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On June 1st, at the Ulsan Hyundai Mipo Dockyard, the finishing construction work was in full swing for the world’s first methanol-powered container ship ordered by Denmark’s Maersk, the world’s second-largest shipping company. It was the first time that the construction site of a methanol-fueled vessel had been publicly disclosed. Maersk, a shipping giant operating over 500 vessels and competing for the top 1-2 spots globally, opted for the “methanol-powered ship” as the next-generation standard vessel and entrusted Hyundai Mipo Dockyard with its first construction in June 2021.
The Korean shipbuilding industry, which began on the vast sandy shores of Ulsan in 1972, is embarking on its second leap. Surpassing Japan in 1999 to become the world’s number one, and topping the export list for the first time ($43.1 billion, 10.2 percent) in 2008, surpassing automobiles and semiconductors, the shipbuilding industry faced challenges in the 2010s due to economic downturns and aggressive low-cost orders from Chinese shipyards. However, despite more than a decade of long-term recession, even recording deficits of over ￦800 billion for the combined three shipbuilding companies in a single year, annual investments of around ￦200 billion were consistently made in research and development (R&D) for future ship technologies, including environmentally friendly areas ($1= ￦1321). Though a relatively modest amount compared to investments in semiconductors and batteries, these funds served as seed money for the shipbuilding industry’s future competitiveness.
Just as internal combustion engine cars are facing narrowing prospects due to carbon emission regulations, leading to a rapid shift to electric vehicles, the maritime industry is also witnessing the rise of “environmentally friendly” ships. The air pollutants emitted by large ships sailing across the oceans, ranging from tens of thousands to hundreds of thousands of tons, are far beyond imagination. The emissions from a single new large container ship are comparable to those from a thousand vehicles.
Korean shipbuilders are taking the lead in the market for environmentally friendly ships (such as methanol and LNG-powered vessels), which is projected to open up a market worth over ￦150 trillion annually, totaling ￦1,500 trillion, with new ship orders expected by 2031 (according to Clarkson Research). With the International Maritime Organization (IMO) practically declaring “net zero (carbon neutrality) by 2050″ last month, pressure has intensified for using low-carbon fuels and transitioning to eco-friendly vessels. The typical ship replacement cycle, which occurred every 30 years, has been shortened by about 10 years.
Seizing the opportunity, Korea’s top three shipbuilding companies are consistently securing more than half of the orders in the eco-friendly ship market. Leveraging key technology such as dual-fuel engines, they have managed to outpace China (with a 43 percent market share) in the first half of this year, holding the top position (50 percent). China’s shipbuilding companies, on the other hand, are importing “Made in Korea” methanol engines as they play catch-up.
The 2100 TEU (Twenty-foot Equivalent Unit) container ship, measuring 172 meters in length and 32.2 meters in beam, is hailed as the “world’s first methanol-powered container vessel.” However, its exterior appearance isn’t drastically different from conventional ships. The phrase “ALL THE WAY TO ZERO” on the ship’s side was the most prominent, conveying Maersk’s future strategy message to become a “carbon-neutral” shipping company by 2040.
Choi Byeong-boong, responsible at Hyundai Mipo Dockyard, explained, “While the exterior may appear similar, the ship’s ‘heart,’ the engine, is a ‘hybrid heart’ capable of using both conventional fuel and methanol. By using only methanol, it can achieve up to 99 percent reduction in sulfur emissions and 80 percent reduction in nitrogen oxide emissions compared to conventional fuels.”
Following the completion of construction after our site visit, this ship set sail from the port of Ulsan in mid-July, heading for the port of Copenhagen in Denmark, where Maersk’s headquarters are located. During a ship-naming ceremony set to take place in Copenhagen, which will be attended by the general public, Maersk will declare that the world’s first methanol-powered vessel, constructed by “Hyundai Mipo Dockyard in Ulsan, Republic of Korea,” is set to become the standard for all of their future ships. Hyundai Mipo Dockyard’s parent company, HD Korea Shipbuilding & Offshore Engineering, is currently constructing an additional 18 large methanol-powered container vessels for Maersk.
◇ Regaining the Top Spot in Monthly Orders Based on Eco-Friendly Ships... Entering the Second Heyday
All three major shipbuilding companies in South Korea are expanding their ventures into the eco-friendly ship market. Samsung Heavy Industries secured a contract last month for 16 methanol-powered container ships with a capacity of 16,000 TEU for approximately ￦3.9 trillion. This marks Samsung Heavy Industries’ largest contract since its founding, with eco-friendly ships. During a visit to Samsung Heavy Industries’ Daedeok Research Center on the 10th of this month, a model testing of the recently ordered methanol-powered container ships was underway in a giant water tank measuring 400 meters in length, 14 meters in width, and 7 meters in depth. Hanwha Ocean, in collaboration with Hanwha Aerospace, has completed the development of a megawatt-hour(MWh)-scale Energy Storage System (ESS) that can be applied to ships, diversifying its business.
Leveraging their advantage in eco-friendly ship orders, South Korean shipbuilding companies regained the top spot in monthly orders, securing 44 percent of the global orders in July. Among a total of 117 methanol-powered container ships ordered so far, domestic shipbuilders have secured contracts for 61 ships. An industry insider stated, “With the demand for eco-friendly ships concentrating on South Korean shipbuilders for over three years, there is a new wave of momentum.”
◇A Growing Market of ￦150 Trillion... Backed by a Strong Shipbuilding Ecosystem
The development of eco-friendly ships requires the capabilities of major companies such as HD Hyundai, Samsung Heavy Industries, and Hanwha Ocean, but small and medium-sized suppliers are also supporting them with outstanding technological expertise. Established in Gyeongju in 1998, engine component specialist Daehyun Industry has been developing and producing chamber components since 2013 that can reduce nitrogen oxide emissions from ships by up to 99 percent. Meanwhile, Busan-based JUNGWOO ENE specializes in extremely low-temperature (minus 163 degrees Celsius) vacuum-insulated piping, essential for liquefying natural gas and storing it in tanks. Choi Gyu-Jong, Vice Chairman of the Korea Offshore & Shipbuilding Association, stated, “While there was a perception that shipbuilding was declining due to labor cost burdens in countries with a GDP per capita exceeding $20,000, the shift to eco-friendly ships could enable a ‘second heyday of shipbuilding’.”
☞ Eco-Friendly Ships
Vessels that utilize alternative fuels with lower carbon emissions than traditional ship fuels such as bunker C oil. These alternative fuels include LNG (liquefied natural gas), methanol, ammonia, electricity, and hydrogen. The demand for eco-friendly ships is rapidly increasing in line with the International Maritime Organization’s (IMO) goal of “2050 Zero Carbon Emission.”
☞ Methanol-Powered Ships
Unlike LNG, which needs low-temperature storage, and ammonia and hydrogen, which requires special processing, methanol can be maintained in a liquid state at room temperature, making it easier to handle. Additionally, methanol-powered ships can significantly reduce air pollutant emissions. Due to its fast commercialization among eco-friendly fuels, methanol holds a competitive advantage.
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