One option is to use a derived table containing the key + max(ship_date) and then delete from your table the rows that don't match as so:

DELETE Orders

--select *

FROM Orders t

LEFT OUTER

JOIN (SELECT Order_No ,Line_No, Ship_Date = MAX(Ship_Date) FROM Orders GROUP BY Order_No ,Line_No) s

ON t.Order_No = s.Order_No

AND t.Line_No = s.Line_No

AND t.Ship_Date = s.Ship_Date

WHERE s.Ship_Date IS NULL