Yangzijiang bags $183m LNG carrier contract

It’s diversifying into the LNG market.

Mainboard-listed PRC-based shipbuilder Yangzijiang has secured a $183m (US$135m) contract to build two liquefied natural gas (LNG) carriers for JHW Engineering & Contracting Limited.

JHW is a subsidiary of JACCAR Holdings that owns EVERGAS, a world leader in ethylene and ethane gas transportation.

According to DBS, the contract price of US$67.5m/unit appears higher than its Chinese peers and comparable to Korean rivals who typically dominate over 70% of the market.

“We understand that payment terms are also decent, on par with other shipbuilding contracts, where payments up to 40% based on milestone completions are received prior to delivery. If these orders are executed well, we can expect more orders to come from JHW, which is embarking on a fleet expansion program,” stated DBS.

DBS notes that the LNG carrier market is among the few bright spots in the shipbuilding sector. Barriers to entry are high due to higher vessel complexity. while demand is growing rapidly with over 200 LNG carriers expected to be added by 2020.

“While there will be a learning curve, we find comfort that: 1) Yangzijiang’s R&D team has successfully developed the design and engineering capability on LNG carriers 1-2 years back; 2) the vessels will be built at its New Yangzi Shipyard, which has the best project team and skilled labour force in the group; 3) experienced talent will be hired to ensure project execution; and 4) there is sufficient lead time of 24-30 months before delivery in 2017,” stated DBS.