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Hanwha Ocean delivers soaring Q1 profits on LNG carrier boom despite geopolitical tensions

Published: 28 Apr. 2025, 19:01

Four LNG carriers are built simultaneously at Dock 1 of Hanwha Ocean’s Geoje shipyard. [MINISTRY OF TRADE, INDUSTRY AND ENERGY]

Hanwha Ocean reported robust first-quarter earnings on Monday, driven by strong sales of high-value LNG carriers despite rising geopolitical uncertainties surrounding the global shipbuilding industry.

The company posted revenue of 3.14 trillion won ($2.18 billion) and operating profit of 258.6 billion won in the January-March period, up 38 percent and 389 percent, respectively, from a year earlier.

Hanwha Ocean attributed the gains largely to surging demand for LNG carriers, even as it warned of heightened risks stemming from U.S. trade policies targeting China.

By segment, merchant ships accounted for around 82 percent of total revenue. The merchant ship division logged 2.57 trillion won in sales and 233.3 billion won in operating profit, marking year-on-year increases of 32 percent and 1,182 percent, respectively. The company said the focus on LNG carriers, which command high profit margins, significantly boosted both revenue and earnings.

Hanwha Ocean’s special ship business, which includes three submarines for the Korean Navy’s Jangbogo-III Batch-II, or KSS-III Batch-II program and maintenance contracts for existing submarines, generated 303.4 billion won in revenue and 41.3 billion won in operating profit.

During a conference call following the earnings release, Hanwha Ocean said U.S. trade measures against China, including tariffs and import levies imposed by the office of the U.S. Trade Representative (USTR), have sharply heightened geopolitical uncertainty in the shipbuilding sector.

“Geopolitical uncertainty surrounding the shipbuilding sector is higher than it has been in recent memory,” a company representative said.

Still, the company projected that U.S. efforts to curb China and strengthen domestic shipbuilding would likely boost demand for Hanwha Ocean’s ships by increasing the company's appeal to U.S. and global customers.

Hanwha Group acquired a 100 percent stake in Philly Shipyard, located in Philadelphia, in 2024. [HANWHA OCEAN]

Hanwha Ocean also disclosed that Philly Shipyard, which it acquired last year, posted 116.5 billion won in revenue and an operating loss of 1.9 billion won in the first quarter.

The U.S.-based shipyard currently produces about one to one and a half ships per year. Hanwha Ocean is investing in facility upgrades with the goal of more than doubling that capacity.

“The results were not particularly great,” a Hanwha Ocean official said.

The firm said it is dispatching additional personnel to accelerate recovery and minimize delays, but acknowledged that achieving profitability in the second quarter remains unlikely. The company is also considering acquiring adjacent land for future facility expansion.

Regarding its maintenance, repair and overhaul (MRO) business for the U.S. Navy’s auxiliary support ships, Hanwha Ocean aims to win orders for five to six vessels this year.

Kim Ho-jung, senior executive vice president of Hanwha Ocean’s special ship division, said, “This is not a loss-making business. We are securing operating profits higher than those from new ship construction.”

The track record from MRO projects could positively influence contract awards under U.S. President Donald Trump’s short-term naval expansion plans, Kim added.

The USS Wally Schirra, a U.S. Navy 7th Fleet vessel that underwent maintenance, repair and overhaul by Hanwha Ocean from June last year to March this year, departs Hanwha Ocean’s Geoje shipyard in South Gyeongsang on March 13. [HANWHA OCEAN]

Korean shipbuilders gain momentum after U.S. trade measures

Following the USTR’s announcement on April 17 of new restrictions on Chinese shipping and vessels, Korea’s three major shipbuilders have reported a string of new orders.

HD Korea Shipbuilding & Offshore Engineering said it secured contracts for 22 container ships worth 2.54 trillion won between April 23 and April 26. Sixteen ships will be built at HD Hyundai Mipo Dockyard in Ulsan and six at HD Hyundai Samho Heavy Industries in Yeongam, South Jeolla, and delivered by the first half of 2029.

Samsung Heavy Industries also announced Monday its first container ship order of the year, winning a contract for two ships worth 561.9 billion won. Hanwha Ocean said the same day it clinched a deal to build two very large crude carriers (VLCCs) for 371 billion won.

Industry eyes 50 trillion won revenue mark

After all three major Korean shipbuilders returned to profitability last year for the first time in 13 years, industry watchers are looking to see whether their combined annual revenue could surpass 50 trillion won for the first time. In 2024, HD Korea Shipbuilding & Offshore Engineering, Hanwha Ocean and Samsung Heavy Industries together reported 46.22 trillion won in revenue.

During their first-quarter earnings calls, all three companies projected higher sales in the second, third and fourth quarters.

“Given U.S. energy policies, we can expect more LNG carrier orders. As shipowners increasingly shy away from China due to trade sanctions, there is a higher likelihood of a rebound in orders placed with Korean shipbuilders,” Jeong Dong-ho, an analyst at Mirae Asset Securities, said.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY LEE SU-JEONG [[email protected]]