For the past several years, Korea’s shipbuilding industry has been branded as a pariah in the country’s economy, losing its previous status as the country’s growth driver.
Due to the cliff in global demand, domestic shipbuilders have been suffering from a liquidity crunch, getting by with rescue money from state-run lenders after pledging harsh restructuring plans. They sometimes fell into court protection, becoming the targets of fearsome criticism for wasting taxpayer money.
Though analysts point out uncertainties in the market, shipbuilders believe these days a rebound seems close as toughened international environmental regulations on shippers is expected to create demand for more eco-friendly and energy-efficient vessels and equipment for them.
On April 13, the International Maritime Organization (IMO) announced that it adopted “an initial strategy on the reduction of greenhouse gas emissions from ships,” implementing its vision to reduce the emissions from international shipping and phase out old inefficient ships.
In the strategy, the IMO envisages for the first time a reduction in total greenhouse gas emissions from international shipping, reducing the total annual emissions by at least 50 percent of what they were in 2008 by 2050.
Also, the strategy calls for improved energy efficiency for vessels, reducing CO2 emissions — as an average across international shipping — by at least 40 percent by 2030, pursuing efforts towards 70 percent by 2050, compared to 2008’s emissions.
This came after the IMO’s 2020 Global Sulphur Limit which was decided in October 2016 to lower the global cap for the sulphur content of fuel oil from the current 3.5 percent to 0.5 percent by Jan. 1, 2020.
The October 2016 decision requires ships to use either low-sulphur compliant fuels oil such as diesel, LNG powered turbines, or approved equivalents, such as exhaust gas cleaning systems called scrubbers. Scrubbers clean the emissions before they are released into the atmosphere.
The toughened rules are not only welcomed among civic environmental groups but also hailed by shipbuilders.
The Climate Action Network, a worldwide network of over 1,100 non-governmental organizations in more than 120 countries, issued the following statement: “This agreement falls short of the 70 to 100 percent reductions by 2050 that the Pacific Islands, the EU and others were calling for ahead of the meeting, but keeps a window open to meet the Paris climate goals and is undeniably a game changer for the shipping sector.”
Shipbuilders are also echoing that the IMO moves will be a game changer, as the rules will set up a new paradigm in shipbuilding that will create demand for more ships.
Currently, they are busy building ships equipped with scrubbers or LNG-powered vessels as the 2020 rule will take effect in less than two years.
Shipbuilders say the concept of the “ecoship” has been the talk of the industry since 2010, referring to ships meeting strengthened IMO rules.
“For a shipper to have a ship sailing, it has to be an ecoship. Also, shipbuilders will not survive if they fail to secure technology making ecoships,” a domestic shipbuilding official said.
“Let’s say for the sulfur rule, ship owners either have to use diesel, equip scrubbers or buy new LNG -propelled vessels. Diesel is a very expensive fuel for a ship, a scrubber costs about $3 million to $5 million, while a vessel operates an average 25 years.”
“By necessity, ship owners are stringently economic, so they will likely make the most effective choices — placing scrubbers for relatively new vessels while replacing 15- to 20 -year-old ships with LNG-powered or duel fuel engine vessels using LNG,” he said.
Most of the orders Korean shipbuilders received over the past several years were for LNG-ready vessels, which can be equipped with LNG turbines.
As of December last year, Samsung Heavy Industries (SHI) received orders for six LNG-powered vessels and Hyundai Heavy Industries (HHI) won seven orders for LNG-powered vessels.
“Given that it takes average of 1.5 to two years to build a ship, it is possible to say all ships in the design and building process at Korean dockyards are ecoships,” the official said. For preparation for the 2050 rule of low emissions and fuel efficiency, shipbuilders are also experimenting with applying energy-saving technologies to the ships they are now building.
SHI said last week that it will apply an energy-saving device, called SAVER-Air, which reduces the friction between seawater by blowing air onto the bottom of a ship hull, to a 23,000 TEU container vessel ordered by MSC.
The air lubrication system was first introduced by Japan’s Mitsubishi Heavy Industries in 2010 and has been used for ferries and small petrochemical products carriers. It is the first time that the technology is being used for a large container carrier.
SHI said the technology is expected to save 4 percent on fuel, which will add up to a year’s fuel cost if the ship runs 25 years.
“Of six 23,000 TEU container carriers ordered last year, we will apply the technology to the MSC ship and design others available for SAVER-Air later,” an SHI official said.
“We believe this technology could be the new standard in fuel reduction for large container vessels, as well as raising ship prices and providing technologies to meet the new IMO rules.”
HHI has also begun development for a dual engine which burns liquefied petroleum gas as well as diesel fuel for large vessels. In cooperation with Denmark’s MAN Diesel and Turbo, HHI will develop the engine that provides more than 6,000 horsepower.
Also, it is promoting the concept of “smartship,” in which vessels find the best sea route and monitor the engine and other systems autonomously.
Daewoo Shipbuilding & Marine Engineering (DSME) is seeking a rebound with the ME-GI engine for ships, an electronically controlled gas injection engine developed by the Danish company and will be installed in vessels built by DSME.
Analysts expect increasing global demand for LNG-propelled vessels will help the company win orders for new ships with ME-GI engines or replace existing engines with ME-GI.
“When it comes to mega-size ships, there are two factors determining a shipbuilder’s competitiveness — price and technology. Frankly, Korean shipbuilders will never beat Japanese or Chinese rivals on price. It is all about technology now,” another shipbuilding firm official said.
“And the global move for eco-friendly vessels will raise demand for companies building ships with the most advanced technologies.”
Source: The Korea Times