Samsung Heavy Industries has officially signed a contract with HSG Sungdong Shipbuilding, a mid-sized South Korean shipyard, to build four oil tankers. This marks the first time a South Korean shipbuilding company has fully entrusted its shipbuilding operations to a non-owned domestic shipyard, signifying the official launch of the collaborative shipbuilding model between Samsung Heavy Industries and HSG Sungdong Shipbuilding.
According to South Korean media reports on the 13th, Samsung Heavy Industries and HSG Sungdong Shipbuilding formally signed a shipbuilding outsourcing contract on the 14th. The four Suezmax tankers Samsung Heavy Industries secured from a Greek shipowner will be outsourced to HSG Sungdong Shipbuilding. Under the contract, HSG Sungdong Shipbuilding will be responsible for the complete construction of the tankers.
In July of this year, Samsung Heavy Industries and HSG Sungdong Shipbuilding signed a “Strategic Cooperation Agreement for Building a Symbiotic and Collaborative Development,” officially launching the construction of a sustainable cooperative ecosystem for the South Korean shipbuilding industry. Samsung Heavy Industries plans to leverage this move to utilize synergies with mid-sized South Korean shipyards, thereby improving process efficiency and strengthening its shipbuilding competitiveness.
Currently, Samsung Heavy Industries has dispatched dozens of technical personnel responsible for shipbuilding quality and processes to be stationed at HSG Sungdong Shipbuilding. As preparations for the full-ship construction contract advance, the scale of Samsung Heavy Industries’ personnel deployment will expand accordingly.
Over the next year and a half, Samsung Heavy Industries and HSG Sungdong Shipbuilding will complete core preparatory work for the new ships, including detailed design, procurement of major equipment, and process simulation.
According to the plan, HSG Sungdong Shipbuilding will commence the steel-cutting ceremony for its first vessel in December 2026, marking the shipyard’s return to full-scale shipbuilding projects after an eight-year hiatus. This initiative aligns with HSG Sungdong Shipbuilding’s strategic plan for a comprehensive return to the full-scale shipbuilding sector.
Samsung Heavy Industries Outsources Entire Ship for First Time to Korean Shipyard Instead of Chinese Shipyard
It is understood that Samsung Heavy Industries made an exception by awarding the tanker construction contract to a medium-sized South Korean shipyard, primarily due to a surge in ship orders. In the first half of this year, the utilization rate of Samsung Heavy Industries’ Geoje dock reached 116%. As of November 7th, Samsung Heavy Industries held a total order backlog of 125 ships, amounting to approximately US$26.9 billion, securing at least three years’ worth of work.
To accelerate shipbuilding progress, Samsung Heavy Industries has adopted a “production flexibility” strategy to manage its order backlog: prioritizing high-value-added ships such as liquefied natural gas (LNG) carriers for its Geoje shipyard while outsourcing tanker orders to other shipyards, aiming to maximize dock utilization.
Previously, Chinese shipyards leveraged their labor cost advantages to become key partners in Samsung Heavy Industries’ tanker outsourcing projects. For instance, Samsung Heavy Industries has outsourced eight Suezmax tankers to PaxOcean Engineering Zhoushan Co.Ltd (POEZ).
Samsung Heavy Industries is responsible for the new ship’s design, performance bonds, and procurement of equipment and materials, while POEZ handles the construction. The South Korean shipbuilding industry believes that while Chinese shipyards may indeed offer greater price competitiveness on a per-unit basis, Korean domestic shipyards are more suitable when considering factors such as quality control and the stability of long-term cooperation.
An industry insider in South Korea stated, “Outsourcing entire ships is not a one-off contract, but rather a collaborative approach spanning several years. Local shipyards, with their geographical proximity and ease of process management, offer greater long-term stability. Given the somewhat weakened state of South Korea’s shipbuilding ecosystem, Samsung Heavy Industries’ choice of a mid-sized local shipyard is also significant for maintaining the long-term stability of the shipbuilding supply chain.”
HSG Sungdong Shipbuilding, once ranked among the world’s top ten, has resumed full-scale shipbuilding
Samsung Heavy Industries reportedly selected HSG Sungdong Shipbuilding as its first mid-sized Korean shipyard partner, primarily valuing the latter’s construction experience, production systems, technical personnel, and its ability to deliver quality and delivery capabilities comparable to those of large shipyards.
HSG Sungdong Shipbuilding, formerly Sungdong Shipbuilding & Marine Engineering, once focused on tanker construction as its core business and ranked eighth among the world’s top ten shipbuilders in 2007. The Suezmax tanker it has now taken over from Samsung Heavy Industries marks a return to the shipyard’s traditional main ship type.
Although Sungdong Shipbuilding & Marine Engineering faced legal challenges and other difficulties in 2018 due to the shipbuilding industry downturn, its core assets were preserved and its main shipbuilding infrastructure remained operational. Meanwhile, the shipyard has developed a unique competitive advantage over other medium-sized South Korean shipyards by shortening the construction cycle through pre-assembling large hull sections in the dry dock and reducing the number of lifting operations.
In 2020, following its acquisition by HSG Heavy Industries, Sungdong Shipbuilding & Marine Engineering has been committed to seeking a restart with offshore wind infrastructure as its core business. HSG Heavy Industries has been a long-term partner of Samsung Heavy Industries since commencing operations as an internal company of Samsung Heavy Industries in 1990. The latest outsourcing contract for complete ships will also instill confidence in HSG Heavy Industries’ resumption of shipbuilding operations.
HSG Sungdong Shipbuilding, once ranked among the world’s top ten shipyards, currently specializes in hull section manufacturing. Over the past several years, it has constructed hull sections and semi-hulls for Samsung Heavy Industries. The collaborative experience accumulated between the two parties has laid a solid foundation for this full-vessel construction partnership.
The shipowner has given approval; quality and delivery schedule are now critical
Although Samsung Heavy Industries is making every effort to implement its shipbuilding outsourcing plan, it is ultimately a contract manufacturing operation, making quality control a core variable in this collaboration. This is why Samsung Heavy Industries has dispatched a team of dozens of technical personnel responsible for quality and processes to be stationed at the shipyard. During the construction of the oil tanker at HSG Seongdong Shipbuilding, key aspects such as inspection, welding quality, and process acceptance were all directly controlled by Samsung Heavy Industries.
A representative from South Korea’s shipbuilding industry stated: “This project is proceeding with the shipowner’s approval, with primary quality inspections and construction progress managed in real time by Samsung Heavy Industries. HSG Sungdong Shipbuilding possesses extensive experience in complete vessel construction, and the proximity of both shipyards in Geoje and Tongyeong facilitates seamless collaboration—a significant positive factor.”
The South Korean shipbuilding industry predicts that this collaboration may usher in a new model of “South Korean tanker contract construction.” Given that the saturation of large shipyards’ dry docks is unlikely to ease in the short term, and that South Korean medium-sized shipyards are gradually restoring a certain scale of new shipbuilding capacity, the trend of outsourcing complete shipbuilding contracts to South Korean shipyards rather than overseas is expected to continue.