Hanwha Engine and HD Hyundai Marine Engine, the two leading domestic ship engine makers, secured as much work in the first half of this year as they did for all of last year. They are benefiting from the shipbuilding supercycle, and some expect the boom to last longer for engine makers than shipbuilders. While shipbuilders face limits on increasing output once their docks are full, engine makers can expand their customer base to overseas yards, including in China, and ramp up production.

According to the industry on the 25th, Hanwha Engine and HD Hyundai Marine Engine booked more than 2 trillion won in orders in the first half. Based on disclosed contracts, Hanwha Engine won 1.4348 trillion won in orders, reaching 81% of last year’s full-year disclosed total of 1.7706 trillion won in just six months, while HD Hyundai Marine Engine won 619.9 billion won, exceeding last year’s full-year disclosed total of 615.9 billion won. Each company’s first-half orders also surpassed last year’s revenue of 1.3711 trillion won and 402.4 billion won, respectively.

The biggest driver of order growth is a gap created as Chinese shipyards increased ship orders faster than local engine makers could keep up. Chinese yards are rapidly winning orders for large container ships, tankers and LNG (liquefied natural gas) carriers, but capacity to produce the high-output engines those vessels require is not matching the pace of yard expansions. After a ship contract is signed and the design and propulsion method are set, orders for main engines follow; some of the volume China cannot absorb is flowing to Korean companies. In the securities industry, the view is that HD Hyundai Marine Engine won about 446 billion won, or roughly 70% of its total first-half orders, from Chinese shipbuilders.

The shift to greener ships is raising engine prices and profitability. Large ships recently being ordered are increasingly adopting dual-fuel engines that use conventional fuel oil together with LNG, LPG (liquefied petroleum gas) or methanol. They are pricier and harder to build than standard diesel engines. Hanwha Engine is focusing on LNG-diesel dual-fuel engines while expanding its lineup to other fuels such as methanol, and HD Hyundai Marine Engine has strengths in LPG dual-fuel engines. An industry official said, “Orders have piled up to the point that we are discussing deliveries for the second half of 2028, and the focus of order strategy is shifting from securing volume to managing profitability,” adding, “There is more room to select higher-margin specifications after weighing price and production efficiency.”

Profitability is also improving quickly as deliveries of higher-priced orders increase. Hanwha Engine’s operating margin rose from 9.5% last year to 14.9% in the first quarter of this year, and HD Hyundai Marine Engine’s rose from 18.9% to 24.4%. Of the 29 engines Hanwha Engine is estimated to have delivered in the second quarter, 20 were orders booked in 2024–2025, when prices were higher. For HD Hyundai Marine Engine, orders secured at higher prices after joining the group are also being reflected in revenue. Most of the new orders won this year will be delivered in stages through 2028–2029.

They are also expanding capacity to meet rising engine demand. Hanwha Engine is increasing production capacity for two-stroke propulsion engines and plans to start producing four-stroke medium-speed engines in the third quarter. HD Hyundai Marine Engine is boosting output by easing bottlenecks instead of massively expanding plants, and there is an outlook that the engine division’s utilization rate will exceed 100% starting in the third quarter.

Against this backdrop, some analysts say engine makers could sustain growth longer than shipbuilders because, even when Korean shipyards cannot raise output further due to dock limits, engine makers can absorb additional demand from overseas yards such as those in China. An industry official said, “Because engine orders follow ship orders, the large-ship volumes recently secured by Chinese yards have not yet been fully reflected in engine orders,” adding, “Even after shipbuilders’ orders slow, continued inflows of China-driven orders and the revenue reflection of high-priced dual-fuel engines could prolong the boom for engine makers.”

Source: Chosunbiz