LNG Carrier Competition
"China News Weekly" reporter: Chen Weishan (chenweishan@chinanews.com.cn)
Published in the 1080th issue of "China News Weekly" magazine on February 20, 2023
The contract for the construction of two 175,000-cubic-meter LNG carriers is a "good start" for Jiangnan Shipbuilding (Group) Co., Ltd. (hereinafter referred to as "Jiangnan Shipbuilding") after the Spring Festival in 2022.
People in the industry are well aware of the weight of this "big order".
Liu Weidong, the chief designer of large LNG ships of Jiangnan Shipbuilding, remembers that on November 25, 2021, he received a call from Lin Qingshan, the deputy general manager of the company, asking him to meet with a ship owner, "the other party wants to talk about large LNG ships."
Walking into Lin Qingshan's office that afternoon, Liu Weidong realized that the visitor was special.
"The owner of the ship is ADNOC, the Abu Dhabi National Oil Company. Middle Eastern oil companies have great energy. On the one hand, the economy of Middle Eastern countries is highly dependent on oil and gas resources. On the other hand, the chairman of these companies is often a member of the royal family." The meeting was very pleasant in the end. , in the face of various technical problems raised by the other party, Liu Weidong repeatedly stated that the technical documents that had been prepared could be sent the next day.
On February 28, 2022, ADNOC and Jiangnan Shipbuilding officially signed a contract for the construction of two 175,000 cubic meter LNG carriers.
Although Jiangnan Shipbuilding received an order of 79,800 cubic meters of LNG ships from JOVO Group in May 2021, the cabin capacity of 100,000 cubic meters is usually regarded as the dividing line between small and medium-sized and large LNG ships in the industry, and the cabin capacity of about 170,000 cubic meters It is also the most mainstream ship type. This order means that Jiangnan Shipbuilding has become the second Chinese shipyard to receive an order for a large LNG carrier after China State Shipbuilding Corporation Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. (hereinafter referred to as "Hudong-Zhonghua") .
The LNG carrier is a special ship for transporting liquefied natural gas at minus 163°C. It is a "sea super refrigerated vehicle" and is known as the "Pearl in the Crown" of shipbuilding in the world. Only the United States, China, Japan, South Korea and Shipyards in a few countries in Europe are able to build.
If you take a longer view, you will find that since Britain built the world's first LNG ship for commercial transportation in 1964, the LNG ship industry chain has undergone several transfers. Depending on the choice of different technical paths, not only may a shipyard miss an order, but may even drive the entire country's shipbuilding industry out of the LNG carrier market.
The competition is still going on today, but the participants are only Chinese and Korean shipyards.
hard to find
The LNG carrier market has never been hotter than in 2022.
Last year, Hudong-Zhonghua added 37 new orders for LNG ships, with a market share of over 20% and nearly 50 orders in hand.
In the memory of Huang Huabing, Secretary of the Party Committee of the Second Department of Hudong-Zhonghua General Assembly, in the past few years, the number of orders per year ranged from two to three ships to as many as seven or eight ships, with an average of about 5 ships per year.
Although there are differences in data from different agencies, the statistics on new LNG ship orders in 2022 are all record highs.
For example, according to Clarkson's statistics, the number of new orders for LNG ships last year reached 182, more than double the record 83 ships in 2021, and more than three times the average of 59 ships per year in the past five years.
The surge in LNG carrier orders is inseparable from the growth in LNG trade volumes in 2022, which reached a record high of 409 million tons last year, according to Refinitiv data, compared with 379.6 million tons the previous year.
The Russia-Ukraine conflict is obviously the driving force behind it, especially in September last year when the "Beixi No. 1" and "Beixi No. 2" natural gas pipelines were damaged one after another.
As a gas with an extremely low density, there are only two long-distance transportation methods for natural gas: pipelines and sea transportation by LNG ships.
The situation of the ebb and flow of the two will be particularly obvious in 2022.
Last year, Europe's pipeline natural gas imports from Russia fell sharply by 55%. To make up for the 83 billion cubic meters difference, Europe stepped up its efforts to purchase LNG.
