SEOUL, Sept. 23 (UPI) -- South Korea is expected to maintain its status as the world's biggest shipbuilder for the next decade mainly on the back of bumper orders for lucrative liquefied natural gas (LNG) carriers, industry analysts say.
Soaring demand for LNG, driven by rising gas consumption and higher crude oil prices, has come as a boon to the shipbuilding sector in South Korea, which has more than 72 percent of the global LNG tanker market.
South Korean shipbuilders sucked more than 90 percent of global orders for new LNG tankers this year until July, according to the Korean Shipbuilders' Association.
The country's three major shipbuilders -- Daewoo Shipbuilding and Marine Engineering Co., Hyundai Heavy Industry Co., and Samsung Heavy Industries Co. -- have been awarded orders of 29 LNG carriers for the seven months.
The local shipbuilders are also expected to win almost all of LNG tanker orders to be tendered later this year, including multi-billion dollar deals from Exxon Mobil Corp, the world's biggest oil company.
Exxon Mobil plans to tender 20 LNG tankers in October to ship gas from Qatar. South Korean shipbuilders are highly likely to clinch at least 16 of them. The U.S. oil giant is a partner in all of Qatar's existing LNG developments.
Buoyed by booming demands over the past month, foreign investors have bought more shares of the South Korean shipbuilders. U.S. investment firm Templeton Asset Management has increased its stake in Daewoo Shipbuilding to 5.01 percent this week, according to South Korea's financial watchdog.
JF Asset Management in Taipei bought a 5 percent stake in Hyundai Heavy this week, the Financial Supervisory Service said on Thursday. GMO-run global funds also bought a 5.68 percent stake in Hyundai Mipo Dockyard Co., a unit of Hyundai Heavy, the world's biggest shipbuilder.
Industry analysts say demands for LNG vessels are expected to maintain upward momentum because worldwide LNG consumption is soaring because crude oil prices remain strong.
"The world's natural reserves are huge enough to make up for decreasing crude reserves. Consumers will increasingly prefer to use cleaner fuel," said Hong Sung-in, a research fellow at Institute for Industrial Economics and Trade (KIET), a government-run think tank, says growing gas demand.
"LNG ship orders are likely to rise steadily because oil majors are issuing more and more tenders to meet rising LNG demand in the United States and Europe," she said.
"Orders of LNG carriers have just begun to come out since early this year despite its strong needs long before, so I expect demand for LNG vessels to continue for the next years," said an official at the Korean Shipbuilders' Association.
Song Jae-hak, an analyst at LG Securities, forecast South Korea's shipbuilders to enjoy more profits next year because the momentum for LNG vessels would keep going. He forecast the price of an LNG tanker to go up as buyers want larger ships.
"The LNG boom will drive an across-the-board profit recovery for South Korean shipbuilders," said Jo Yong-joon, an analyst at Daewoo Securities.
Daewoo Shipbuilding, the world's largest LNG shipbuilder, has won $2.2 billion worth of orders to build 13 LNG tankers so far this year.
The shipbuilder now has a total of 26 LNG carries in its order book, the largest among shipbuilders worldwide, a company spokesman said. The carriers are mostly 150,000-cubic-meter tankers.
"We has achieved this year's goal of winning 11 LNG tankers already in the first half. We expect more orders in the second half," he said.
Samsung Heavy has won orders to build 9 LNG carriers this year and has a total of 20 LNG carries in its order book. It has an annual capacity of producing 7 LNG tankers. Hyundai Heavy also has won orders to build 7 LNG carriers this year and has a total of 12 LNG carries in its order book.
South Korean shipbuilders have the capacity of turning out an estimated 20-25 LNG carriers a year. It usually takes 28-29 months to build one 150,000-cubic-meter LNG carrier.
Exxon Mobil plans to have a tender offer for several 200,000-cubic-meter carriers. The ships are estimated to cost as much as $216 million apiece. "We are confident that we can win a deal from Exxon Mobil to build giant 200,000-cubic-meter LNG tankers," said Ki Won-kwang, a Daewoo Shipbuilding executive in charge of sales.
Thanks to the LNG tankers boom, South Korean shipbuilders grabbed 43.8 percent of global orders for new vessels this year until July, widening the gap with the world second biggest shipbuilder, Japan.
South Korean shipbuilders won 10.5 million CGT of orders during the January-July period out of total orders of 25.2 million. CGT, or compensated gross tons, takes into account such factors as volume, weight and degree of difficulty to build.
South Korea overtook Japan to become the world's largest shipbuilder last year with over 40 percent of the world market. China, the world's third-largest shipbuilder, has narrowed its output gap in recent years, but its technology generally lags behind South Korea and Japan.
"China hopes to join the LNG shipbuilding market, but it is unlikely to produce outputs in the near future due largely to technical problems," said Hong of the KIET.
Jang Sok-in, another shipbuilding sector analyst at the KIET, said South Korea will remain the world's biggest shipbuilder with 40 percent of the global shipbuilding market at least until 2015.
South Korean shipbuilders are now investing aggressively in the development of high-value-added niche models as a means to cope with an increasingly crowded market for conventional ships.
Daewoo Shipbuilding, the world's sole builder of an LNG regasification vessel (LNG-RV), is pushing for the portion of the high value vessels. LNG-RVs are advanced LNG carriers that can convey gas through submarine pipelines to land and are valued at $30 million more than ordinary LNG vessel
"The portion of high-value-added ships, such as LNG carriers, is urged to increase to 60 percent from the current 35 percent in the country's local shipbuilders' products," Hong said.
