Samsung Heavy Industries Stops Russian LNGs Despite Slowing Orders
South Korean shipbuilding Samsung Heavy Industries is moving to temporarily suspend its work for Russia related to the construction of Arctic LNG carriers. The move comes despite the world’s third largest shipbuilder falling behind on its 2023 orders as the shipbuilding industry has begun to struggle and South Korea’s yards experience increasing competition in more sectors from China.
According to reports from Reuters and Bloomberg, SHI will be temporarily halting its efforts to build further blocks for the Russian Arctic LNG carrier program. With mounting pressure from the Western sanctions against Russia and its shipbuilding and energy industries, SHI is reported to be completing blocks for the first five vessels but will not be proceeding at this time with the block for 10 more vessels. SHI builds in conduction with Russia’s Zvezda shipbuilding complex supplying hull blocks for the vessels that are outfitted in Russia.
Last year, Daewoo Shipbuilding and Marine Engineering also backed out on contracts with a Russian shipowner. They canceled three contracts citing a failure of the shipowner which was believed to be Sovcomflot to make installment payments for the contracts.
While having the overall largest backlog in the industry, Samsung Heavy Industries has failed to keep pace in 2023 and according to a stock exchange filing will fall short of its 2023 order targets. Business Korea reports that going into the last week of the year, SHI was only at 69 percent of its target for the year and is unlikely to close the gap.
Samsung Heavy Industries is not alone in the shortfall according to the newspaper. They calculated that Hanwha Ocean, the former Daewoo Shipbuilding, is at less than half its annual target. The shipbuilder, which recently won a large order from the Korean Navy, is looking to refocus its strategy on military work after the acquisition by Hanwha. Since the takeover was completed, they reported several high-profile assignments but are still working to overcome the troubles experienced by DSME which led to the government privatization. HD Korea Shipbuilding & Offshore Engineering Co. (Hyundai) however reported in December that its shipbuilders had reached nearly 140 percent of its annual shipbuilding target or a total of $15.7 billion worth of new orders.
The reports are that both SHI and Hanwha Ocean have been unable to conclude negotiations with Qatar Energy to convert reservations into firm construction contracts for new LNG carriers. The newspaper reports the yards have been unable to reach agreements with Qatar on the price for up to 20 additional LNG carriers.
Samsung Heavy Industries started the final week of 2023 by announcing a new order which was significant as the yard joined its peers with the first orders for large ammonia gas carriers. Both HD KSOE (Hyundai) and Hanwha Ocean previously reported orders for ammonia carriers as part of the emerging sector. SHI announced today it received an order from an unnamed shipowner in Oceania for two large ammonia carriers.
This latest order, which was valued at $240 million and due for delivery in 2027, pushed SHI to 72 percent of its annual target. Orders for the year now stand at $6.8 billion for Samsung Heavy Industries with the company unlikely to close the gap this week to the annual target of $9.5 billion. The group however highlights that its three-year backlog is valued at nearly $32 billion and it continues to win orders in the highly profitable gas carrier segment.