According to the statistics of the Oxford Institute of Energy Research, in 2022, Europe's LNG imports will increase by 60%, and imports will increase by 63 billion cubic meters.
Kazuya Hamasaki, the executive director of Mitsui, Japan, once estimated that "the current LNG ship transportation volume is 370 million tons, and the annual natural gas purchased by pipelines in Europe is about 120 million tons calculated as LNG." If all of them are replaced by LNG, the existing LNG ships It is difficult to undertake such an increase.
Hitoshi Nagasawa, president of NYK, said that to transport 100 million tons of LNG more, about 100 more LNG ships are needed.
In 2022, more than a quarter of the new LNG carrier orders will be participated by Japanese shipowners.
The tight capacity has directly pushed up the daily rent of LNG ships. Taking the daily rent of LNG ships sailing between the United States and Europe as an example, it will exceed US$480,000 in November 2022, which is about twice that of the same period in 2021.
It is against the background of the growth of LNG trade volume and the shortage of shipping capacity that the LNG carrier market exploded.
Huang Huabing revealed to China News Weekly that before the Russian-Ukrainian conflict broke out, Hudong-Zhonghua had already received intentional orders for 15 to 20 LNG carriers in early 2022. After the conflict broke out, these orders accelerated.
The price of an LNG carrier of about 170,000 cubic meters will rise from US$185 million to US$186 million before 2021 to more than US$190 million in 2021, break through US$200 million by the beginning of 2022, and reach US$230 million in the fourth quarter $240 million.
"In the case of limited profit margins for civilian products, the profit margin of LNG ships is better than that of container ships, but it is also related to the timing of receiving orders. Some shipyards that still have production capacity in the fourth quarter of 2022 can receive orders at higher prices." Huang Huabing said .
The high cost is more due to the limited capacity of the shipyard.
"At present, Hudong-Zhonghua can deliver about 5 LNG carriers every year, and it has been maintained at this level in recent years, which also matches the previous average annual order volume." Huang Huabing revealed that the current Hudong-Zhonghua delivery cycle has been scheduled to 2028 Year.
The Korean shipyards represented by Hyundai, Daewoo, and Samsung are in a similar situation. At least until 2026, there is no excess capacity to release, and it is already hard to find a dock.
The difficulty of building an LNG ship determines that its production capacity must be limited.
Hudong-Zhonghua is still the only shipyard in China with delivery records of large LNG carriers. In the world, there are only single-digit shipyards with delivery records in recent years, concentrated in China and South Korea.
Unlike the Korean shipyards that entered the LNG carrier field in the 1980s and 1990s, Hudong-Zhonghua did not deliver the first LNG carrier until 2008.
GTT: French company hard to bypass
"The design of any ship type must first meet its function. Is the object to be carried people or cargo? Is it dry cargo or liquid cargo? Is it normal temperature liquid cargo or low temperature liquid cargo? Cargo system.” Liu Weidong told China News Weekly.
In particular, the containment system directly in contact with LNG is considered to be the main technical difficulty in the construction of large LNG ships.
LNG, that is, liquefied natural gas at minus 163°C, needs to be kept at a low temperature during long-distance transportation. At the same time, the airtightness of the liquid cargo tank is extremely high. Once leaked, the steel plate of the hull will be brittle. It will explode in an instant.
170,000 cubic meters of liquefied natural gas exploded at the same time, releasing energy equivalent to 323,000 tons of TNT high explosives.
The purpose of the containment system is to ensure the heat insulation and airtightness of the cargo tank, which is similar to the liner of a thermos pot exposed to boiling water.
The containment system of large LNG ships mainly adopts membrane technology, mainly based on two technical routes of NO and MARK, using different raw materials and processes.
Both membrane technologies originated in the early 1960s and were originally controlled by two French companies. In the mid-1990s, the two companies merged into GTT to monopolize the membrane technology for LNG ship containment systems.
Taking the NO 96 thin film technology as an example, it needs to lay a layer of insulation box in the hull first, and then lay a layer of invar steel. The tile steel forms a structure of two layers of insulating boxes and two layers of invar steel.
The material of the invar steel that directly contacts with LNG is steel containing 36% nickel, which has an extremely low coefficient of thermal expansion, and hardly shrinks or deforms from normal temperature to minus 163°C.
