Domestic mid-sized shipbuilders are accelerating their entry into the high value-added ship market on the back of a shipbuilding boom. As ship demand increases and construction slots at large shipyards grow tight, shipowners are broadening their options to mid-sized shipyards that can meet delivery schedules and offer price competitiveness. To seize this opportunity, mid-sized shipbuilders are expanding their business scope from their experience building tankers (liquid cargo carriers) and container ships to gas carriers, high-efficiency tankers, and even alternative-fuel ship designs.
◇ Leveraging tanker strengths to move into gas carriers and high-efficiency ships
On the 5th, the shipbuilding industry said Daehan Shipbuilding has focused on Suezmax crude oil carriers (the largest size of ship that can pass through the Suez Canal), but it is preparing to enter the very large liquefied petroleum gas carrier (VLGC) market with the goal of fully launching sales in the second half of this year.
Daehan Shipbuilding recently obtained basic approval from Lloyd's Register in the United Kingdom and the Korean Register for the concept design of an 88,000-cubic-meter VLGC. Basic approval is the first-step process to verify whether a ship's concept design meets classification rules and safety standards.
A Daehan Shipbuilding official said, "Based on our tanker competitiveness, we believe we have secured a stable order backlog, and we are pushing to diversify our ship types to shuttle tankers, mid-sized container ships, and gas carriers to expand revenue," adding, "We are now speeding up follow-up development of the VLGC." To date, Daehan Shipbuilding has won orders for 35 ships worth $3.3 billion, securing about 3 years and 6 months of work.
Daehan Shipbuilding chose VLGCs as its new bet after weighing both market demand and construction efficiency. LNG carriers, which large domestic shipbuilders focus on, are representative high value-added ships, but the technology for cargo tanks and issues with overseas licenses make entry barriers high.
Rather than jumping straight into liquefied natural gas (LNG) carriers, Daehan Shipbuilding decided to first target VLGCs, for which demand is expected to grow while also improving production efficiency with current facilities. Considering the beam and hull size, VLGCs are favorable for simultaneously carrying out multiple processes even at the Haenam shipyard, which has a single dock (a shipbuilding facility), leading the company to judge that this ship type can improve profitability.
K Shipbuilding Co., Ltd. is upgrading its core mid-sized tankers into multipurpose, high-efficiency ships. Last month, it obtained basic approval from the Korean Register for the design of a 74,000-ton product carrier applying "corrugated bulkheads."
Corrugated bulkheads simplify the internal structure of cargo tanks to reduce the burden of washing, inspection, and maintenance. They have mainly been used on ships of 50,000 tons or less, but K Shipbuilding Co., Ltd. expanded the application to 74,000 tons in this design. Because it can carry both petroleum products and chemicals, shipowners gain greater flexibility in cargo operations.
◇ Adding eco-friendly features to expand selective orders
Mid-sized shipbuilders are also developing technologies to meet environmental regulations as a source of order competitiveness. K Shipbuilding Co., Ltd. is jointly developing a 22,000-cubic-meter LNG bunkering vessel with DongHwa Entec and Lloyd's Register. It is also developing a tanker applying a wind-assisted propulsion system with a Spanish company, among others.
Daehan Shipbuilding is also developing an air lubrication system with a British eco-friendly technology company that creates an air layer on the bottom of a ship to reduce frictional resistance. The move aims to enhance the marketability of existing merchant ships by adding features that can reduce fuel costs and carbon emissions.
HJ Shipbuilding & Construction is likewise widening shipowner options by adding biofuel and autonomous navigation features to existing container ships. In early this month, HJ Shipbuilding & Construction obtained basic approval from the Korean Register for the design of a 10,000-TEU biofuel-propelled container ship. By applying a biofuel propulsion system to existing container ships, it has secured a ship model that can respond to carbon emission regulations. It also signed a partnership with Avikus, HD Hyundai's autonomous navigation affiliate, to make autonomous navigation solutions standard equipment on merchant ships built by HJ Shipbuilding & Construction.
Mid-sized shipbuilders plan to strengthen their policy of selective order-taking based on the development of new ship types and eco-friendly technologies. While large shipbuilders are filling their slots mainly with large, high-priced ships such as LNG carriers and ultra-large container ships, demand continues in the mid-sized tanker and container ship markets for replacing aging ships and complying with environmental regulations. Mid-sized shipbuilders aim to expand their order ranges to ships with higher per-vessel prices and profitability by adding eco-friendly, high-efficiency features to ship types that can be built with existing facilities and workforces.
An industry official said, "For mid-sized shipbuilders to translate the development of new ship types into increased sales, they still need to prove they can secure shipowners, meet delivery schedules, and control costs through repeat builds," but added, "This is an unusually strong boom in which shipowners are paying close attention to mid-sized shipbuilders because of delivery and price, so the speed of turning design approvals into actual orders and construction results is critical."