China’s pol­lu­tion crack­down a boon to world’s ship­builders

South Florida Sun-Sentinel (Sunday) - - Money - By Kyunghee Park Bloomberg News

The world’s big­gest ship­builder sees China’s cleanup of its smoggy skies lift­ing prices of the ves­sels this year.

As China pri­or­i­tizes deal­ing with the smog that has fa­mously blan­keted Bei­jing and other big cities, the world’s sec­ond-big­gest econ­omy is in­creas­ingly turn­ing to liq­ue­fied nat­u­ral gas as a re­place­ment for coal for heat­ing and other pur­poses, boost­ing im­ports of the cleaner fuel. Hyundai Heavy In­dus­tries Co. ex­pects or­ders for car­ri­ers of the gas to lead de­mand for new ships, Chief Ex­ec­u­tive Sam H. Ka said.

“China’s need for LNG ap­pears to have trig­gered the restart of some gas projects in the U.S., Aus­tralia and Qatar,” Ka said in a phone in­ter­view from Seoul. “Our slots for LNG­car­rier con­struc­tion are pretty much filled up un­til 2021.”

Surg­ing de­mand for LNG in China, as well as in smaller emerg­ing economies, has spurred en­ergy ex­plor­ers in­clud­ing Royal Dutch Shell Plc and To­tal SA to fo­cus on in­vest­ments in gas de­vel­op­ment projects. The ac­com­pa­ny­ing de­mand for car­ri­ers to trans­port the fuel is a bright spot for a ship­build­ing in­dus­try that has strug­gled to win or­ders since crude oil prices slumped in 2014. Qatar plans to or­der about 60 new LNG car­ri­ers, adding to the

50 it al­ready owns, ac­cord­ing to En­ergy Min­is­ter Saad Sherida Al Kaabi.

Shares of Hyundai Heavy rose 0.7 per­cent in Seoul to

$129 Tues­day, the high­est clos­ing price since March

28. That com­pares with a

0.3 per­cent gain in South Korea’s bench­mark Kospi in­dex. Hyundai’s ri­vals Dae­woo Ship­build­ing & Ma­rine Engi­neer­ing Co. and Sam­sung Heavy In­dus­tries Co. also ad­vanced.

Ka ex­pects the ris­ing de­mand to ben­e­fit the world’s top three ship­yards, which are all based in South Korea. Gas car­ri­ers are the most ex­pen­sive com­mer­cial ships and take the long­est time to build.

“This is a good start to the new year with clear signs of strong de­mand for LNG car­ri­ers,” said Um Kyung-a, an an­a­lyst at Shiny­oung Se­cu­ri­ties Co. in Seoul. “As more and more slots get filled with LNG-car­rier or­ders, it’s go­ing to en­able ship­yards to raise prices for all types of ves­sels.”

Hyundai Heavy, Sam­sung Heavy and Dae­woo Ship­build­ing, to­gether with other smaller South Korean ship­yards, won 94 per­cent of the 80 LNG car­ri­ers or­dered world­wide last year, ac­cord­ing to the coun­try’s Min­istry of Trade, In­dus­try and En­ergy. The com­pa­nies also ac­counted for 87 per­cent of Very Large Crude Car­ri­ers or­dered glob­ally.

Th­ese helped in­crease their or­der back­log by 25 per­cent last year and will al­low them to raise prices for ves­sels, Ka said on Jan.


The ex­ec­u­tive pre­dicted that av­er­age prices for ships built by Hyundai Heavy and its ri­vals could climb 10 per­cent this year fol­low­ing a 10 per­cent in­crease in


Sam­sung Heavy re­ceived an or­der from Cel­sius Tankers in Europe to build two

180,000-cu­bic-me­ter LNG car­ri­ers for about $375 mil­lion, the Seong­nam-based ship­builder said in an email Tues­day.

The lat­est or­ders planned by Qatar, an­nounced Mon­day at a Qatar-South Korea sum­mit, come more than a decade af­ter the Mid­dle East­ern na­tion’s last ma­jor LNG-car­rier con­tracts for Korean ship­yards. In the three years through 2007, the world’s three big­gest ship­builders won or­ders from Qatar to build more than 40 LNG car­ri­ers.

Ka ex­pects the global ship­build­ing in­dus­try to con­tinue on a grad­ual re­cov­ery over the next few years.

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