This year, new orders for liquefied natural gas (LNG) have decreased, while the dismantling of aging LNG carriers is actively underway. The shipbuilding industry expects that an increase in scrapped vessels will lead to a rise in new orders.

According to the shipbuilding industry on the 19th, the modern Cosmopeia, a 135,000㎥ LNG carrier listed for dismantling earlier this month by Hyundai LNG Shipping, was sold for $580 per ton. This vessel, built in 2000 and equipped with a first-generation steam turbine engine, is known to have significantly lower fuel and loading efficiency compared to newer vessels.

With the successful sale of the modern Cosmopeia for dismantling, the total number of LNG carriers sold for dismantling this year has reached eight. According to the U.K. shipbuilding and shipping market analysis agency Clarkson Research, one LNG carrier was scrapped in 2022, and seven were scrapped in 2023. Last year, eight vessels were scrapped, and this year has reached the same level as last year’s total by early July.

The International Maritime Organization (IMO) regulates aging vessels through measures such as the Energy Efficiency Existing Ship Index (EEXI) and the Carbon Intensity Indicator (CII). The IMO has categorized the carbon emissions produced when a vessel transports one ton of cargo for one nautical mile (1,852 m) into grades A to E. Additionally, it requires annual verification, stating that if a vessel receives a D grade for three consecutive years or an E grade for more than one year, it must establish an energy efficiency improvement plan and restrict operations if it fails to do so.

Currently, around 60 LNG carriers are on standby (a situation where a vessel stops operating and remains moored for an extended period). The industry believes that if these vessels cannot find other contracts, they will eventually be sold for dismantling. According to Clarkson Research, about 12% (93 vessels) of the LNG carriers currently in operation worldwide are over 20 years old.

As the replacement of LNG vessels begins in earnest, the newbuilding market for LNG vessels is expected to become vibrant. From the beginning of the year until June, the new orders for LNG carriers have decreased by 82% to 1.05 million CGT compared to the same period last year.

Han Young-soo, a researcher at Samsung Securities, noted, “Considering the establishment of new LNG production plants, 295 new vessels will be needed by 2028, while 300 LNG carriers are scheduled for delivery by then,” adding, “More LNG carriers are needed, but shipowners have postponed orders.” Eom Kyung-ah, a researcher at Shinyoung Securities, predicted, “In the future, more than 200 vessels will be scrapped or enter the retrofit market.”
Source: CHOSUNBIZ