"The invar steel laid on LNG ships is only 0.7 mm in most cases. We usually compare it to the thickness of paper. This places high requirements on welding technology and no leaks." Huang Huabing said, the enclosure system The difficulty of construction is mainly reflected in welding, which is similar to the construction on rice paper.
The containment system of a large LNG carrier has a total of 150 kilometers of welds, 90% of which use automatic welding technology, and the remaining 10% require manual welding.
It takes an average of three months to train a qualified welder, and at least another year of work to become a relatively skilled welder.
Nowadays, only when a shipyard completes the construction of the simulation cabin of the containment system and obtains the certification and issuance of certificates from GTT, will it be considered as an "admission ticket" to enter the large LNG carrier market.
Naturally, domestic shipyards cannot avoid GTT to break through the LNG carrier.
In the late 1990s, GTT went to China to promote thin-film technology and visited many domestic shipyards.
The cooperation mode between GTT and the shipyard is to only provide drawings and inspection services, without providing any physical components of the containment system. The shipyard needs to purchase components from qualified suppliers approved by GTT, and is charged a patent fee of 5% of the cost of each ship.
Liu Weidong said frankly that it was difficult for domestic shipyards to accept this cooperation model conceptually at that time, and gradually realized that the construction of large-scale LNG ships could not bypass GTT's membrane technology.
Another technical route is the MOSS type, that is, the spherical tank type LNG ship. Although the patent fee is relatively low, if you want to achieve the same tank capacity and energy consumption as the membrane type LNG ship, the cost will be higher.
Japanese shipyards, which entered the LNG carrier market before Korean shipyards, still use spherical tank-type LNG carriers as their main products after 2000. With the emergence of the advantages of membrane-type LNG carriers and the rise in labor costs in Japan, Japanese shipyards will be the first in the 21st century. In the past ten years, it has been gradually squeezed out of the LNG carrier market.
In 1997, Hudong-Zhonghua started the preliminary investigation of LNG ship construction.
"At that time, I didn't even know what the LNG ship looked like. After sorting out the information, I visited foreign shipyards and classification societies and gradually came into contact with LNG ships." Huang Huabing introduced that the real step forward was in mid-2001, when he was represented by GTT. Under the guidance of Hudong Zhonghua, the first containment system simulation cabin was built.
In 2004, Hudong-Zhonghua won the bid for the Guangdong LNG project, which was the first liquefied natural gas project in China and the first bidding for an LNG ship.
In April 2008, Hudong-Zhonghua delivered the 147,000 cubic meter LNG carrier "Dapeng Hao", which became the first LNG carrier built by a domestic shipyard.
The design and construction of Hudong-Zhonghua's first-generation LNG carrier has the technical cooperation of the French Atlantique Shipyard.
"Hudong Zhonghua did not have independent design capabilities at that time, and could only cooperate with the French Atlantique Shipyard, and provided a lot of technical support for convenience from the selection of ship types." Huang Huabing recalled that Hudong Zhonghua's designers usually traveled in France for half a year. Above, jointly designed with Atlantic Shipyards.
In addition to the joint design, the staff of Atlantic Shipyard participated in the follow-up process preparation, installation and commissioning, and even the sea trial.
Since the second generation of LNG carriers, Hudong-Zhonghua has started independent research and development and design. After several rounds of upgrades in terms of ship type, main engine, and enclosure system, the LNG carrier "Changheng Series" that Hudong-Zhonghua started construction in 2022 is already the first Five generations.
The evaporation rate, which is an important technical indicator of LNG ships, has dropped from 0.15% per day in the first generation to 0.085% per day in the fifth generation.
In the past 14 years, Hudong Zhonghua has become the only shipyard in China that has entered the field of large LNG ships.
The secret battle behind the "dominance of one family"
In fact, at the end of the 1990s, Hudong Zhonghua was not the only domestic shipyard that wanted to enter the LNG carrier field.
At that time, apart from Hudong Zhonghua, the shipyards participating in the bidding for the first LNG carrier of the Guangdong project also included Jiangnan Shipbuilding and Shanghai Waigaoqiao Shipbuilding Co., Ltd. (hereinafter referred to as "Waigaoqiao").
