Posted on February 1, 2023
Japan Marine United, the country’s second-largest shipbuilder, will start constructing vessels fueled by liquefied natural gas, considered a transitional technology as the industry aims for full decarbonization.
Amid intensifying competition with Chinese and Korean players, JMU hopes to take advantage of environmentally friendly technology to capture demand.
LNG-fueled ships can reduce carbon dioxide emissions by about 25% compared with heavy fuel oil. More than 2,000 LNG-fueled ships are expected to be operating worldwide by 2030.
“Our raison d’etre is to respond quickly to changes in society and provide a stable supply of high-value-added ships,” Nobuyuki Nada, JMU’s incoming president, said Thursday. Nada, who will officially join the company next month, was brought in from Steel Plantech, a major steelmaking machinery company with close ties to the shipbuilding industry.
From the period ending in March, JMU is expected to raise capital investments by 20% to 30% from typical years to about 7.5 billion yen ($57.72 million).
Construction of LNG-fueled ships will begin at the company’s plant in Tsu, Mie prefecture. The technology to build the ships will then be deployed at plants in Kumamoto and Hiroshima prefectures.
JMU’s strength lies in fuel efficiency of its ships, achieved by combining hull designs that reduce water resistance with efficient engines.
“The performance of JMU’s ships is highly regarded. Fuel efficiency is likely to become more important than ever before, and will be our strength,” said current President Kotaro Chiba, who will remain in his position through the end of March.
Other domestic shipbuilding companies are also moving to LNG-fueled ship production. Imabari Shipbuilding, Japan’s largest shipbuilder, has already entered the field and will invest billions of yen on in-house LNG tank production. Stabilizing the procurement of core parts will help expand production.
Mitsubishi Shipbuilding is constructing a second ferry capable of switching between LNG and heavy fuel oil, following Japan’s first LNG-fueled ferry, the Sunflower Kurenai, which went into service in January.
Japanese shipbuilders are under pressure to evolve after losing battle after battle with Chinese and Korean companies in fierce price wars.
Demand for LNG carriers has surged due to the energy supply crisis caused by Russia’s invasion of Ukraine, increasing the global order volume for the ships by a factor of 2.3 from 2021 to 2022, according to British firm Clarksons Research.
About 70% of orders for LNG carriers were won by South Korean manufacturers, and the remainder by Chinese manufacturers. Meanwhile, Japanese companies, which cannot compete in price, have not received any orders since 2016.
Under these circumstances, JMU is focusing on LNG-fueled ships because, even though China and South Korea have opened up a big lead in the number of orders, there is still room in the market for Japanese companies to develop environmentally friendly ships.
SEA-LNG, an international organization that promotes the use of LNG fuel for ships, issued a report on Jan. 18 about LNG-powered ship order trends in 2022.
“2022 was another very strong year for LNG-fueled vessel orders, with numbers almost equaling those in 2021, the record year to date, despite exceptionally high LNG prices,” the report said. “If current growth trends continue, we can expect to see 2,000 to 4,000 LNG-fueled ships in operation by 2030.”
The trend toward LNG-fueled ships is being helped by a greater movement toward decarbonization. The International Maritime Organization, a U.N. agency, has set a goal of improving average fuel efficiency by 40% from 2008 levels by 2030, and companies are being pressured to take action.
In July, the IMO is scheduled to revise its strategy to reduce greenhouse gases, which incorporates emissions reduction targets adopted in 2018. There is a strong possibility that greater improvements in the fuel efficiency of ships will be required.
LNG-fueled ships are a transitional technology, making the development of ships that burn a next-generation fuel also essential.
Companies are planning to use the cash from sales of LNG-fueled ships to build investment capacity. Through a joint venture with Imabari Shipbuilding, JMU hopes to quickly develop ships that run on ammonia, which does not emit carbon dioxide when burned and is expected to be a next-generation fuel.
Kawasaki Heavy Industries is developing a ship that uses hydrogen, which is also considered a next-generation fuel.
The technical capabilities of Chinese and Korean companies have also improved in recent years, and competition in next-generation ships is likely to intensify.
JMU’s consolidated sales for the period ending March 2022 decreased by 4% from the previous period to 227.4 billion yen. Net earnings turned into the black with a profit of 500 million yen after a loss of 10.4 billion yen in the previous term.
Orders increased by more than 70%, partly due to the effects of the alliance with Imabari Shipbuilding. However, the gap in terms of sales and other factors with world leader China State Shipbuilding Corp. is significant. There is also a gap in cost competitiveness and financial strength with Chinese and Korean giants.