With demand for gas soaring in Asia and a North American gas export boom just over the horizon, China’s technical skills are improving and Beijing wants importers to use more ships built at home. Meanwhile, despite political tensions, Japanese shipbuilders are preparing to build LNG tankers in China.
Kawasaki Heavy Industries Ltd. 7012.TO 0.00% , which makes other types of ships with China Ocean Shipping (Group) Co., will expand this cooperation to LNG carriers in the near future, a spokesman for the Japanese company said. It hopes to get orders to build two or three LNG carriers a year.
“Orders of new LNG carriers in the next five years could be between 100 and 200, depending on how many North American projects come to pass,” said Yoshikazu Nakaya, a shipping analyst with Mizuho Bank. “South Korean and Japanese shipbuilders will take most of them, but Chinese shipbuilders may get a small part.”
Of 134 LNG tankers built since 2009, 100 were made by South Korean companies, 20 by Chinese companies and 13 by Japanese yards, according to shipping-data provider IHS Maritime.
China could need around 60 new LNG tankers by 2020 to meet demand for gas, according to Standard CharteredSTAN.LN +1.52% and law firm Watson, Farley and Williams. That would add to the country’s influence in the market. LNG tankers typically cost around $250 million apiece. China is building LNG terminals to facilitate delivery of imported cargo.
Japan and South Korea for decades have been the biggest LNG users world-wide. Demand in the two resource-poor nations is growing as debates rage over the use of nuclear energy. Gas use in China and India also is ballooning.
In Canada, around a dozen projects to export LNG extracted from shale rock are planned. These and similar ventures in the U.S. will need fleets of ships to reach markets, mainly in Asia. LNG projects being built or planned in Qatar, Australia, Russia and Africa will further bolster order books.
Builders of LNG tankers need technical skill to install the “moss” or “membrane” linings used in storage tanks and must make license payments to the two European companies that designed them.
“Currently, many of the Chinese yards lack the technology and quality controls required for sophisticated tanker construction,” said Gary Li, a senior analyst at IHS Maritime.
But they are learning fast, using government aid and collaboration with Japanese LNG shippers and yards.
Japanese LNG shipper Mitsui OSK 9104.TO +0.45% Lines Ltd. in April said it had won agreements for around $1.5 billion in orders for six LNG ships to be built at Hudong-Zhonghua Shipbuilding Group Co. yards in eastern Shanghai. The tankers, each with a capacity of 174,000 cubic meters, will be used by China Petroleum & Chemical Corp.600028.SH +1.32% , also known as Sinopec Corp., to ship LNG from Australia.
The partners in 2011 won an order for four ships to carry LNG produced by Exxon MobilCorp. XOM -0.75% in Australia and Papua New Guinea to China. Hudong-Zhonghua, a unit of state-owned China State Shipbuilding Co., built its first LNG tanker in 2008.
In Japan, restructuring in the shipbuilding industry is creating new economies of scale and improving purchasing power and the transfer of technological know-how. Combined with a weak yen, that could help win orders. Japan Marine United Corp. was created through a merger in January.
In March, Mitsubishi Heavy Industries Ltd. 7011.TO -0.31% , Japan’s biggest LNG shipbuilder, and Imabari Shipbuilding Co. unveiled a partnership able to build eight LNG carriers a year. “The joint venture will help us a lot, as big LNG projects sometimes do not talk to shipbuilders with small capacity. We’ll be able to sit at the negotiation table,” a Mitsubishi Heavy spokeswoman said. The partnership hasn’t yet secured any LNG shipbuilding orders from North American projects, she said.
South Korean yards continue to pull in business. Daewoo Shipbuilding and Marine Engineering Co. 042660.SE +0.29% had 17 orders as of the end of last month. The company said that as long as Chinese yards mostly supply domestic customers, it is hard to see them as direct competitors, but they have the potential to be rivals as they gain technical know-how.
South Korea’s Hyundai Heavy Industries Co. 009540.SE -0.99% , citing data from shipping specialist Clarksons, said it won 14 of 36 new orders world-wide last year. It expects similar figures for this year and as of November had received 11 orders.
China is emerging as threat to Korean yards, said Luis Benito, a Singapore-based marketing manager for Lloyds Register. “Its presence may push ship prices downwards.”
—Colum Murphy in Shanghai, Mari Iwata in Tokyo and In-Soo Nam in Seoul contributed to this article.
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