[Edaily Reporter Kim Kyung-eun ] Analysts have suggested that the Democratic Party’s victory in the U.S. midterm elections could worsen the order intake environment for liquefied natural gas (LNG) carriers in the domestic shipbuilding industry. This is because stricter permitting procedures for U.S. LNG export terminals could delay new projects and ship orders. On the other hand, growing demand for on-site power generation at data centers is expected to present new growth opportunities for domestic shipbuilders.

In a report released on the 6th, Kang Kyung-tae, an analyst at Korea Investment & Securities, analyzed the impact of the U.S. midterm election results on the domestic shipbuilding industry in three areas: △delays in LNG carrier orders, △changes in opportunities for U.S. naval vessel orders, and △growing demand for on-site power generation at data centers.

The greatest concern is the deterioration of the order environment for LNG carriers. As of the end of September this year, LNG projects underway worldwide targeting operation by 2032 total 478 million metric tons annually. Of this, U.S. projects account for 255 million metric tons, or 53.2% of the total. This region represents the largest share of domestic shipbuilders’ LNG carrier order pipeline.

Researcher Kang analyzed, “If environmental impact assessments or permitting procedures for LNG export terminal projects underway in the U.S. Gulf of Mexico region are tightened, the start of construction and commercialization of these projects could be delayed.”

Consequently, there are concerns that the business environment for LNG carriers scheduled for delivery after 2029 may deteriorate. This means shipbuilders could face a situation where they must lower newbuilding prices to secure an adequate order backlog. Researcher Kang diagnosed that these concerns over weak ship prices were the primary cause of the recent correction in domestic shipbuilding stock prices following the midterm elections.

He assessed the impact on orders for U.S. naval vessels as neutral. Although the likelihood of legislative amendments allowing overseas orders for U.S. naval vessels has decreased due to the Democratic Party’s expanded influence, he predicted that opportunities for domestic shipbuilders to secure orders through local investments in the U.S. would continue.

Researcher Kang explained, “Opportunities for Korean shipyards to secure U.S. naval vessel orders will arise solely as a reward for ‘MASGA’ investments,” adding, “Orders for naval vessels placed with U.S. shipyards owned by Korean shipbuilders—such as Hanwha Philly Shipyard’s contract for a medium-sized amphibious assault ship—have already begun.”

In particular, he noted that the value of the maritime defense business could be reevaluated depending on future news of new orders. Key variables cited included the results of the overseas design evaluation for next-generation frigates, additional orders for medium-sized landing ships, and the selection of a conceptual design for next-generation logistics support ships.

On the other hand, the growing demand for on-site power generation at U.S. data centers was assessed as a positive factor for the domestic shipbuilding industry. This is because bills currently being pushed through the U.S. Congress include provisions requiring large-scale electricity consumers to bear the costs of grid expansion.

The Electricity Ratepayers Protection Act, introduced in the U.S. House of Representatives last June, recommends that large-scale consumers with peak electricity demand of 100 MW or more bear the full cost of grid expansion. A bill introduced in the Senate in September expands the scope of application to consumers with demand of 20 MW or more and mandates that they bear these costs.

Researcher Kang explained, “If grid connection costs rise and financial guarantees for grid expansion expenses are required, it will become more advantageous for operators to secure their own power generation sources rather than wait for grid connection.”

Consequently, he projected that demand for power generation equipment—such as medium-speed engines, gas turbines, and fuel cells—would expand. In particular, he anticipated that orders would materialize to support the utilization rates of new facilities at HD HYUNDAI HEAVY INDUSTRIES(329180)starting in 2029. Floating data centers utilizing their own power generation sources were also cited as a new business opportunity.

Research Analyst Kang stated, “With the uncertainty surrounding the midterm elections now gone, only valuations that have been rapidly adjusted remain,” and maintained his “Overweight” investment rating for the shipbuilding sector and his “Top Pick” rating for HD HYUNDAI HEAVY INDUSTRIES.