en.Wedoany.com Reported - Coinciding with the "super cycle" of booming global demand for new ships, the long-dormant Gunsan Shipyard in South Korea has found an opportunity for revival. After completing asset transfer from HD Hyundai Heavy Industries, this giant shipyard, which once boasted the "world's largest" dry dock, plans to return to full shipbuilding by targeting VLCCs, potentially becoming a key pillar for expanding South Korea's shipbuilding capacity and seizing the high-end market.
High VLCC prices and strong demand! Gunsan Shipyard plans first vessel delivery by 2028
Following the signing of the Memorandum of Agreement (MOA) on the asset transfer for the Gunsan Shipyard with HD Hyundai Heavy Industries in March this year, South Korean private equity fund manager Eco Prime Marine Pacific recently unveiled its utilization plan for the shipyard. According to the plan, the Gunsan Shipyard will not only handle simple block fabrication but will also undertake the construction of large vessels, including VLCCs, and the MRO (Maintenance, Repair, and Overhaul) of large naval vessels, thereby re-entering the complete shipbuilding market, with a target to deliver the first VLCC in 2028.
Eco Prime Marine Pacific stated that on March 13, it signed the asset transfer agreement for the Gunsan Shipyard with HD Hyundai Heavy Industries. Due diligence is currently underway, and the transaction is estimated to be valued at approximately 700 billion to 1 trillion won (approximately USD 530 million to USD 760 million, or RMB 3.2 billion to RMB 4.6 billion). The goal is to start the shipbuilding-related facilities at the Gunsan Shipyard within the year. The South Korean industry is closely watching the scale of the acquisition amount and the timing of signing the final asset transfer contract.
In South Korea, the Gunsan Shipyard is regarded as a shipyard with top-tier hardware facilities. Located in a national industrial complex in Gunsan City, North Jeolla Province, it was built by the HD Hyundai Group during the pre-2008 global financial crisis boom period. Construction began in early 2008, and the yard commenced operations at the end of 2009. Covering an area of 1.8 million square meters, it features a world-record 700-meter long, 1-million-ton capacity dry dock capable of simultaneously building four 250,000-ton vessels. It also houses a then world-record gantry crane, 115 meters high with a lifting capacity of 1650 tons, and approximately 4 kilometers of quay length. Even compared to the main shipyards of South Korea's "Big Three," the Gunsan Shipyard's facilities are competitive. Therefore, in terms of hardware, there are no issues with building VLCCs.
Industry sources indicate that the core reason for Eco Prime Marine Pacifics planned VLCC construction at Gunsan is that a significant portion of the global VLCC fleet is over 15 years old and entering a renewal cycle. Additionally, recent geopolitical risks leading to increased demand for diverted voyages have further boosted demand for oil products. Major South Korean shipping companies are also concentrating on expanding their VLCC fleets. These factors collectively create favorable opportunities for the Gunsan Shipyard's return to complete shipbuilding.
It is reported that the current price for a new VLCC vessel exceeds USD 130 million (approximately RMB 887 million). Given the current high vessel prices and improvements in production efficiency, the estimated operating profit margin for construction could be 10% to 15%, translating to an operating profit of about 170 billion to 250 billion won (approximately RMB 78 million to 114 million) per vessel built.
Eco Prime Marine Pacific is also the largest shareholder of the South Korean mid-sized shipbuilder HJ Shipbuilding & Construction (formerly Hanjin Heavy Industries). HJ Shipbuilding & Construction had previously received an order for a 300,000-ton VLCC in 2014, but the vessel was built at the Subic Shipyard in the Philippines, not its Yeongdo Shipyard. By acquiring the Gunsan Shipyard, construction of 300,000-ton VLCCs, previously only achievable at the Subic shipyard, can now be carried out within South Korea.
Furthermore, the Gunsan Shipyard is not only suitable for VLCC construction but is also well-suited for U.S. Navy large vessel MRO operations, with its facilities capable of accommodating ships like 40,00-ton plus supply ships and amphibious assault ships. According to Eco Prime Marine Pacific's vision, HJ Shipbuilding & Construction could utilize the Gunsan Shipyard to perform maintenance on multiple U.S. Navy Arleigh Burke-class destroyers simultaneously, or leverage its expansive premises for long-term, large-scale naval vessel repair projects.
The current U.S. Navy MRO market is estimated at around 20 trillion won (approximately RMB 91 billion) annually. The routine maintenance cost for a single naval vessel typically reaches tens of billions of won, and if performance upgrades are included, revenue from a single project can scale up to hundreds of billions of won.
Clear division of labor! Yeongdo Shipyard focuses on naval MRO and small/medium vessel construction
Industry observers in South Korea note that after acquiring the Gunsan Shipyard with its superior shipbuilding conditions, Eco Prime Marine Pacific plans to leverage synergies between the Gunsan Shipyard and HJ Shipbuilding & Construction to restore its full shipbuilding capabilities. Particularly in the current boom cycle of the global shipbuilding market with increased order intake, this could become a foundation for expanding South Korea's mid-sized shipbuilder capacity, providing new momentum for the resurgence of companies like HJ Shipbuilding & Construction.
Eco Prime Marine Pacific simultaneously unveiled the division of work between the Yeongdo Shipyard and the Gunsan Shipyard. Under the plan, the Yeongdo Shipyard will focus on building eco-friendly vessels and special-purpose ships, while the Gunsan Shipyard will be dedicated to large commercial vessel construction and serve as a base for large naval vessel MRO.”
This division is seen as a decision reached by comprehensively considering factors such as the dock sizes and equipment limitations, geographical conditions, and strategic choices of the two shipyards.
Specifically, while the Yeongdo Shipyard is the birthplace of South Korea's shipbuilding industry, it is located in the city center and cannot be expanded. Due to its limited dock length and width, it cannot construct large merchant ships exceeding 100,000 tons. Therefore, it has adopted a strategy of focusing on specialized vessels like naval ships and research vessels, as well as smaller, high-value-added ships such as LPG carriers. Yeongdo's advantage lies in being located within Busan Port, facilitating U.S. Navy vessel berthing and access to experienced labor. Moreover, its surrounding area hosts a large cluster of ship parts suppliers, ensuring efficient component supply and maintenance.
Last December, HJ Shipbuilding & Construction won a Mid-Term Availability contract for the USNS Amelia Earhart, a 40,000-ton logistics replenishment ship for the U.S. Navy, becoming the first South Korean mid-sized shipbuilder to secure a U.S. Navy MRO project. The ship began its scheduled MRO work at HJ Yorqiang's dock in January this year in the Yongdo shipyard. U.S. Navy representatives who visited the Yeongdo Shipyard in January also praised its optimal capability for performing MRO operations on U.S. naval vessels.
Notably, to ensure stable operations at the Gunsan Shipyard, HD Hyundai Heavy Industries plans to maintain its cooperation for a certain period after the sale.
HD Hyundai Heavy Industries stated that if this sale leads to a final agreement, it will continue to order ship blocks from the Gunsan Shipyard and provide design assistance for the next three years. It will also collaborate in related technological fields such as raw material procurement, automation innovation, and smart shipyard construction.
Industry sources believe this cooperation model will help ensure the operational stability of the Gunsan Shipyard. An HD Hyundai Heavy Industries official commented: "The company hopes that through this asset transfer, the Gunsan Shipyard can resume its role in the final assembly and construction of ships. After the sale, both parties will maintain the current level of block supply and cooperative relationship, so it's expected to produce positive outcomes for both the acquirer and the local community."
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