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Asia's tight capacity limits the number of new LNG ships that can be built, according to a Korea Shipbuilding executive

Image: Reuters Berita 24 English - As a result of the pandemic , Korea Shipbuilding & Offshore Engineering (KSOE) has mostly filled its ...

Image: Reuters

Berita 24 English - As a result of the pandemic, Korea Shipbuilding & Offshore Engineering (KSOE) has mostly filled its order book for the next 2-1/2 years, leaving limited room to meet the needs of the liquefied natural gas (LNG) sector, according to a senior business executive.

With increased LNG exports from the United States, more LNG carriers are traveling longer distances to customers in North Asia and Europe, while European countries are buying floating storage and regasification units (FSRUs) as they ramp up LNG imports to replace Russian gas supplies in the aftermath of the Ukraine crisis.

Shipyards in South Korea and China, on the other hand, are unable to meet demand for new LNG boats as they try to meet a rush of orders for new container ships as a result of global supply chain disruptions and port congestion that have slowed ships in the US and China. This helps to underpin LNG carrier spot chartering rates, which have reached all-time highs.

"A substantial amount of new-build orders have taken up slots at China and South Korean shipyards," said K.W. Kim, senior vice president of Hyundai Heavy Industries, the flagship subsidiary of KSOE, the world's largest LNG carrier builder.

He added that KSOE's capacity is practically filled, with orders reaching out to 2025, and that container ships and LNG carriers each account for around 30% of slots. Every year, KSOE constructs 20 to 22 LNG ships.

Shipyards are also finding it difficult to expand due to labor shortages, as well as a more than 15% increase in the price of essential material steel plates, according to Kim.

"At this time, we are unable to accept new FSRU orders," he continued.

Qatargas and TotalEnergies have both reserved shipbuilding slots for LNG projects in Qatar and Mozambique for 2020, he said, while US LNG producers are also looking for new vessels as they ramp up exports.

"Shipowners benefit from favorable charter prices," Kim explained.

He stated that ships fitted with dual fuel engines - either LNG or methanol - with oil account for almost half of new-build orders for commercial boats. Methanol-powered container ships are being built by Hyundai Heavy for A.P. Moller-Maersk.

Smaller oil tankers, such as Aframax and Medium-Ranged vessels, are also in high demand, according to Kim, as Europe strives to import more oil products from outside to replace Russian supplies.

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