Prices for high-value vessels, including liquefied natural gas  carriers and ultra-large container ships, have begun to decline despite rising demand. Intensifying competition from Chinese shipbuilders entering the premium vessel market, coupled with their aggressive supply strategies, is putting downward pressure on newbuilding prices.

According to UK-based shipping market intelligence provider Clarksons Research, the benchmark newbuilding price for an LNG carrier stood at $245 million as of Oct. 23, down $3 million from $248 million in October last year. Prices for ultra-large container ships also declined over the same period, from $266.5 million to approximately $242 million. The downturn is particularly notable given that LNG carrier orders have increased more than 4.5-fold year-on-year.

China’s rapid expansion in both shipbuilding capacity and technological capabilities is seen as a major factor behind the price decline. Yangzijiang Shipbuilding, previously focused on medium-sized vessels, has been securing more orders for ultra-large container ships. Hengli Heavy Industries, meanwhile, is targeting the LNG carrier market through a build-first, sell-later strategy, constructing vessels before securing buyers. Jiangnan Shipyard has also intensified price competition by securing LNG carrier orders at $225 million per vessel, undercutting prevailing benchmark prices and challenging South Korean shipbuilders’ market share.

South Korean shipbuilders are unlikely to experience an immediate earnings impact, as this year’s results largely reflect vessels ordered at peak prices approximately two years ago. HD Korea Shipbuilding & Offshore Engineering’s third-quarter operating profit is projected to rise 50.5% year-on-year to 1.5854 trillion won, while Hanwha Ocean and Samsung Heavy Industries are expected to record profit growth of 86.5% and 8.9%, respectively. However, a prolonged decline in newbuilding prices could erode profitability once their existing backlog of higher-priced orders is delivered.

An oversupply of vessels and mismatches between ship deliveries and LNG project schedules are also limiting price recovery. Large numbers of vessels ordered since 2022 are entering service, while major LNG production projects, including Qatar’s North Field East, have experienced delays. With shipping capacity expanding ahead of available cargo volumes, shipowners have less incentive to pay premium prices for new vessels.

Industry experts say South Korean shipbuilders need to accelerate technological development and business diversification to maintain their competitive edge over Chinese rivals. The period around 2029, when the quality and performance of vessels built by newer Chinese entrants become clearer, could prove a critical test of competitiveness. In response, Korean shipbuilders are expanding beyond conventional commercial vessels into higher-value businesses, including small modular reactor (SMR)-powered ships, offshore power generation facilities and floating liquefied natural gas production (FLNG) units.

Source:Business Korea