S. Korean shipbuilders eye the MRO market for US Navy ships

On By Vaseline

This file photo provided by HD Hyundai Heavy Industries Co. shows shipbuilder Vice Chairman Chung Ki-sun (3rd from left) introducing a Navy ship under construction to U.S. Secretary of the Navy Carlos Del Toro (2nd from left) during his visit to the HD Hyundai Shipyard in Ulsan, about 300 kilometers southeast of Seoul, on February 27, 2024. (Image courtesy of Yonhap)

This file photo provided by HD Hyundai Heavy Industries Co. shows shipbuilder Vice Chairman Chung Ki-sun (3rd from left) introducing a Navy ship under construction to U.S. Secretary of the Navy Carlos Del Toro (2nd from left) during his visit to the HD Hyundai Shipyard in Ulsan, about 300 kilometers southeast of Seoul, on February 27, 2024. (Image courtesy of Yonhap)

SEOUL, May 3 (Korea Bizwire) — South Korean shipbuilders have been exploring opportunities to enter the US Navy maintenance, repair and overhaul (MRO) market, in line with US efforts to revive the declining shipbuilding industry through cooperation with their Asian allies .

HD Hyundai Heavy Industries Co. (HHI) and Hanwha Ocean Co. seeking partnership and acquisition agreements with shipyards authorized to build and repair American warships, as the US seeks to revive its dormant shipyards and increase maritime competitiveness in response to the rapid expansion of China’s navy.

Their bid for the US naval market was in the spotlight following US Secretary of the Navy Carlos Del Toro’s visit to their shipyards in February to assess their shipbuilding and MRO capabilities.

The two shipbuilders have applied for a Master Ship Repair Agreement to qualify for MRO duties for U.S. Navy ships at their local shipyards after completing U.S. Navy on-site inspections, company officials said.

After the visit, del Toro praised South Korea’s capabilities to cost-effectively build high-quality commercial and warships, expressing concern about America’s declining shipbuilding capabilities.

U.S. Secretary of the Navy Carlos Del Toro (2nd from left) is greeted by Hanwha Ocean Co. officials. briefed 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)

U.S. Secretary of the Navy Carlos Del Toro (2nd from left) is greeted by Hanwha Ocean Co. officials. briefed 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 US Navy’s top official highlighted the potential of dormant and intact shipyards for redevelopment into dual-use facilities for both military and civilian purposes.

“In each of these engagements, I brought a simple, yet profound opportunity to the table: investing in America,” Del Toro said, according to a transcript from the Navy’s website. “I was extremely pleased with the strong interest shown by the leaders of each of these world-class shipbuilders in establishing U.S. subsidiaries and investing in shipyards in the United States.”

The US marine market is the largest and most influential market in the world; the Pacific Fleet alone has approximately 200 ships. However, according to the US Naval Institute, US private shipbuilding capacity is only 0.13 percent, far below China’s 46.6 percent share of the global market.

South Korea is the world’s second-largest shipbuilder with a 29.2 percent share and Japan is third with a 17.3 percent share, the data showed.

Because the U.S. Jones Act prohibits foreign-built, foreign-owned or foreign-flagged vessels from engaging in coastal trade, Korean shipbuilders are seeking cooperation 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 regarding 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 cooperation with U.S. companies in government and military ship construction and MRO activities,” said Joo Won-ho, CEO of the Navy and special shipping department of HHI.

A subsidiary of the Norwegian energy company Aker, Philly Shipyard was founded in 1997 on part of the site of the Philadelphia Naval Shipyard.

Joo Won-ho (R), CEO of HD Hyundai Heavy Industries (HHI) Co.'s marine and special ship division. and Steinar Nerbovik, president and CEO of Philly Shipyard Inc., sign a Memorandum of Understanding to joint U.S. government shipbuilding and maintenance contracts on April 12, 2024, at Philly Shipyard in Philadelphia, in this photo from HHI. (Image courtesy of Yonhap)

Joo Won-ho (R), CEO of HD Hyundai Heavy Industries (HHI) Co.’s marine and special ship division. and Steinar Nerbovik, president and CEO of Philly Shipyard Inc., sign a Memorandum of Understanding to joint U.S. government shipbuilding and maintenance contracts on April 12, 2024, at Philly Shipyard in Philadelphia, in this photo from 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.

Austal, headquartered in Australia, generates about 90 percent of its revenue from its U.S. subsidiary, which operates under a special security arrangement that allows it to work on sensitive U.S. defense programs despite foreign ownership. The company also has branches in the Philippines and service centers in Singapore.

“We tapped Austal’s parent company in Australia. Discussions are ongoing, but they are expected to take quite some time,” Lee Yong-ook, senior executive vice president of Navy Ships, said at a news conference on Thursday.

On Wednesday, Australian Defense Minister Richard Marles said his government is not concerned about Hanwha’s potential bid to take over Austal, noting that safeguards are needed to protect the shipbuilder’s sensitive defense technologies and intellectual property.

(Yonhap)