As demand for liquefied natural gas (LNG) carriers increases, orders are concentrating on Dongsung Finetec and Hankuk Carbon, corporations that produce insulation materials. Insulation materials play a role in maintaining the internal temperature of LNG storage tanks on ships at ultra-low temperatures. Currently, Dongsung Finetec and Hankuk Carbon dominate this market.
According to the shipbuilding industry on the 14th, Dongsung Finetec has secured an order backlog of around 2.5 trillion won in insulation materials, which is enough to keep about three years' worth of work. Its annual production capacity is already fully booked until 2027.
Insulation materials are thermal insulation that is applied to the walls of LNG storage tanks to keep LNG in a liquefied state. Dongsung Finetec processes reinforced polyurethane foam (R-PUF) to produce insulation materials and essential products like membranes and insulation panels for storing LNG at ultra-low temperatures. About 40% of the insulation materials used in LNG carriers around the world are Dongsung Finetec products.
As demand for LNG carriers increases significantly overseas, orders for insulation materials have surged. European countries have begun replacing Russian natural gas with LNG from the Middle East and the United States, leading to an increase in new LNG carrier construction. Dongsung Finetec supplies insulation materials to major LNG carrier builders such as HD Hyundai, Samsung Heavy Industries, and Hanwha Ocean. Dongsung Finetec's annual revenue surpassed 500 billion won in 2023, increasing to 597.4 billion won last year.
In response to the increase in orders, Dongsung Finetec expanded its Ansung Plant in 2023 and is also enhancing its Tongyeong facility. Analysts expect Dongsung Finetec's annual revenue could increase to around 700 billion won this year.
Kwak Jae-hyuk, a NH Investment & Securities analyst, noted, "As the prices of raw materials such as laminated wood plywood decline and the selling prices of insulation materials rise, an operating profit margin of over 10% is expected in the second half."
Hankuk Carbon is expected to secure new orders for insulation materials worth 600 billion won this year. Hankuk Carbon also supplies insulation materials to the three major Korean shipbuilders. As of the end of the first quarter, its order backlog was around 1.75 trillion won.
If orders for LNG carriers continue from domestic shipbuilders, Hankuk Carbon can also expect an increase in insulation material orders. Recently, Hankuk Carbon raised about 40 billion won through convertible bond issuance to expand its production facilities. Analysts expect Hankuk Carbon's annual revenue to be around 900 billion won this year.
LNG carriers are a type of vessel for which Korean shipbuilders have a competitive advantage. The shipbuilding industry expects that the orders for LNG carriers from domestic shipbuilders will increase in line with the LNG export expansion policy of the U.S. Donald Trump administration. The U.S. currently lacks the capability to build LNG carriers on its own. Due to the Trump administration's sanctions on China's shipbuilding industry, Korean shipbuilders are considered the most viable option.