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How Korea's shipbuilders could win the U.S.-China trade war

Published: 19 Feb. 2025, 07:00

LEE JAE-LIM
[email protected]

A 174,000-cubic-meter (6,144,752-cubic-foot) liquefied natural gas (LNG) carrier built by HD Hyundai Heavy Industries [HD HYUNDAI HEAVY INDUSTRIES]

Industry insiders expect major Korean shipbuilders to benefit from rising liquefied natural gas (LNG) carrier demand spurred by U.S. President Donald Trump’s protectionist trade stance and his drive to increase U.S. energy exports.

The establishment of the U.S. National Energy Dominance Council on Feb. 14 signaled the Trump administration’s commitment to expanding domestic energy production and achieve energy independence, including the expansion of LNG exports and offshore drilling initiatives. Since then, discussion of expanded LNG imports from the United States are already underway in some countries, such as Japan and India. Indian oil companies are looking to increase U.S. LNG shipments following Trump's lifting of the export permit ban last month.

As U.S. LNG exports grow, insiders anticipate that Korean shipbuilders will feel a ripple effect.

Global demand for new LNG carriers could reach as many as 126 ships by 2029, according to report from U.S. investment firm Clarksons Securities, which could open up a market worth 43 trillion won ($30 billion) for the vessels, which cost approximately $260 million.

Unlike container ships, LNG carriers require highly specialized technology for ship construction and LNG cargo containment systems.

Korean shipbuilders won 70 percent of the LNG carrier orders placed globally last year, according to industry sources.

“Of the 750 LNG carriers currently in operation worldwide, 90 percent are ‘Made in Korea’ ships,” said an industry insider who spoke on condition of anonymity. “LNG carriers are the last stronghold where Korean shipyards maintain a significant technological advantage over Chinese companies.”

Geographic tensions driven by the U.S.-China tariff war are proving to be favorable for Korean shipbuilders. The U.S. Department of Defense has already placed China’s largest state-owned shipbuilding company, China State Shipbuilding Corporation, on a blacklist, defining the company as a “Chinese military company” operating in the U.S.

President Donald Trump speaks to reporters after landing at Palm Beach International Airport in West Palm Beach, on Feb. 16, after attending the NASCAR Daytona 500 auto race. [AP/YONHAP]

“Additional LNG carrier demand is expected due to Trump’s energy export policy,” an HD Korea Shipbuilding & Offshore Engineering official said at a conference call on Feb. 6. “Shipowners are also reluctant to place orders from Chinese shipyards, taking a risk-averse stance amid escalating tension between the U.S. and China.”

To fully be at the receiving end of the U.S. policies, a key mission left for Korean companies is to acquire core LNG cargo containment technology, which is currently owned by the French engineering company Gaztransport & Technigaz (GTT). Typically, when Korean shipyards construct LNG carriers, they pay GTT a royalty fee of 10 billion won per vessel.

Since 2020, Korea’s three major shipbuilders — HD Hyundai Heavy Industries, Hanwha Ocean and Samsung Heavy Industries — have been collaborating with state-run Korea Gas Corp. (Kogas) to develop a domestically designed cargo containment system known as KC-2. The technology development is led by Kogas’s subsidiary KC LNG Tech while the three shipbuilders are conducting verification tests.

A previous attempt to develop the system, known as KC-1, came to a halt due to icing problems, caused by unresolved issue of outer wall temperatures of the system dropping below the minimum temperature threshold.

“Since LNG cargo containment systems require long-term verification and operations to gain shipowners’ trust, government support and interest in the development process are crucial, alongside corporate efforts,” commented Yang Jong-seo, a senior researcher at the Overseas Economic Research Institute of the Export-Import Bank of Korea.

BY PARK YOUNG-WOO, LEE JAE-LIM [[email protected]]