Better Fuel Efficiency Lets Korean Ships Command Premium over Chinese Rivals

DSME's ships are commanding a premium

Analysts have said that South Korean shipbuilders are commanding a premium over Chinese rivals due to their greater fuel efficiency, IHS Maritime 360 reports.

Two recently built South Korean ships sold for 16.7 percent more than similar ships on the order books at a Chinese rival, said a note from analysts at Hana Daetoo Securities.

According to the note, better fuel efficiency afforded by South Korean ships is cited a major factor in the price differential.

Shipowners are said to be keenly aware that the value of their assets will be impacted by ships' fuel efficiency.

Fuel efficiency is key

"The two 156,000dwt Suezmax tankers that South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering (DSME) clinched last week were priced at $70M each," said the note.

"The $70M is higher by 16.7% than the price of a 160,000dwt tanker which will be built by China's shipyard New Times Shipbuilding."

The DSME-built ships were ordered by Angola's Sonangol state oil company while the Chinese newbuilds are understood to have been ordered by Bermuda-based tanker operator Frontline 2012.

"According to shipbrokers, the newbuilding price index has dropped 1% within the past two months," said the analysts note.

"However, the price of DSME vessels is going up."

In addition, Chinese yards are said not to be able to command the same payment terms as South Korean rivals, with 70 percent payment-on-delivery terms making conditions tough.

DSME recently began construction of a Liquefied Natural Gas carrier designed for use on the Northern Sea Route.