Positive outlook for Korean shipbuilders in 2020 with new sulfur cap

Korean shipbuilders, which secured over a third of new orders placed around the globe last year, are expected to lead the global industry in 2020 as well, especially with the new maritime cap regulating sulfur emissions, according to industry sources on Tuesday.

Five prominent Korean shipbuilding companies recorded a combined $26.2 billion in 2019, fulfilling 81 percent of annual targets, industry data showed.

Hyundai Heavy Industries won $12 billion in new orders to build 135 ships, achieving some 76 percent of its order target. Daewoo Shipbuilding & Marine Engineering clinched $6.11 billion worth of orders to build 33 vessels, reaching 73 percent of its annual order target. Samsung Heavy Industries built 44 ships to bag $7.1 billion, which is 91 percent of its order target.

South Korea topped the list of countries to secure the most new orders with 9.43 million compensated gross tons, among 25.3 million CGT, or 37 percent of deals placed around the world, according to data from Clarkson Research.

As a new regulation is implemented to reduce sulfur oxide release into the air, starting this year, demand for liquefied natural gas-powered vessels is expected to surge, placing Korean companies in a more favorable spot in the market, according to industry sources.

The International Maritime Organization implemented a new regulation under which ships have to use marine fuels with less than 0.5 percent sulfur content, a reduction from the previous 3.5 percent.

With the new regulation in place, shipowners have had to come up with ways to meet the new standard, such as using more expensive low-sulfur fuel oil, replacing vessels with those powered by liquefied natural gas or installing on-board scrubbers to abate sulfur emissions.

Korean shipbuilders hold a firm foothold in constructing LNG-powered ships. In 2018, Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries clinched all orders worldwide placed for 38 LNG-powered vessels.

(herim@heraldcorp.com)