The results of this bidding directly established the pattern of Hudong-Zhonghua being the "dominant" among the domestic shipyards in the LNG carrier field for nearly 20 years.
At that time, the Jiangnan Shipyard was still located upstream of the Shanghai Nanpu Bridge, and the LNG ship could not pass through the Nanpu Bridge after construction, so it chose to cooperate with the newly established Waigaoqiao.
"At that time, Chen Jinhai, the chairman of Jiangnan Shipbuilding, also served as the chairman of Waigaoqiao. At that time, Waigaoqiao didn't even have a delivery record for bulk carriers, which was equivalent to elementary school students taking the college entrance examination." Liu Weidong said half-jokingly.
The confidence of Jiangnan Shipbuilding and Waigaoqiao Consortium stems from the fact that they chose the membrane-type technology route when bidding, and the bidding document clearly stated that the bidding target was membrane-type LNG carriers.
However, Hudong Zhonghua finally won the bid for the three LNG ships of the Guangdong project.
After the Guangdong project, two LNG carriers of the Fujian project approved in 2003 started bidding.
This time, Jiangnan Shipbuilding changed its technical route when bidding, and cooperated with Finnish Massa Shipyard to introduce its spherical tank technology.
"At that time, I was more confident in winning the Fujian project. I believed that China's LNG ship technology route could not be limited to the membrane type, which would also help reduce dependence on a certain foreign technology patent." A person in charge of Jiangnan Shipbuilding who participated in the tender recalled that year. , but the shipowners behind the Guangdong and Fujian projects were both CLNG, the first LNG carrier shipping company established in China. Naturally, the same shipowner was unwilling to operate two types of ships, and preferred to choose membrane-type LNG carriers.
Subsequently, the Shanghai project invited bids for an LNG carrier again, and Jiangnan Shipbuilding was clearly in a state of "accompanying".
After 2006, the LNG carrier project of Jiangnan Shipbuilding has been at a standstill until 2012 when it bid again for the China Shipping Group project and "accompanied it" again.
After the bidding experience in 2012, Lin Ou, then the general manager of Jiangnan Shipbuilding, called the main leaders of the company for a four and a half hour meeting.
"The meeting decided not to continue the 'accompanying run', but to establish its own technical reserves, and choose the MARK-type thin film technology route that competes with Hudong Zhonghua in a differentiated manner to seek breakthroughs."
In 2022, with the outbreak of the LNG ship market, Jiangnan Shipbuilding, DSIC, Yangzijiang Shipbuilding, and China Merchants Industry have successively received orders for LNG ships. As "latecomers", the four shipyards all adopt the MARK-type membrane technology route.
"If you choose the same NO-type thin film technology route as Hudong Zhonghua, you need a huge investment to build an insulation box production line, and there are big doubts about the source of funds and costs. Back then, Hudong Zhonghua mainly obtained national support through research projects to build insulation boxes. Container production line, other shipyards have been difficult to copy." Liu Weidong explained.
After selecting the MARK-type membrane technology route, at the end of 2016, after the establishment of the Jiangnan Research Institute, Jiangnan Shipbuilding began to really invest in the research and development of the MARK III-type LNG ship. The initial plan was to jointly develop with a domestic design unit, but the first version of the design plan The energy consumption index of the ship is 15% higher than that of similar ships of the Korean shipyard. It is estimated that the cost of energy consumption is 70 million US dollars higher than that of a 40-year cycle.
After the death of the first version of the design plan, Jiangnan Shipbuilding began to lead the development of the second phase.
At the end of 2018, Jiangnan Shipbuilding first entered the fuel tank market and gradually became capable of independently building and delivering 18,000 cubic meters of fuel tanks using Mark III membrane technology, which means that Jiangnan Shipbuilding has the ability to undertake the construction of Mark III membrane containment systems.
"The fuel tank can be understood as a small liquid cargo tank, which is used for some LNG-fueled ships to store LNG. Before that, not many people in the company believed that they would be able to take orders for Mark III LNG ships, and they felt the distance after the fuel tank was delivered. Orders for large LNG carriers are no longer far away," Liu Weidong said.
