Tanker owners risk being elbowed out of Korea’s top yards as huge LNG order hoves into view

Tanker owners have been advised to get their orders in fast at South Korea’s blue chip yards before available slots dry up.

In its latest weekly report brokers Gibson note that 2019 has already started out as a busy year in terms of tanker ordering activity with VLCCs and MRs once again appearing to be in vogue. So far this year, at least 12 VLCCs and 11 MRs have been contracted. Both asset classes also received the most interest in 2018, with 42 and 49 units being ordered respectively.

With consolidation increasing – notably Hyundai Heavy Industries set to take control of Daewoo Shipbuilding & Marine Engineering (DSME) next month – there is a risk that prices will climb for tanker newbuilds at these two premier Korean yards. Moreover, whilst investment in 2018 was well below record levels, contracting of complex LNG carriers and containerships roughly doubled year-on-year, suggesting that newbuilding slots at premium yards could be a little scarcer over the next few years.

“This may be particularly true if, as widely reported in the press, a large LNG order (of up to 60 vessels) is placed by Qatar,” Gibson noted.

“Higher consolidation should reduce ‘overcapacity’ in the Korean shipbuilding sector, which, coupled with higher demand from other sectors (e.g. LNG), could support higher prices, potentially impacting on the volumes of newbuilds contracted,” Gibson suggested.

Prices have already increased over the past 12 months, with a newbuild VLCC (non-scrubber, Korea) having risen approximately $10m over the past 12 months, according to Gibson data.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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