Annual LNG carrier orders seen reaching up to 110 ships as South Korea, China battle for market share

Global orders for liquefied natural gas (LNG) carriers have surged eightfold so far this year, and analysts now project annual orders could reach as many as 110 ships — driven by a wave of upcoming LNG projects and an aging global fleet in need of replacement. The boom is set to intensify competition between South Korea, the world leader in LNG carrier construction, and China, which is rapidly closing the gap.

Global LNG carrier orders in the first half of this year totaled 47 million compensated gross tons (CGT), equivalent to 54 vessels — up roughly eightfold from 6 million CGT (seven ships) in the same period last year, according to Clarkson Research, a British shipbuilding and shipping market analysis firm. South Korea and China held market shares of 64.6 percent and 35.4 percent, respectively.

The sharp rebound in the global LNG carrier market — which had entered a correction phase — is linked to the war in the Middle East. Since the conflict broke out in late February of last year, major governments and global companies have stepped up orders for LNG carriers and other energy vessels as they diversify their energy supply portfolios.

Demand for LNG carriers is expected to grow even after the Middle East conflict ends, as the number of aging vessels due for replacement continues to rise and the United States pushes ahead with projects to expand its LNG exports. In a report issued July 9, DS Investment Securities projected that an average of 90 to 110 LNG carriers per year will be ordered from this year through 2032.

"If the large-scale orders from Qatar that are currently delayed materialize, and long-term supply contracts tied to global LNG projects expand, the LNG carrier boom cycle could extend for five years or more," said Kim Dae-seong, an analyst at DS Investment Securities.

The market upswing is expected to trigger a full-scale battle for dominance between South Korea and China. Until the early 2020s, South Korea in effect monopolized the global LNG carrier market, backed by the specialized expertise required to build the high-value vessels.

China also built LNG carriers, but shipowners largely shunned them due to a series of defect-related incidents. In 2018, the LNG carrier Gladstone, built by China's Hudong-Zhonghua Shipbuilding, broke down in waters off Australia due to an engine failure.

Of late, the picture has changed. China has pushed its market share into the 30–40 percent range, rapidly narrowing the gap with South Korea. The country improved the technical capabilities once seen as its weak point and, backed by sweeping government support, sharpened its price competitiveness — driving a sharp rise in orders. Its customer base, once concentrated among domestic shipping companies, has expanded to include Middle Eastern and European carriers. China Merchants Heavy Industry delivered an LNG carrier to a Danish shipping company in May.

China is building up its shipbuilding competitiveness in a bid to overtake South Korea and claim the top spot. Hudong-Zhonghua Shipbuilding recently began construction of an LNG carrier with a capacity of 271,000 cubic meters — the largest in the world. South Korea, unwilling to fall behind, is pursuing domestic development of cargo containment systems, a core LNG carrier technology. However, industry analysts say South Korea will find it difficult to reclaim the 80–90 percent or higher market share it once held, given how firmly China has established itself in the market.

"The reality is that global shipping companies are attracted to Chinese LNG carriers — their technology has improved, and the price is lower than South Korean vessels," an industry official said.