In 2022, Jiangnan Shipbuilding finally received an order for six 175,000 cubic meter LNG carriers from ADNOC.
In 2022, in addition to the sharp increase in market size, the biggest change in the domestic LNG carrier field is that four shipyards including Jiangnan Shipbuilding have begun to break the situation of Hudong Zhonghua's "one big company".
Regarding the intensified competition among domestic shipyards, Huang Huabing admitted that he did feel the pressure, but he is still confident that Hudong-Zhonghua will maintain its leading position among domestic shipyards within three years.
However, the emergence of more players has opened up the possibility for China to challenge South Korea's position in the LNG carrier field.
China and South Korea compete for the international market
In the past ten years, Hudong-Zhonghua has stopped taking orders for bulk carriers and oil tankers, and its civilian product line has concentrated on LNG carriers and large container ships.
From the perspective of product structure, LNG ships have accounted for more than half of the company's total orders.
"During the '14th Five-Year Plan' period, Hudong-Zhonghua will increase the production capacity of LNG ships as an important strategy. The number of LNG ships delivered will increase to 10 in 2025, which means that the production capacity will double in two to three years." Huang Huabing revealed.
At the 2023 business strategy conference held at the beginning of the year, Hudong Zhonghua put forward the annual goal of "implementing the strategy of doubling LNG production capacity and optimizing the structural layout of the entire industrial chain".
The second phase of the Changxing Shipbuilding Base, which undertakes the strategic task of doubling Hudong-Zhonghua's LNG production capacity, is advancing various construction works in full swing.
Before 2022, the global annual LNG ship orders will be around 60.
According to Huang Huabing's estimation, the production capacity of LNG ships in South Korea is dominated by Samsung, Hyundai, and Daewoo, with a total annual production capacity of about 60 ships, which means that Korean shipyards previously occupied an absolute majority of the market.
With more domestic shipyards entering the LNG field in 2022, Chinese shipyards have undertaken a total of 59 LNG carriers, accounting for 32% of the market.
South Korean shipping companies received orders for 122 LNG carriers, accounting for 67% of the market.
In addition to the 181 orders received by Chinese and South Korean shipyards, the only remaining LNG ship order is the 3,500 cubic meter LNG bunkering ship undertaken by Mitsubishi Shipbuilding in March.
In 2022, in addition to ADNOC's 6 large LNG ship orders from Jiangnan Shipbuilding, the Singapore shipowner's two large LNG ship orders are also undergoing technical negotiations at the end of October and will be signed at a later date.
According to the relevant person in charge, at present, Jiangnan Shipbuilding is still negotiating with some shipowners, and is still actively accepting orders, "every order must be contested."
Large container ships, large liquefied gas carriers and large LNG carriers are the three strategic products of Jiangnan Shipbuilding.
Jiangnan Shipbuilding has just entered the field of large-scale LNG ship construction, and the temporarily announced production capacity is to deliver 3 ships per year.
However, it is expected that the annual production capacity will be greatly improved before the delivery of the first batch of ships, that is, the delivery speed of the first one or two ships will be relatively slow, and then it will be greatly improved.
A senior expert in the field of LNG ships told China News Weekly that the LNG ships built by Chinese shipyards have no gap with South Korean shipyards in terms of energy consumption, speed, evaporation rate and other indicators. As more Chinese shipyards enter this field, the future 3 It is possible to reach or even surpass South Korea in production in ~5 years.
At present, Chinese and South Korean shipyards are launching a competition for LNG ship capacity, hoping to get a bigger share of the pie.
The production capacity is closely related to the construction cycle, which is also an important gap between Chinese shipyards and Korean counterparts.
At present, the construction period of Hudong-Zhonghua LNG ship is about 21 months from start of construction to delivery, which has been greatly shortened compared with the initial nearly 40 months. However, the average construction period of Korean shipyards is 18 months, and can even be shortened to 16.5 months. .
This makes the current quotations of large LNG carriers from Chinese shipyards lower than those of South Korean shipyards, with a difference of several million to 10 million US dollars. The main reason is that the construction period of Korean shipyards is shorter. Put it into operational profit earlier.
