As orders for very large crude carriers (VLCCs) hit the highest level in 57 years, Hanwha Ocean is continuing to win high-priced contracts approaching 200 billion won per ship. While Chinese shipyards have taken about 90% of new orders in the first half of the year, Hanwha Ocean is said to be improving profitability by securing back-to-back VLCC orders at the top end of the market price.
◇Even with a premium, a four-year wait
According to industry sources on the 22nd, the price per ship for two 320,000 DWT VLCCs ordered from Hanwha Ocean by JPMorgan Asset Management's shipping investment fund on the 14th is about $131 million (about 197.2 billion won). This is the highest price level recently seen in the newbuild VLCC market. The vessels are scheduled for delivery by late Mar. 2030, which is three years and eight months from now.
Hanwha Ocean also signed four 300,000 DWT VLCCs ordered last month by Pan Ocean at about $131 million per ship. Their delivery deadline is Feb. 2030. A shipbuilding industry official said, "With the docks (dock·shipbuilding yard) at major shipyards full, it takes nearly four years to receive a VLCC, yet prices keep rising," adding, "Not a few shipowners are willing to pay a premium to secure even a slightly earlier construction slot."
Hanwha Ocean is winning consecutive VLCC orders by using a repeat design approach that reuses previously built hull forms. Building identical or similar ships in succession reduces trial and error in design, materials procurement, and production, and improves work proficiency. When the repeat-build effect is added to high prices, profitability increases accordingly.
◇With freight rates at records, orders pour in
Global VLCC orders are rising at an unprecedented pace. According to shipbroker Affinity, this year's VLCC orders stand at 168 ships, already surpassing the previous record of 110 in 1969 by the first half. It is the first time in 20 years that annual orders have exceeded 100 ships, since 2006 (103 ships).
What ignited the order race were instability in the Middle East and a surge in freight rates. In Mar., as the Strait of Hormuz was effectively paralyzed by the U.S.-Iran war, the daily rate for VLCCs from the Middle East to China at one point soared to an all-time high of $423,736 (about 630 million won). As of last month, the one-year time charter rate also remained elevated at about $102,000 per day (about 150 million won). As fares climbed, orders flooded in from shipowners seeking new tonnage.
The reduction in available ships also spurred orders. Sanctioned vessels carrying Iranian and Russian crude have left the normal charter market, and as routes hauling crude from distant regions such as the United States and Brazil to Asia increased to replace Middle Eastern crude, more ships have been needed to move the same volumes. With about 22% of crude carrier capacity exceeding 20 years of age, demand to replace aging ships is also pushing up orders.
◇China, backed by low prices, sweeps 89% this year
However, in terms of volume, Chinese shipyards have been the biggest beneficiaries of this year's order boom. According to maritime market analysis firm MSI, about 89% of VLCC contracts signed in the first half went to Chinese shipyards, a result driven by lower prices and expanded production facilities.
Recently, some VLCC contracts at Chinese shipyards have been priced at about $122 million to $123 million per ship (about 180 billion to 182 billion won), which is roughly $8 million to $9 million (about 11.8 billion to 13.3 billion won) lower than Hanwha Ocean's latest contract. A JPMorgan-affiliated fund is also said to have ordered two 307,000 DWT VLCCs from China's Dalian Shipbuilding in Apr. at about $123 million per ship (about 182 billion won). The same buyer paid more at a Korean shipyard.
Hanwha Ocean is commanding top-of-market prices with its construction track record and fuel-efficient, eco-friendly specifications instead of competing on price. According to Clarksons Research, among the 1,233 VLCCs currently in operation worldwide, 228 were built by Hanwha Ocean, the most by a single shipyard. In other words, about one out of every five VLCCs in operation globally was built by Hanwha Ocean.
Some warn that excessive ordering could come back as a supply burden in two to three years. As of last month, the VLCC orderbook stood at about 35% of the current operating fleet, meaning one new ship is being built for every three in operation. This ratio has surged in three years from 2% in 2023. About 83% of the ships contracted in the first half are scheduled for delivery in 2028–2029.
An industry official said, "Given instability in the Middle East and the need to replace aging ships, VLCC orders are likely to continue for the time being," but added, "With first-half orders alone more than doubling the previously planned 2028 deliveries, if high freight rates even delay scrapping of older ships, oversupply and falling rates could appear from 2028."