This file photo, provided by HD Hyundai Heavy Industries Co., shows the shipbuilder’s Vice Chairman Chung Ki-sun (3rd from L) introducing a naval ship under construction to U.S. Secretary of the Navy Carlos Del Toro (2nd from L) during the latter’s visit to the HD Hyundai shipyard in Ulsan, about 300 kilometers southeast of Seoul, on Feb. 27, 2024. (Image courtesy of Yonhap)
SEOUL, May 3 (Korea Bizwire) — South Korean shipbuilders have been exploring opportunities to enter the U.S. Navy’s maintenance, repair and overhaul (MRO) market, aligning with the United States’ efforts to revitalize its declining shipbuilding industry through collaboration with its Asian allies.
HD Hyundai Heavy Industries Co. (HHI) and Hanwha Ocean Co. are pursuing partnership and acquisition deals with shipyards authorized to build and repair U.S. warships as the U.S. is seeking to revive its dormant shipyards and boost maritime competitiveness in response to China’s rapid naval expansion.
Their bid in the U.S. naval market has been in the spotlight following U.S. Secretary of the Navy Carlos Del Toro’s visit to their shipyards in February to assess their ship construction and MRO capabilities.
The two shipbuilders have applied for a Master Ship Repair Agreement to be eligible for MRO tasks for U.S. naval vessels at their local shipyards, having completed the U.S. Navy’s on-site inspections, according to company officials.
Following the visit, Del Toro has touted South Korea’s capabilities to build high-quality commercial and warships in a cost-effective way, voicing concerns over America’s declining shipbuilding capabilities.
U.S. Secretary of the Navy Carlos Del Toro (2nd from L) is briefed by Hanwha Ocean Co. officials on the shipbuilder’s capabilities during his visit to the company’s shipyard in Geoje, about 330 kilometers southeast of Seoul, on Feb. 28, 2024, in this file photo provided by the company. (Image courtesy of Yonhap)
The top U.S. Navy official highlighted the potential of dormant and intact shipyard sites for redevelopment into dual-use facilities for both military and civilian purposes.
“In each of these engagements, I brought to the table a simple, yet profound opportunity: invest in America,” Del Toro said, according to a transcript from the Navy’s website. “I was enormously gratified by the strong interest expressed by the leaders of each of these world-class shipbuilders in establishing U.S. subsidiaries and investing in shipyards in the United States.”
The U.S. naval market is the world’s the biggest and most influential market, with its Pacific Fleet alone boasting around 200 vessels. However, the U.S.’ private shipbuilding capacity stands at a mere 0.13 percent, far below China’s 46.6 percent share of the global market, according to the U.S. Naval Institute.
South Korea is the world’s second-largest shipbuilder with a 29.2 percent share and Japan comes third with a 17.3 percent share, the data showed.
As the U.S. Jones Act prohibits any foreign-built, foreign-owned or foreign-flagged vessels from engaging in coastwise trade, Korean shipbuilders have been seeking partnership with U.S.-based shipyards to pave the way for entry into the restrictive market.
Last month, HHI signed a memorandum of understanding with Philly Shipyard Inc. to explore a potential business relationship relating to future U.S. government shipbuilding projects, as well as MRO projects.
“We look forward to further growing HHI’s presence in the global defense market through collaboration with U.S. companies in government and military vessel building and the MRO business,” Joo Won-ho, chief executive of naval and special ship business unit of HHI, said.
As a subsidiary of Norwegian energy firm Aker, Philly Shipyard was founded in 1997 on part of the site of the Philadelphia Naval Shipyard.
Joo Won-ho (R), chief executive of the naval and special ship business unit of HD Hyundai Heavy Industries (HHI) Co. and Steinar Nerbovik, president and chief executive of Philly Shipyard Inc., sign a memorandum of understanding to explore joint U.S. government shipbuilding and maintenance contracts on April 12, 2024, at Philly Shipyard in Philadelphia, in this photo provided by HHI. (Image courtesy of Yonhap)
Hanwha Ocean, formerly known as Daewoo Shipbuilding & Marine Engineering Co., said the company has been negotiating with Austal as part of its strategy to acquire shipyards abroad for potential warship and MRO deals in advanced markets.
Headquartered in Australia, Austal generates about 90 percent of its revenue from its U.S. affiliate, which operates under a special security arrangement allowing it to work on sensitive U.S. defense programs despite foreign ownership. Additionally, the firm has affiliates in the Philippines and service centers in Singapore.
“We have been tapping Austal’s parent company in Australia. Talks have been under way, but they are expected to take considerable time,” Lee Yong-ook, senior executive vice president of naval ship business, said during a press conference Thursday.
On Wednesday, Australian Defense Minister Richard Marles said his government does not have concerns over Hanwha’s possible bid to acquire Austal, noting the need to have security arrangements to protect the shipbuilder’s sensitive defense technologies and intellectual property.
(Yonhap)
