Retrofitting Ships: A Smarter Path to a Greener Future
As environmental consciousness continues to grow worldwide, a green wave is sweeping across the globe. This trend is prominently visible not only on land but also at sea.
More than 3% of global carbon emissions are released over the sea annually. This amounts to a total of millions of tons. The International Maritime Organization (IMO), under the United Nations, recognized the severity of carbon emissions in the shipping industry early on and has been leading marine decarbonization efforts by gradually strengthening carbon emission regulations. Consequently, the number of eco-friendly ships being ordered and built is increasing every year. According to Clarksons Research, last year's global eco-friendly ship orders totaled 64 vessels, and this year has already exceeded 75 vessels as of late October. The industry notes that social awareness and the importance of carbon reduction have increased significantly, with eco-friendly fuel vessels accounting for more than half of all new shipbuilding orders worldwide.
IMO has set an ambitious goal of achieving complete net-zero carbon emissions from ships by 2050. The interim targets include a minimum 20% reduction by 2030 and a minimum 70% reduction by 2040 compared to that of 2008.
The 2030 target of a 20% curb can reportedly be achieved through relatively simple methods such as slow steaming. However, the 2040 target of a 70% reduction is impossible to achieve without using next-generation eco-friendly fuels such as ammonia and methanol.
Additionally, IMO has implemented the Carbon Intensity Indicator (CII) regulations since 2023, assigning grades from A to E to ships over 5,000 tons based on their carbon dioxide emissions. Ships receiving an E grade or three consecutive D grades will face operational restrictions. This necessitates the retrofit of existing vessels into eco-friendly ships.
Then what should be done to the diesel-fueled vessels that are currently operating on sea? Scrapping ships with significant remaining service life just to meet upcoming global carbon emission standards would only cause additional environmental and economic damage. To this question, HD Hyundai found the answer in ‘eco-friendly ship retrofitting.’
Executive Vice Chairman Chung Kisun introducing HD Hyundai Marine Solution during his keynote speech at CES 2024
HD Hyundai Marine Solution: A Pioneer in the Ship Retrofit Market
With the growing importance of eco-friendly vessels, the role and significance HD Hyundai Marine Solution, HD Hyundai's comprehensive marine industry solutions company, is also increasing day by day.
HD Hyundai Marine Solution was first established in 2016 through the spin-off of HD Hyundai Heavy Industries' Ship A/S (After Service) division. Initially entering the market under the name HD Hyundai Global Service, it became the industry's first and Korea's only provider of comprehensive lifecycle services including maintenance, repair, and retrofitting of ships. Recently, it has been expanding its business areas to include eco-friendly ship retrofitting, bunkering, and digital solutions. In November 2023, demonstrating its commitment to securing new growth engines and transforming itself into a comprehensive marine solutions company, it announced its new name to HD Hyundai Marine Solution.
HD Hyundai Marine Solution successfully listed on the Korea Exchange in May 2024. Major international media outlets including Bloomberg, Reuters, and The Wall Street Journal noted the successful IPO and expressed expectations for future business developments. Bloomberg, in particular, praised HD Hyundai Marine Solution's potential, noting that as demand for after-service for eco-friendly ships grows and requires more sophisticated management, the company's comprehensive lifecycle services, when executed efficiently, would offer competitive advantages.
Another key business area besides the aftermarket for ship parts and services is engineering-based eco-friendly retrofitting. Since entering the ship retrofit business in 2018, HD Hyundai Marine Solution has focused on installing scrubbers for reducing sulfur oxide (SOx) emissions and ballast water treatment systems to prevent marine ecosystem disruption. Now, with the explosive growth in the ship retrofit market, the company is focusing more towards providing solutions related to carbon reduction. This includes retrofitting LNG carriers with re-liquefaction systems to improve transportation efficiency by re-liquefying naturally evaporated gas, converting aging LNG carriers into floating storage units (LNG-FSU), and modifying conventional fossil fuel engines to dual-fuel systems. While these technologies meet environmental regulations in the long term, they also result in less fuel consumption, longer product lifetime, resulting in higher return of investment as they require relatively less financial investment compared to new shipbuilding. Transferring to clean energy sources like methanol are especially meaningful as it creates economic advantages for new supply chains, building more competence in sustainability.
HD Hyundai Marine Solution is also expanding its business scope by offering various digital solution services. These include the Integrated Smartship Solution (ISS), which analyzes ship operation data to provide information that supports vessel operation and maintenance, including optimal navigation routes. Additionally, the company offers the Ship Control and Machinery Automation System, which controls and automates key equipment such as engines, boilers, and pumps.
Particularly noteworthy is OceanWise, a solution that predicts carbon emissions based on ship navigation routes and weather changes using AI technology. OceanWise uses Digital Twin technology to create virtual environments identical to real conditions, visualizing and predicting carbon emissions based on navigation routes, weather, and current changes. The accuracy improves with AI technology as actual operational data accumulates. OceanWise was introduced as a core vision for realizing Ocean Transformation, HD Hyundai's fundamental maritime transformation presented at CES 2023 and was further unveiled at CES 2024 during Executive Vice Chairman Chung Kisun's keynote speech.
The Digital Insight Center located at HD Hyundai's Global R&D Center
The Infinite Potential of the Eco-Friendly Ship Retrofit Market
Global eco-friendly trends and IMO environmental regulations are providing new business opportunities for HD Hyundai Marine Solution. According to global market research firm Infinity Research, the ship retrofit market, valued at $1.9 billion in 2023, is predicted to grow to $4.2 billion by 2028—more than doubling in size over five years. Additionally, according to Lloyd's Register (LR), approximately 470 ships currently need retrofit to eco-friendly vessels using methanol, ammonia, and other alternative fuels—indicating very positive future global market prospects. In particular, with only 5.5% of currently operating ships using eco-friendly fuels, the ship retrofit market is expected to expand further.
HD Hyundai Marine Solution has signed contracts for a total of 10 vessels to date, starting with the installation of re-liquefaction facilities for five LNG carriers in June 2023, bringing its cumulative order value to USD 116 million. In addition, the company has achieved significant milestones in the ship retrofitting sector, including securing orders for Engine Part Load Optimization (EPLO) services for car carriers, signing an LNG-FSU conversion project, and developing the Shaft Generator System, which generates electricity by utilizing the rotational power of large ship propulsion engines.
The eco-friendly ship retrofit market is considered a competitive field as relatively few companies have entered despite its importance. In fact, besides HD Hyundai Marine Solution, only a handful of companies such as the German engine maker MAN Energy Solutions and Finland's Wärtsilä provide similar services. As a pioneer and leader in the eco-friendly ship retrofit market, HD Hyundai Marine Solution plans to lead the industry faster than anyone else with a sense of responsibility for realizing decarbonization.
Koolhusky, an LNG carrier re-liquefaction retrofit completed by HD Hyundai Marine Solution
2025.02.10