In January of this year, the shipbuilding industry in South Korea surpassed its competitors, including China, to take the top spot in the world for order volume. This marked a significant turnaround compared to December of the previous year. Thanks to the presidency of Trump, the South Korean shipbuilding industry is expected to continue to prosper this year.
Despite a significant decrease in global ship orders in January, the South Korean shipbuilding industry showed a clear rebound trend. Data from the UK shipbuilding and maritime research institution Clarkson Research on February 7th revealed that the global ship order volume in January was 1.46 million Compensated Gross Tonnage (CGT), a sharp 74% year-on-year decline. Among the orders from various countries, South Korea contracted orders totaling 900,000 CGT, accounting for 62%, ranking first in global ship orders, far exceeding China in second place. China secured orders of 270,000 CGT, accounting for 19%.
Compared to December of the previous year, the performance of the South Korean shipbuilding industry has shown a prominent upward trend, with a clear reversal of fortunes. At that time, South Korea only secured orders totaling 130,000 CGT, with a market share of just 6%, while China clinched orders totaling 1.93 million CGT, holding a market share of 82%.
In terms of the number of vessels, South Korea and China secured orders for 13 and 21 vessels respectively. South Korea focused on high value-added large vessels such as LNG-related ships, while China focused on smaller vessels with lower added value.
Last year, with the arrival of the shipbuilding industry’s super cycle and the prosperity of high value-added ship types such as competitive LNG carriers in South Korea, the three major Korean shipbuilders – Hyundai Heavy Industries, Hyundai Mipo Dockyard, and Samsung Heavy Industries – all turned profitable simultaneously for the first time in 13 years, with a total operating profit exceeding 2 trillion Korean won (approximately $13.7 billion), which was a sevenfold increase from the previous year.
This year, the prosperity of the South Korean shipbuilding industry is expected to continue. The shipbuilding industry in South Korea is considered the biggest beneficiary industry in South Korea after Trump took office.
After Trump was elected, when speaking with South Korean President Yoon Suk-yeol over the phone, he stated, “The American shipbuilding industry has declined significantly, and Korea’s help and cooperation are crucial. I understand very well Korea’s world-class abilities in building warships and vessels, not only in ship exports, but also in the field of maintenance, repair, and overhaul (MRO), close cooperation with Korea is necessary.”
For Trump, who hopes to overpower the military power of China, strengthening the combat capabilities of the US Navy is essential. However, the US Navy faces challenges in rebuilding its capacity to build, maintain, and repair ships. According to research data, with government subsidies, China’s share in the $150 billion global shipbuilding industry has increased from around 5% in 2000 to over 50% in 2023, while the share of the once dominant US shipbuilders has fallen to below 1%. Therefore, cooperation with the shipbuilding power of South Korea has become crucial for the United States.
Since 2003, South Korea has overtaken Japan to become the dominant force in the world shipbuilding industry, holding the top position in terms of order volume, construction volume, and order backlog. However, starting from 2020, South Korea’s global shipbuilding orders have been outrun by China. During this period, China prioritized price competitiveness based on low-wage labor for bulk carriers and other low-value-added vessels. According to the UK shipbuilding and marine market specialist Clarkson Research, China’s share of new shipbuilding orders last year was 70.6%, while South Korea’s was 16.7%.
However, despite trailing behind China in shipbuilding order volume since 2020, South Korea still monopolizes orders for high value-added vessels such as large container ships and LNG carriers. In the first three quarters of last year, South Korea held a global market share of 60% for LNG carriers.
The Korean market anticipates that under Trump’s administration, Korean shipyards will greatly benefit from US military ship MRO activities.
On another front, on his first day in office, President Trump declared a national energy emergency, emphasizing the exploration of oil resources. Trump stressed, “It will lower prices and export US energy to the world.” An increase in US energy exports will inevitably stimulate the LNG carrier market, which would be a positive development.
Regarding the capability to manufacture LNG carriers, South Korea’s shipbuilding industry is the strongest. Designing and producing cargo holds for liquefied natural gas under ultra-low temperature conditions of -162°C for safe storage and transport is crucial, and South Korea possesses unique technical expertise in this area, enabling the construction of stable and efficient LNG carriers. In contrast, China lags significantly behind in this technology.
According to the global market research institution Business Research Insight, the LNG carrier market is projected to grow from $137.1 billion in 2023 to $221.1 billion in 2032.
Since last year, the South Korean shipbuilding industry has been collaborating with the US Navy in the MRO business. The MRO business involves activities related to the maintenance, repair, and performance improvement of equipment used by the US Navy for immediate combat readiness.
Hyundai Heavy Industries aims to secure MRO contracts for up to three US Navy vessels this year. Last July, Hyundai Heavy Industries signed a Ship Repair Agreement (MSRA) with the US Navy’s Military Sealift Command for the first time domestically and is currently coordinating the time to engage in US MRO activities.
Hanwha Shipbuilding plans to secure MRO contracts for up to six US Navy vessels this year. Following its repair project for the USS Wally Schirra support ship of the US Navy last August, Hanwha Shipbuilding also secured the routine maintenance project for the USS Yukon, a refueling vessel belonging to the Seventh Fleet, in November this year. In December last year, Hanwha Shipbuilding completed the acquisition of the Philadelphia-based Phila Shipyard in the United States.
Samsung Heavy Industries has benefited from the US sanctioning Chinese shipyards. Samsung Heavy Industries’ business focus is on shipbuilding orders for floating liquefied natural gas production equipment (FLNG), which is a complete set of marine equipment for refining natural gas after offshore extraction, storage of liquefied natural gas, and marine loading and unloading.
China’s Zhoushan Wison Offshore and Marine is a competing company of Samsung Heavy Industries and the only FLNG shipyard in China. Recently, the US authorities sanctioned Zhoushan Wison Offshore and Marine based on its involvement in the Russian Arctic LNG 2 project, prohibiting the company from conducting financial transactions through the US financial system, thereby significantly restricting its global market activities.
In a report, South Korean NH Investment Securities analyst Jeong Yeon-seung analyzed that Zhoushan Wison Offshore and Marine, which has strengthened its position due to new FLNG orders, was selected as a target of US sanctions. In reality, besides Samsung Heavy Industries, there are no other options for new FLNG shipbuilding orders.
Similarly, South Korean SK Securities analyst Han Seung-han predicted in a report that with Trump’s second term in office, the global LNG investments and production momentum, including in North America, will expand, and the differentiation of Samsung Heavy Industries, possessing the world’s highest FLNG construction performance and technological capabilities, will be highlighted further this year.