China to challenge Japanese and South Korean in LNG Shipbuilding

China would like to compete with South Korea in the field of building liquefied natural gas (LNG) carriers building.

South Korea has won 86 percent of the world’s total orders or 52 orders for LNG carriers so far in 2018, according to Clarkson Research. The remaining nine orders were shared by companies from China, Singapore and Japan.

Though China leads offshore engineering products and mega container vessel shipbuilding sectors, the country is a laggard in LNG shipbuilding.

A recent report in the country’s official media, China Daily, quoted Tan Naifen, deputy secretary-general of the China Association of the National Shipbuilding Industry (CANSI) as saying: “The global demand for LNG carriers will continue to surge in the long term, thanks to eco-friendly energy policy measures from China, India and many European countries, as well as the strong push of Russia, Australia and the United States for energy exports.”

The report pointed out that, building LNG carriers requires more advanced technology than what is used to make conventional storage tanks. They need to store LNG at a temperature of-163 C and are mostly powered by steam turbines. Each LNG carrier can be sold for $200 million to $250 million.

Tan said that it’s time for capable Chinese shipyards to make complex, high value-added vessels to reach buyers in new segments through international collaboration, research and development activities

At present, China’s LNG import is still heavily dependent on foreign LNG carriers, with external capacity dependence rate around 60 percent. Only 13 shipyards are able to produce them across the world.

Shanghai-based Hudong-Zhonghua Shipbuilding (Group) Co, China’s only builder of large LNG carriers which delivered 17 LNG carriers to shipowners throughout the world since 2008.

Meanwhile, CANSI data revealed that China’s shipbuilders completed 32.93 million deadweight tons of new vessels over January-November, lower by 14% year on year.

With the goal to restructure the country’s shipbuilding sector that has seen better days and secure its energy supply, Chinese shipyards are aiming high with a planned intake of new orders in the amount of $10 billion, for new LNG carriers over the remainder of the decade.

China plans to use the LNG new builds as leverage in the push to challenge Japanese and South Korean shipyards that have been the main builders of high-tech LNG vessels over the last 30 years.

American Bureau of Shipping expects that up to 50 LNG carriers or more than 20% of the total 225 LNG vessels expected to be added worldwide by the end of 2020 are set to be built in China, reports Reuters.

“In the future, our output is going to outstrip that of Japan and Korea,” said Yang Baohe, principal naval architect at the Marine Design & Research Institute of China, a subsidiary of China State Shipbuilding Corporation (CSSC).

China sees an opportunity in developing the skills and technology to build more sophisticated ships as the global shipbuilding industry emerges from a five-year downturn, the worst in 30 years.

The country is fighting the battle against carbon emissions and plans to double its gas supply and triple the LNG import by 2020, but apart from Hudong-Zhonghua, no other Chinese shipbuilding company has a respectable track record in building LNG carriers. This puts Chinese shipyards in a bad position as they are not likely to start winning any orders for projects outside China, due to the lack of experience, according to a South Korean rival, Samsung Heavy Industries. Most contracts, like the 14 vessels being built by Hudong-Zhonghua will be used to transport LNG from Papua New Guinea and Australia to China.

ABS vice president of global gas development, Bill Sember said that China needs to put about $9 billion to $10 billion into expanding its fleet.