China's top private shipyard shifts to selective orders, lifting price outlook for Korean rivals

Signs of selective order-taking are emerging even among Chinese shipyards that once swept up volume by competing on price. Analysts attribute the shift to a sustained, unprecedented boom in shipbuilding over recent years that has steadily eaten into available construction slots.

According to foreign media including China's Sindermarinews, Yangzijiang Shipbuilding, China's largest private shipyard, posted record first-half earnings this year. Sales reached 17.5 billion yuan ($2.59 billion), up 36.2 percent from a year earlier, while net profit for the same period rose 28.4 percent to 5.37 billion yuan. Its order backlog stood at 256 vessels worth $22.4 billion as of end-June, with deliveries secured through 2030. The gross profit margin in its core shipbuilding segment reached 37.1 percent.

With its backlog on solid footing, Yangzijiang is expected to prioritize a profitability-driven order strategy going forward. The yard set its order target for this year at $4.5 billion — 25 percent below last year's $6 billion — focusing on new demand for tankers and petrochemical product carriers. The move signals that even China's largest private shipyard is stepping back from pure volume competition.

An aerial view of HD Hyundai Heavy Industries' Ulsan shipyard. [Provided by HD Hyundai]

South Korean shipyards made the shift to selective ordering well ahead of their Chinese rivals. HD Korea Shipbuilding & Offshore Engineering, Hanwha Ocean and Samsung Heavy Industries each hold more than three years' worth of backlog. The three yards have built their competitive edge through experience managing large-scale projects, quality control and on-time delivery — particularly in high-value vessel types such as LNG carriers.

LNG carriers transport liquefied gas at minus 163 degrees Celsius and require advanced technologies including cryogenic cargo containment systems, thermal insulation design and long-voyage operational stability, making construction track record a critical barrier to entry. China has dominated the bulk carrier and container ship markets and has been accumulating LNG carrier construction experience in recent years, but South Korea is still regarded as ahead on quality and delivery performance.

South Korea's shipbuilding industry views China's pivot to selective ordering as both evidence of a global shortage of construction slots and a positive development for newbuild prices. When dry docks are fully booked, shipyards have little incentive to lower prices, supporting a floor under contract values. "If Chinese shipyards that once competed aggressively on price shift to a selective order strategy with profitability in mind, Korean yards — which hold an advantage in quality and delivery — are likely to gain a meaningful edge in order competition," an official at a domestic shipyard said.

An LNG carrier built by Hanwha Ocean. [Provided by Hanwha Ocean]

Yang Jong-seo, a senior researcher at the Export-Import Bank of Korea's Overseas Economic Research Institute and a visiting professor in the Department of Naval Architecture and Ocean Engineering at Seoul National University, said China had been sweeping up tanker and container ship orders for years before its backlog exceeded five years' worth of production last year, pushing it toward selective ordering. "If the current boom continues, newbuild prices will inevitably rise significantly," he said. He added that shipyards with full backlogs have no urgency to cut prices, and that strong newbuild prices are expected to hold for now.

Meanwhile, South Korea's shipbuilding industry is actively broadening its business scope to move beyond its traditional reliance on commercial vessels. Yards have recently entered markets spanning naval vessels, engines for AI data centers, small modular reactor-powered ships and floating data centers, and are beginning to show results. HD Hyundai Heavy Industries recently signed a power equipment supply contract with US-based Coban Energy Group worth 956 billion won ($673 million) — the largest power generation engine supply deal the company has ever secured.

keg@heraldcorp.com