HD Hyundai Marine Solution has secured contracts to modify engines of 74 vessels to be eco-friendly this year alone, expanding its presence in the environmentally friendly vessel market. With global engine modification demand expected to reach 5 trillion won due to stricter environmental regulations, HD Hyundai Marine Solution plans to further broaden its market presence.
According to industry sources on June 1, HD Hyundai Marine Solution has signed engine part load optimization (EPLO) contracts for 74 vessels with European and other shipping companies this year. With an average price of about 800 million won per vessel for EPLO service, the total contract value approaches 60 billion won.
The company has identified EPLO as a future growth engine. EPLO is an eco-friendly solution that improves combustion efficiency by modifying components such as turbochargers to match engine output. It extends engine life by suppressing sediment formation during engine operation and increases efficiency by adjusting fuel injection. This enables a reduction in carbon emissions. Applying the EPLO solution to existing vessels can reduce carbon emissions by up to 6g per kWh.
HD Hyundai Marine Solution launched its EPLO service on Oct. 10, 2023, in collaboration with Accelleron, a global leader in engine turbocharger technology. After successfully completing EPLO services for eight vessels last year, attracting attention from global shipping companies, the company has aggressively pursued new contracts this year, securing agreements for a total of 74 vessels as of last month. This translates to $50 million (approximately 69 billion won) in sales generated through EPLO services. HD Hyundai Marine Solution stated, “The level of customer satisfaction is so high that shipping companies that previously contracted EPLO services are immediately discussing additional contracts,” adding, “As the engine market share of affiliates HD Hyundai Heavy Industries and HD Hyundai Marine Engines increases, the sales competitiveness of HD Hyundai Marine Solution’s EPLO service is also improving.”
HD Hyundai Marine Solution has set a goal to pursue contracts for 200 new vessels this year. This would represent a 25-fold growth compared to last year (8 vessels).
Demand for EPLO is expected to steadily increase as global environmental regulations become more stringent. The International Maritime Organization (IMO) approved monetary regulatory measures to reduce greenhouse gas emissions from ships at the Marine Environment Protection Committee held in London last month. As a result, ships over 5,000 tons that emit greenhouse gases above the standard will have to pay a charge of up to $480 per ton starting from 2027. Global shipping companies are rushing to replace their fleets with eco-friendly vessels to avoid the IMO’s increased regulatory charges. However, as building new ships costs hundreds of billions of won per vessel and takes 2-3 years to construct, EPLO is emerging as an alternative that allows ships to be redeployed quickly at a relatively low cost. In particular, shipping companies are considering limiting engine output to 70% of existing levels for slow-speed operations to reduce costs, further increasing the demand for EPLO.
Industry analysts estimate that over 10% of the global fleet of about 60,000 vessels could be targets for EPLO services. This suggests a potential market formation of nearly 5 trillion won.
HD Hyundai Marine Solution anticipates that adding the EPLO business to its existing cash cow, the ship maintenance, repair, and overhaul (MRO) business, will lead to medium to long-term performance improvements. In the first quarter of this year, HD Hyundai Marine Solution recorded sales of 485.6 billion won and operating profit of 83 billion won, marking the fourth consecutive quarter of record-breaking sales. At this rate, the industry projects that the company’s sales will exceed 2 trillion won this year, with operating profit continuously improving to 350 billion won this year, 450 billion won next year, and 580 billion won by 2027.
Since its listing in May last year, HD Hyundai Marine Solution has been laying the groundwork for growth through aggressive investments. In the second half of this year, the company plans to establish a logistics complex near Singapore Port, covering an area of 13,200 square meters (about 4,000 pyeong) and capable of storing 13,000 parts and materials. Building a large-scale parts supply chain at Singapore Port, the world’s largest transshipment port, is expected to significantly improve the company’s ability to respond to ship MRO demand.
Source: Business Korea