Hyundai Motor Group's logistics affiliate Hyundai Glovis began operating the Glovis Lander, the world's largest pure car and truck carrier (PCTC) capable of loading more than 10,000 small cars, at the end of last month. It is the third 10,800 CEU (car equivalent unit)-class PCTC to be deployed, following the Glovis Leader delivered at the end of April and the Glovis Lighthouse, which began sailing in early June.
At present, the only 10,800 CEU-class car carriers in the world capable of transporting more than 10,000 cars are the three vessels operated by Hyundai Glovis. All of these ships were split-built by two shipyards under China State Shipbuilding Corp. (CSSC), Guangzhou GSI and Shanghai SWS. A Korean shipping company from a shipbuilding powerhouse is using three of the world's largest car carriers, all made in China.
China's solo run in the car carrier market continues. As Korean shipbuilders focus on higher-margin liquefied natural gas (LNG) carriers and have not actively pursued orders, and as Chinese shipbuilders wage an aggressive low-price campaign, they are yielding most of the market. Shipbuilding industry experts say that even in a low-profit market, it is necessary to avoid ceding the entire market.
According to China's Xinde Marine News and U.K.-based Clarksons Research on the 6th, about 20 car carriers are estimated to have been ordered through June this year. Except for the two ordered by HD Hyundai Heavy Industries in April, Chinese shipyards are said to have taken all the remaining volume.
Norway's UECC in March ordered two 3,000 CEU-class PCTCs for short-sea routes within Europe from Nanjing CSSC Jinling Shipyard. U.K.-based Zodiac Maritime in May ordered two 7,000 CEU-class LNG dual-fuel PCTCs from China's Yantai CIMC Raffles.
Zodiac Maritime currently has a fleet of 22 PCTCs, more than half of which were built by Yantai CIMC Raffles. Cyprus-based Salamis Lines last month ordered four 8,600 CEU-class PCTCs from Xiamen Shipbuilding Industry.
The car carrier market boomed with 60 to 90 orders annually in 2022 to 2024. Even then, Chinese shipyards absorbed a large share of the volume. According to a monthly report published in February by French shipping and logistics data analytics company AXSMarine, of the 276 car carriers delivered or scheduled for delivery from 2023 to 2028, 219 (79.4%) were ordered from Chinese shipyards. Japan followed with 47 (17%). Korean shipyards have a minimal presence in the newbuild car carrier market.
As large-scale orders moved into full delivery, new orders for car carriers fell to about 30 ships last year. About 20 were ordered in the first half of this year, slowing compared with the boom period, while Chinese shipyards' "monopoly" has deepened.
With relatively ample order backlogs, domestic shipbuilders are filling their limited construction slots with higher value-added and more profitable vessel types such as LNG carriers and ultra-large container ships.
For example, the contract price per LNG carrier among the two ordered by HD Hyundai Heavy Industries in May was 371.9 billion won (about $250 million) per ship, about 87% more expensive than the two PCTCs ordered in April at 199.2 billion won (about $134.46 million) per ship. LNG carriers are also said to have mid-10% profit margins, roughly double the single-digit margins of PCTCs.
Some analysts say China has taken control of the market by leveraging cost competitiveness because construction technology for car carriers has become standardized. Compared with the price of equivalent PCTCs ordered from Korean shipyards, Chinese shipyards' contract prices are said to be about 15% to 20% cheaper. Chinese shipyards have lowered unit costs by mass-building car carriers, which have relatively low technological barriers to entry, and internalizing components.
Yang Jong-seo, senior research fellow at The Export-Import Bank of Korea's Overseas Economic Research Institute, said, "Car carriers have a simple structure, so the competition is about who can build them cheaper, and when it comes to price competition, in a high-cost structure like Korea, competitiveness in fact falls."
Experts also cite the increase in China-origin auto exports, led by electric vehicles, as a reason for Chinese shipbuilders' domination. Um Kyung-a, an analyst at Shinyoung Securities, said, "The car carrier market is a special and limited transport market that trades a single item—cars—so it is difficult for countries without manufacturers that export cars in large quantities to engage in the business," adding, "Right now the segment where auto cargo volume is rising significantly is China's electric vehicles, so it can be seen that carrier construction is also taking place in China."
Experts say domestic shipbuilders should not completely abandon this market even if car carriers do not generate significant revenue. Lee Eun-chang, a research fellow at the Korea Institute for Industrial Economics & Trade (KIET), said, "Car carriers are a critical vessel type in emergencies, so the current situation of excessive reliance on overseas sources is concerning," adding, "If possible, Korea's car carriers should be built at Korean shipyards, so there is a need to implement policies that subsidize the price gap between overseas and domestic construction."
The domestic shipbuilding industry has not completely abandoned this market. It is seeking to raise future market share by developing high-spec car carrier technology. HD Hyundai Heavy Industries is developing an SMR-powered car carrier. Last month, HD Hyundai Heavy Industries received approval in principle (AIP) from Lloyd's Register (LR) for the concept design of a large car carrier applying molten salt reactor (MSR) technology, a type of SMR.
An HD Hyundai Heavy Industries official said, "An SMR-powered vessel emits no carbon during operation, making it the ultimate eco-friendly ship suited to the era of carbon neutrality."