Korea's major shipbuilders have filled about half of their key order targets in just over four months this year. As the Middle East war drags on and momentum grows to reorganize energy supply chains, orders have continued for tankers and liquefied natural gas (LNG) carriers. Although some initially worried that the newbuilding market would slow this year after several years of large orders, global newbuilding orders in the first quarter rose 67% on the year to 36.9 million GT (gross tonnage), extending the uptrend.
◇ Order pace faster than last year
On the 11th, according to the shipbuilding industry, HD Korea Shipbuilding & Offshore Engineering, the intermediate holding company for HD Hyundai's shipbuilding institutional sector, has won orders for 94 vessels worth $10.81 billion so far this year, achieving 46.4% of its annual target of $23.31 billion. That compares with 53 vessels worth $6.49 billion during the same period last year, when it had achieved 35.9% of its then target, indicating a faster order pace this year.
Samsung Heavy Industries secured orders for 17 vessels worth $3.4 billion through April this year. Of that, merchant ship orders totaled $3 billion, filling 52.6% of the annual merchant ship target of $5.7 billion. In the same period last year, it won orders for 18 vessels worth $2.6 billion, achieving 27% of its annual target of $9.8 billion at the time. In an earnings conference call at the end of last month, Samsung Heavy Industries said, "We can more than meet this year's merchant ship order target."
Hanwha Ocean does not disclose its annual order target, but it has secured work for 19 vessels worth $3.44 billion so far this year. That slightly exceeds the 14 vessels worth $3 billion in the same period last year.
◇ LNG carrier orders up fivefold from a year ago
Tankers and LNG carriers are the ship types underpinning this year's order flow. In a first-quarter earnings conference call on the 7th, HD Korea Shipbuilding & Offshore Engineering explained, "Tanker orders have increased on firm freight rates and replacement demand for aging vessels, and orders are also continuing for LNG carriers, LPG carriers, and container ships."
The expansion of tanker orders is intertwined with the reorganization of energy supply chains after the Middle East war. As crude oil procurement sources and transport routes diversify, shipping distances are getting longer, and the number of ships needed to move the same volume is increasing. Riding this trend, Hanwha Ocean increased its very large crude carrier (VLCC) orders to 10 from 6 in the same period last year.
Orders for LNG carriers are also rising on the trend of strengthening energy security and diversifying supply chains. As LNG procurement sources diversify, expectations have grown that shipping distances will lengthen, and coupled with replacement demand for older vessels, newbuilding demand is being lifted. The three shipbuilders have booked 23 LNG carriers this year (HD Korea Shipbuilding & Offshore Engineering 12, Samsung Heavy Industries 6, Hanwha Ocean 5), more than five times the four booked in the same period last year.
In the second half, new LNG projects centered on the United States are fueling expectations for additional orders. A Samsung Heavy Industries official said, "We expect global LNG carrier orders this year to be around 80, but Clarkson put its March forecast at 125," adding, "With 35 LNG carriers already ordered in the first quarter, actual orders could exceed the company's outlook."
◇ "Uptrend likely to continue through 2028"
Profitability is also improving. The share of past low-priced orders in construction is shrinking, while the share of ships ordered after prices rose is growing. In the first quarter, the operating margin of the shipbuilding institutional sector at HD Korea Shipbuilding & Offshore Engineering was 16.6%, up 3.2 percentage points from 13.4% a year earlier. HD Hyundai Heavy Industries posted an operating margin of 15.3%, and HD Hyundai Samho recorded 18.6%.
Samsung Heavy Industries' first-quarter operating margin was 9.4%, nearly double the 4.9% in the first quarter of last year. Although slightly lower than the previous quarter, the company said the improvement trend is continuing as low-priced orders decline and the share of higher-margin projects increases.
Hanwha Ocean's first-quarter operating margin in the merchant ship institutional sector was 18%, about double the 9.1% a year earlier. With special ships and offshore plant institutional sectors in the red, the merchant ship institutional sector supported the overall results. Hanwha Ocean cited productivity gains from repeat builds, early delivery, and cost-reduction efforts as key factors.
As domestic shipbuilders have already secured around three years of work, they plan to continue selective ordering that weighs ship prices, delivery times, and profitability rather than pushing for excessive volume expansion. An industry official said, "The Middle East situation and the global economic slowdown are variables, but on the back of aging ship replacement, environmental regulations, and expansion of LNG projects, order momentum for domestic shipbuilders should remain solid in 2027–2028."