Hanwha Ocean, the world’s third-largest shipbuilder, has decided to stop receiving container ship orders.
According to the shipbuilding industry on Jan. 7, Hanwha Ocean has decided to suspend its container ship ordering business as a management policy and has established a business plan for this year based on it. The suspension includes not only container ships powered by diesel engines, which have low added value, but also eco-friendly container ships equipped with relatively expensive methanol and LNG engines.
Container ships have been the main cash cow of Hanwha Ocean (founded in 1973 as Daewoo Shipbuilding & Marine Engineering, or DSME) but prices began to fall about a decade ago as Chinese companies, supported by the Chinese government, began to wage a price war, making Hanwha Ocean quickly become unprofitable. This explains why Hanwha Ocean, which won orders for 20 container ships in 2021, did not land any container ship orders in 2023. A Hanwha Ocean official explained, “While last year we decided whether or not to take container ship orders while monitoring the market, in 2024, we have decided not to do it at all.”
As part of its strategy to go all-in on taking orders for high-value vessels, Hanwha Ocean has decided to reduce its current five shipbuilding docks to four within a few years. This means the company will also not need orders for less profitable vessels to keep its shipbuilding docks busy. World shipbuilding leader HD Korea Shipbuilding & Offshore Engineering (17 total shipbuilding docks) and second-ranked Samsung Heavy Industries (8) are also shifting their focus to winning orders for higher-value vessels. But given their large number of docks, they have no immediate plans to suspend their container ship business.
China is the main culprit behind Hanwha Ocean’s decision to stop winning container ship orders. The container ship market has been dominated by Chinese shipbuilders in recent years. In 2023, Chinese shipbuilders won 101 (57 percent) of the 178 container ships ordered by global carriers. The figure is more than South Korea (51) and Japan (24) combined. Most of China’s orders were for expensive container ships that were methanol- or liquefied natural gas-powered ships and hybrids that use both fuels. There were fewer diesel-powered vessels, which are usually low-priced ships.
“Container ship orders are being swept up by Chinese companies,” said a Korean shipbuilding industry insider. “These orders include those for expensive hybrid ships. Korean shipbuilders have no choice but to propose prices offered by Chinese shipbuilders to some extent to win orders.”
Hanwha Ocean’s supposed failure to turn to profitability last year is also blamed on its aggressive ordering of container ships three years ago. Due to inflation and rising labor costs, Hanwha Ocean reportedly lost around 10 billion won on each container ship it delivered clients in 2023.
Source: Hellenic Shipping News
