The manufacturer of liquefied gas tanks, Sejin Heavy Industries, is experiencing strong revenue growth due to increased demand for gas carriers. The demand for gas carriers has risen as a result of strengthened maritime carbon emission regulations and the Donald Trump administration's policies to expand liquefied petroleum gas (LPG) and liquefied natural gas (LNG) exports. When demand for gas carriers increases, orders for tanks used in these ships also rise.
According to the shipbuilding industry on the 16th, Sejin Heavy Industries is expected to deliver around 20 tanks this year, double the amount delivered last year (9 tanks).
Sejin Heavy Industries produces liquefied gas tanks, which are containers that store gaseous forms of petroleum gas, ethylene gas, natural gas, and ammonia in a liquefied state. The company’s main revenue sources are the institutional sector that manufactures Deck Houses, which serve as living quarters for crew members, and the hull segment that produces gas tanks, with the hull making up about 34% of total revenue. Particularly, it holds the top market share in the LPG tank segment.
Analyst Oh Ji-hoon from IBK Securities noted, "While large ship engines are dominated by Hanwha Engine and HD Hyundai Heavy Industries, and insulation materials are shared between Hankuk Carbon and Dongsung Finetec, Sejin Heavy Industries holds high bargaining power as the number one manufacturer for LPG tanks."
Sejin Heavy Industries aims to deliver 30 tanks next year. The Trump administration has redirected domestic LPG and LNG consumption, which is lagging behind production, to export volumes. To increase exports, construction projects for LPG and LNG export terminals are underway. The U.S. maritime LPG shipping share is expected to rise from the current 50% to around 60% after the completion of export terminal expansions by 2028.
There are forecasts that Korean shipbuilders will secure a substantial number of gas carrier orders due to sanctions imposed on China's shipbuilding industry by the Trump administration, which is calling for a revival of the shipbuilding sector. In this case, orders for tanks might follow at Sejin Heavy Industries. Its main clients, HD Hyundai Heavy Industries and HD Hyundai Mipo, which lead the LPG ship market share, predominantly source LPG tanks from Sejin Heavy Industries. The company is also diversifying its revenue sources by capturing some tank orders from Samsung Heavy Industries.
Sejin Heavy Industries is relatively profitable in the booming shipbuilding industry. After achieving an operating profit margin of 10.2% last year, surpassing double digits, it recorded the highest operating profit margin of 18.1% among shipbuilding materials companies in the first quarter of this year. This was further enhanced by supplying liquefied carbon dioxide carrier tanks, which are over 30% more expensive than LPG carriers.
The industry anticipates that Sejin Heavy Industries' annual operating profit margin can rise to around 15% this year. When the ship new building price goes up, equipment prices also rise accordingly, and the contract price for LNG bunkering ships, which Sejin Heavy Industries agreed upon last February, has nearly doubled compared to 2019. It is expected that the unit price of tanks for these ships will also rise accordingly.