As the U.S. Congress pushes for legislation to strengthen its domestic shipbuilding industry by collaborating with South Korea and Japan, several domestic shipbuilders are accelerating their efforts to enter the maintenance, repair, and overhaul (MRO) business for U.S. warships and new warship construction. Currently, only HD Hyundai and Hanwha Ocean can participate in the U.S. warship MRO business, but other shipbuilders are eyeing opportunities.
According to the shipbuilding industry on the 29th, several large and medium-sized domestic shipbuilders are reportedly reviewing the signing of the Master Ship Repair Agreement (MSRA), a prerequisite for entering the U.S. warship MRO business. This agreement is to be signed between the U.S. Navy's Supply Systems Command and private shipbuilders for the maintenance and repair of U.S. vessels. Corporations that obtain the MSRA after passing the U.S. Navy's review process will be qualified to participate in various maintenance projects for the U.S. Navy's fleet.
The industry has also reported that Samsung Heavy Industries and K Shipbuilding are considering entering the U.S. warship MRO business. A source from the shipbuilding industry noted, 'We believe that signing the MSRA will not be difficult. Most shipyards in our country are likely preparing to enter the U.S. warship MRO business and the new shipbuilding market. We expect various types of vessels to emerge in the market, not just warships.'
The time and procedures for signing the MSRA are decreasing. In the case of HD Hyundai, which signed the MSRA first, it took over a year from application to qualification acquisition. Hanwha Ocean reduced the MSRA certification period to seven months and won an MRO contract for military support ships shortly after obtaining certification. HJ Shipbuilding & Construction applied for the MSRA earlier this year and is currently in the final stages of signing. As of January this year, regulations were changed to allow bids for military support ship MRO without obtaining the MSRA.
U.S. Secretary of the Navy Jon F. Verga is reportedly scheduled to visit South Korea later this month and tour several shipyards in Geoje. Industry sources believe that Secretary Verga is visiting to review the shipyards before awarding the MRO contracts.
A legislative forum focusing on the revitalization of the shipbuilding industry is expected to be held in the U.S. on the 1st of next month (local time). This forum will focus on the Ships for America Act and the Save Our Shipyards Act, with a high likelihood that related bills will be legislated afterward. Senators Mark Kelly and Todd Young, along with Congressman John Garamendi, who co-sponsored the Ships for America Act in the previous 118th Congress, are expected to lead the legislative discussions.
There are also concerns about low-priced contracts. Kim Dae-young, a military expert at the Korea National Strategy Research Institute, remarked, 'While several domestic shipbuilders are eager to enter the U.S. warship MRO business, this could potentially lead to low-price contracts and a bidding war. The method of securing MRO contracts should be carefully considered through government-to-government consultations, and a collective contract approach through a consulting body of shipbuilders could also be an alternative.'
The Korea Trade-Investment Promotion Agency (KOTRA) estimated in a report issued last March titled 'Trends in the U.S. Maritime Shipbuilding Market and Policies' that the market for new U.S. warship construction will reach 43 trillion won annually, while the MRO market will reach 11 trillion won.