleground in the global shipbuilding market, and the competition for orders between Korea and China is expected to continue. As of June 2022, the construction cost of a 174K-class LNG carrier was $227 million, higher than that of a 22,000-24,000 TEU container ship ($205.5 million). However, the gap has been narrowing annually, and in June last year, container ships overtook LNG carriers with a price of $268.5 million compared to $264 million for LNG carriers. This year, the construction cost for container ships stands at $273 million, while LNG carriers are priced at $255 million.

Source : Businesskorea