Improving the localization rate of supporting components can shorten the construction cycle to a considerable extent.
"The procurement cycle of some important supporting components may be as long as 10 to 14 months, and Korean shipyards can greatly shorten the construction cycle based on their scale advantages and high supply priority from domestic supporting manufacturers." Liu Weidong said.
Like the Chinese shipyards, the mainstream LNG ship enclosure system of Korean shipyards also adopts the patent of GTT Company, and the two core raw materials also need to be imported. Birch in the arctic regions of Russia.
"Talking about the differences in the localization of supporting components in Chinese and Korean shipyards, it is mainly reflected in the liquid cargo system, that is, a system for controlling LNG loading and unloading, especially a series of low-temperature equipment. Most of the Korean shipyards can achieve domestic matching. , Chinese shipyards still need to import. At the main engine level, dual-fuel main engines can already be produced domestically, but some shipowners may name and require the use of foreign-produced main engines.” Huang Huabing believes that the current localization rate of supporting components can reach more than 60%. The South Korean shipyard can reach more than 90%.
Liu Weidong told reporters that the design and integration of the liquid cargo system is not a problem for Chinese shipyards, but compressors, heat exchangers, inert gas generators, and even metering equipment need to be purchased from abroad.
"These equipments are basically developed by corresponding domestic manufacturers and are gradually applied to small LNG carriers, but not to large membrane LNG carriers."
However, he is more optimistic about the increase in the localization rate of supporting equipment. "If only Hudong Zhonghua enters the large LNG carrier market among Chinese shipyards, the market for upstream supporting manufacturers is extremely limited, and more shipyards entering this field means more Supporting manufacturers are willing to invest in this field."
The above-mentioned senior experts in the field of LNG revealed to China News Weekly that the scientific research project on LNG ships led by Hudong Zhonghua has been approved in principle at the State Council level, but the formal approval will not be until the second half of 2023. The most important content is the localization of supporting equipment.
"It is estimated that after three years, the first batch of domestic equipment will be on board, and the optimized second batch of domestic equipment should be on the right track, but it will still be used in a small range, because many foreign shipowners will still not choose domestic equipment. It is expected that this process will take Five or six years."
If calculated based on this time, China's LNG ship industry chain can catch up with the stage of rapid market growth.
According to Huang Huabing's prediction, the short-term effects of the Russia-Ukraine conflict will continue in the next two to three years, but in the longer term, the proportion of natural gas in energy consumption will increase, and some previous ship types are aging, or energy consumption If the standard is no longer met, at least it will bring growth prospects for the LNG carrier market for 10 to 15 years.
"LNG ships are inseparable from the cargo they transport, and the position of LNG in many energy sources is inseparable from geopolitics and the goal of 'dual carbon'. Therefore, it is difficult to predict the number of orders for LNG ships in the new year, especially if it is also mixed with It is mixed with the variables of the conflict between Russia and Ukraine.” Liu Weidong said frankly that he is paying close attention to the information in these aspects recently, especially its impact on the domestic LNG market.
He predicts that from a global perspective, it will be difficult to reach the new orders of about 170 LNG carriers in 2022 in 2023.
However, starting from January 1, 2023, the new emission standards in the shipbuilding field will be implemented, including the first domestic LNG carrier "Dapeng Hao", which may face the fate of being eliminated, which will bring new market opportunities.
In the middle of 2022, Liu Weidong sorted out the production capacity of global natural gas liquefaction plants. Liquefaction is a prerequisite for LNG trade, and it can also reverse the LNG trade volume to a large extent.
According to his estimation, the production capacity of global natural gas liquefaction plants can reach 800-900 million tons in 2030.
Although the trade volume will be discounted accordingly, if the global LNG trade volume reaches 700 million tons by then, even considering the replacement of old and new LNG ships, the average annual demand for LNG ships may be 40 to 50 ships.
In 2024, the temperature may drop significantly, and after a certain amount, there may be a rebound.
"For the order volume of 40 to 50 ships per year, the competition pattern between China and South Korea will become clearer. In addition to technical and performance indicators, whoever builds well and quickly will get more orders. is the decisive factor.”
"China News Weekly" Issue 6, 2023
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