Latest / The Emerging Markets Podcast with Fexingo: Developing Economies, Growth, and Investment / How South Korean Shipbuilders Are Winning the LNG Tanker Race
Transcript
- Lucas: South Korea's three big shipbuilders just reported their strongest first-half order intake in a decade, and almost all of it is LNG carriers. Luna: That tracks with what we're seeing in the headlines — every time Qatar signs another fleet deal, it seems like Korean yards are the ones building the ships. Lucas: Exactly. QatarEnergy's massive LNG expansion program — they're targeting 126 million tons per year of production by 2027 — required a complete renewal of their shipping fleet. And the Koreans locked in those orders years ago. Hyundai Heavy Industries, Samsung Heavy Industries, and Daewoo Shipbuilding — now Hanwha Ocean — together control about 70 percent of the global LNG carrier orderbook. Luna: Seventy percent is enormous. How did they get that kind of dominance in what used to be a pretty cyclical industry? Lucas: It's a combination of early specialization and government backing. Korea's industrial policy in the 1970s and 80s deliberately targeted heavy industries — shipbuilding was one of the first. Then in the 1990s, when LNG trade started growing, Korean yards invested heavily in the specialized welding techniques needed for membrane-type LNG tanks. That's the technology that keeps the gas at minus 162 degrees Celsius. Chinese yards tried to compete, but the quality gap was too wide for a long time. Luna: And now China is trying to catch up? I know Jiangnan Shipyard and Hudong-Zhonghua have been building LNG carriers, but they're still a distant second, right? Lucas: Right. Hudong-Zhonghua is the only Chinese yard that's built a large LNG carrier with its own design, and they've delivered maybe 20 or so. Compare that to the Koreans — they've delivered hundreds. The learning curve matters enormously here. One LNG carrier takes about two years to build, and each one is essentially a custom engineering project. The Koreans have been doing it for decades, so they have the workforce, the supply chain, and the project management expertise. Luna: It's interesting that you mention the workforce — because this is one of those industries where the skill bottleneck is real. It's not like you can just retrain a car factory worker to weld cryogenic-grade steel. Lucas: Exactly. And the Korean government has been reinforcing that advantage through research institutes and tax incentives for R&D. The Korea Shipbuilding & Offshore Engineering research center in Daejeon is basically a national lab focused on LNG containment systems. That's the kind of institutional support that Chinese yards just haven't had. Luna: So what does this mean for the actual LNG trade? Because we're in the middle of this giant build-out of LNG export capacity — the US, Qatar, even some East African projects — and all that gas has to move by ship. Lucas: It means that shipping capacity is going to be a constraint on how fast LNG trade can actually grow. The orderbook for LNG carriers is about 350 ships right now, and that's already a record. But the number of projects that need ships is growing even faster. So vessel availability and charter rates are going to be a key variable in global gas markets for the next five years. Luna: And of course, geopolitics plays into this too. This week's headlines about the Strait of Hormuz blockade — if that escalates, it directly affects LNG shipping routes and insurance costs. Suddenly, having a fleet that's already built and deployed matters even more. Lucas: That's the thing — a lot of LNG carriers are flagged in Panama or the Marshall Islands, but the owners are often Korean or Greek. The physical vessels are built in Korea. So the country's economic exposure to LNG shipping isn't just about construction jobs — it's about the whole value chain. If you're building the ships, you're also financing them, insuring them, and eventually maybe even managing them. Luna: And that's a nice segue to why this show exists — to connect those dots between industrial policy, trade, and the real economy. If walking through the economy with us has made something click for you, we hope you'll consider supporting the show. A couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Lucas: Yeah, it makes a real difference. Anyway, back to the shipyards — one thing I find fascinating is how the Korean yards are now pivoting to ammonia and hydrogen carriers. They're not just building for today's fuel. Luna: Right, because if the energy transition accelerates, those are the next-generation cargoes. And they want to own that market from the start. Lucas: Exactly. Hyundai Heavy Industries already has an ammonia carrier design approved in principle by Lloyd's Register. Samsung Heavy is working on a hydrogen carrier that uses a new type of insulation. So the same playbook — early investment, government support, proprietary technology — is being applied to the next wave. Luna: It's almost like they're treating shipbuilding as a strategic industry, not just a manufacturing business. Which in Korea, it is. Lucas: And that's the lesson for other emerging markets trying to break into high-value manufacturing. You can't just build a shipyard and expect to compete. You need the ecosystem — the training, the research, the long-term buyer relationships. Korea's LNG carrier dominance took forty years to build. That's not a quick win. Luna: So for investors watching this space, the key metric isn't just orderbook value — it's how many of those orders are for the most complex, high-margin vessels. Because that's where the real competitive advantage shows up. Lucas: Exactly. And right now, the Koreans are essentially unopposed in that segment. The question is whether China can close the gap in the next decade, or whether new players — maybe in Vietnam or India — will emerge as niche competitors.