Japan's shipbuilding industry is moving to resume domestic construction of liquefied natural gas (LNG) carriers, which has been halted since 2019. The judgment is that energy transport cannot be left only to Korean and Chinese shipyards. Japan is also leaving open the possibility of pursuing technical cooperation with Korea's shipbuilding industry to restore an LNG carrier production system weakened by a long hiatus. In Korea's shipbuilding industry, some say Korea-Japan shipbuilding cooperation could serve as a card to keep China's shipbuilding industry in check, but others note there is considerable reluctance to transfer core LNG carrier construction know-how.
According to Nikkei on the 15th, Imabari Shipbuilding, Kawasaki Heavy Industries, and Namura Shipbuilding are pushing to resume construction of LNG carriers in Japan around 2035. Targeting three to five ships annually, the three companies plan to rebuild the production system by sharing technology and personnel and mutually supporting skilled welders. The Japanese government, which has made rebuilding shipbuilding a key policy priority, is also considering providing subsidies to buyers of Japan-made LNG carriers.
Japan's declaration to revive LNG carrier construction is rooted in the view that it must secure key transport vessels on its own for energy security. Japan relies on imports for 98% of its LNG, which is used as fuel for power generation and as a feedstock for city gas. About 100 ships currently transport LNG to Japan; assuming a vessel lifespan of 20 years, around five new ships need to be built each year to maintain existing transport capacity. Lee Eun-chang, a research fellow at the Korea Institute for Industrial Economics & Trade (KIET), said, "As Japan is the world's No. 3 shipping nation, the government is concerned that Japanese shipping companies are placing many orders with Chinese shipyards."
◇ Japan, having ceded LNG carriers, slips to 2% of ship order share
The problem is that Japan's shipbuilding base has changed 180 degrees from the past. Japanese shipbuilders led the LNG carrier market in the 1980s and 1990s, but since the 2000s, Korean shipbuilders have expanded technology investments focused on high value-added vessels and took the lead. According to Clarksons Research, Japan's share of global ship orders from January to May this year was 2%. China had 68%, and Korea had 21%. Looking only at LNG carriers, among the 53 ships ordered through early June this year, Korea's three shipbuilders won 34 (64%) and Chinese shipbuilders won 19 (36%), with Korea and China dividing the market.
Japan ceded the LNG carrier market to Korea because it failed to respond in time to shifts in mainstream technology. In the past, Japanese shipbuilders were strong in the Moss-type cargo containment system, which uses spherical independent tanks inside the hull, and in steam turbine propulsion, but these had limits in loading efficiency and fuel economy. Meanwhile, Korean shipbuilders adopted the membrane-type cargo containment system, which bonds the cargo tanks to the inside of the hull, and dual-fuel engines that use both LNG and fuel oil, improving efficiency and bolstering competitiveness in orders.
The gap also widened as Japan's major shipbuilders cut shipbuilding investment during a prolonged slump. While Korea's major shipbuilders such as HD Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering (now Hanwha Ocean) developed LNG carriers into core high value-added models, major Japanese companies such as Mitsubishi Heavy Industries and Kawasaki Heavy Industries diversified and reduced the weight of shipbuilding. As merchant ship volumes shifted toward mid-sized players such as Imabari Shipbuilding, the base of advanced ship technologies and skilled labor weakened together.
◇ Japan lacks experience with membrane types… potential for a request to cooperate with Korea
In the industry, many say it will be difficult for Japan to quickly revive an LNG carrier production system. LNG carriers must transport natural gas liquefied at around minus 163 degrees Celsius, making their design and construction more difficult than general merchant ships. Key elements include installing the LNG cargo containment and insulation, and conducting precision inspections and quality control to prevent leaks. Korean shipbuilders have accumulated experience in cargo tank installation and quality control by repeatedly building dozens of LNG carriers annually, but Japan lacks experience building membrane-type LNG carriers, which dominate the market.
There have also been cases where Japanese shipbuilders received help from Korean personnel in building LNG carriers. Imabari Shipbuilding previously won an order in 2014 from a Spanish shipping company for an LNG carrier equipped with then-state-of-the-art cargo containment and a high-efficiency engine, but it faced difficulties applying the unfamiliar membrane-type cargo containment and propulsion systems. During this process, it reportedly recruited highly skilled workers who had left Korean yards after restructuring and received help.
Because of this, Japanese shipbuilders are said to be considering asking Korea's shipbuilding industry, which has abundant LNG carrier know-how, for technical support. Some in Korea's shipbuilding industry say cooperation with Japan could serve as a card to keep China's shipbuilding industry in check. In particular, as Japan is the world's No. 3 shipping nation with strong shipordering demand, there is room for cooperation from the perspective of Korean yards as well. Lee Eun-chang said, "With China taking a substantial portion of shipbuilding volumes, other shipbuilding nations such as Korea and Japan need to join forces to keep it in check," adding, "Korea has strengths in high value-added ships like LNG carriers, and Japan has competitiveness in standard designs and equipment, so cooperation that leverages each side's strengths is possible."
However, there are concerns that if the scope of cooperation expands to cargo containment installation and quality control, the core construction know-how accumulated by Korean shipbuilders could be transferred. An industry official said, "Cooperation with Japan could be expected to help keep China in check, but since Korea's LNG carrier technology is ahead, the scope of cooperation must be determined carefully," adding, "It is necessary to seek selective cooperation focused on areas where each side can complement the other's strengths."