Hapag-Lloyd inks LOI of almost US$1Bn for dual-fuel box ships

German container ship giant Hapag-Lloyd has signed a letter of intent (LOI) with Daewoo Shipbuilding and Marine Engineering (DSME) to construct six 23,000-TEU container ships. The LOI contains options to build up to six more vessels worth close to US$1Bn, according to BRL Newbuilding Weekly. The six ultra-large container ships (ULCS) “are likely to employ dual-fuel main propulsion using LNG,” reports BRL, “with Hapag-Lloyd seriously considering utilising two LNG bunker tanks on deck of a new type B tank of 18,000 m3 constructed with cryogenic high-manganese steel in preference over normal membrane type.” South Korean steel company POSCO has developed high-manganese steel for use in LNG tanks. High-manganese steel was first used in the LNG fuel tanks of IL Shin Logistics’ LNG-powered bulk carrier Green Iris built by South Korean shipbuilder Hyundai Mipo Dockyard in 2017. POSCO’s high-manganese steel has also been used for onshore LNG storage tanks. In 2019, the Korean Gas Technical Standards Committee listed high manganese steel on the KGS code as verified material for onshore LNG storage tanks, enabling commercialisation. In operation since April, the 200,000-m3 storage tank No 5 at Gwangyang LNG receiving terminal in South Korea was constructed with high manganese steel. BRL reports that using high-manganese steel for the LNG fuel tanks in Hapag-Lloyd’s newbuild box ships could yield a potential cost savings of “US$2M to US$3M over competitors and be worth the investment in the long run. This will allow bunkering on board from self-sufficiency.” The estimated cost per dual-fuel vessel is US$165M, putting the firm contract value at US$990M. One of the world’s largest container shipping lines, Hapag-Lloyd has a fleet of 234 vessels, with a total capacity of 1,708,977 TEU as of 20 September 2020 and an average age of 9.3 years. The average ship size within the Hapag-Lloyd Group fleet is 7,303 TEU, which is approximately 15% above the comparable average figure for the 10 largest container liner shipping companies. To comply with the IMO 2020 0.50% sulphur cap, Hapag-Lloyd has been predominantly using low-sulphur fuel. On 17 of its own larger ships and nine container ships chartered on a long-term basis, Hapag-Lloyd reported it is installing exhaust gas cleaning systems. As reported, the company also has a pilot project to retrofit the ULCS Sajir with dual-fuel propulsion to burn to LNG.