When will Qatar’s Phase 2 order land as talks are stalled?

On October 26, 2023, HD Hyundai Heavy Industries (HHI), the shipbuilding subsidiary of HD Hyundai Group, announced that it had signed a contract with Qatar Energy for the construction of 17 174,000 m3 LNG carriers in the second phase of its “100 Ships Program”. Two months after HHI signed the contract, the other two South Korean shipbuilding enterprises Samsung Heavy Industries and Hanwha Ocean have still not announced the new ship order. According to the Korean media, Samsung Heavy Industries and Hanwha Ocean are asking Qatar Energy to raise the price of their vessels, but some sources are concerned that orders will be delayed due to disagreements between the two sides.

In recent news from the Korean shipbuilding industry, Hanwha Ocean and Samsung Heavy Industries are finalizing negotiations with Qatar Energy on the details of the contract for the second phase of the “Hundred Ship Program” for LNG carriers, including the price of the vessels. It is reported that Qatar Energy “Hundred Ship Program” second phase in the second half of 2023 to start the implementation of the planned order size of 40 ships, valued at KRW 12 trillion (about US$ 10 billion). Previously, it was said that the second phase of the order size may increase.

HHI is the first shipbuilder to announce the second phase of the order, valued at about KRW 5.2511 trillion ( about USD 3.9 billion / CNY 28.5 billion), with a single ship cost of about USD 230 million, which is 13.6% lower than the latest shipbuilding price announced by Clarksons (USD 265 million). As of the end of November 2023, the ship price for large LNG carriers was $265 million, up 6.5% from the beginning of 2023.

In contrast, Hanwha Ocean and Samsung Heavy Industries are still negotiating with Qatar Energy over the remaining orders, but they appear to have been delayed. It is predicted that Hanwha Ocean and Samsung Heavy Industries may have reached a stalemate in their negotiations over vessel prices.

According to industry sources, the two shipbuilders are constantly negotiating with Qatar to raise prices. Hanwha Ocean and Samsung Heavy Industries must be a bit disappointed because HHI set the precedent of ‘low-priced orders,'” said the source. Although both companies are selectively taking on high-margin ships rather than receiving unnecessary orders, it seems difficult to obtain ship prices significantly higher than those of HHI, considering their relationships with shipowners.”

Earlier, Hanwha Ocean had pointed out that HHI’s agreed ship price was significantly lower than market expectations. Hanwha Ocean accused it of disrupting the market, claiming that HHI had contracted at a low price when it could have negotiated a higher ship price. Whereas at the time, Samsung Heavy Industries’ stated: not necessarily so.

In addition, the overall delay in the Qatar LNG project has also contributed to the delay in signing contracts with the two companies. According to reports, no decision has been made on which shipowner will operate the LNG carriers.

Another industry source said, ” The owner and the shipyard have actually signed the contract, but the Qatar side is still delaying the owner’s decision when the ship order is signed. The shipowner must be identified before the news of the shipbuilder’s contract will be announced with it.” In response to market concerns that HHI may take a larger order size than expected, thus reducing the order book for Hanwha Ocean and Samsung Heavy Industries, he said, “It is unlikely that the number of contracted vessels will be reduced as Qatar Energy has already booked slots for the second batch of the order with the two companies.”

Hanwha Ocean and Samsung Heavy Industries have reserved 14 and 16 slots, respectively, for the second phase of Qatar Energy’s “Hundred Ships Program” under a slot reservation agreement signed in 2020. As it stands, Hanwha Ocean and Samsung Heavy Industries’ contract for LNG carriers in Qatar will be delayed until 2024. As a result, both companies will not be able to fulfill their order targets for 2023. According to the latest order data, Hanwha Ocean and Samsung Heavy Industries have only completed 43% and 72% of their FY2023 orders, respectively.

Yangzijiang Shipbuilding

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