As discussions on shipbuilding cooperation between South Korea and the United States intensify, Hanwha Group and HD Hyundai are accelerating efforts to secure a shipyard in the U.S. maritime defense market. The goal is to establish a base in the U.S. and eventually enter the U.S. Navy's warship construction sector.
According to the defense industry on the 7th, Hanwha Group is working on improving productivity at the Hanwha Philly Shipyard, which it acquired at the end of last year. In addition to coating and post-processing work to normalize the shipyard, the group is also pushing for facility investments to expand production capacity. A key goal is to enhance productivity by integrating the DNA of Hanwha Ocean.
The Philly Shipyard is the shipyard in Philadelphia that Hanwha System and Hanwha Ocean acquired for $100 million (approximately 143.1 billion won) in December of last year. This marks the first case of a South Korean corporation acquiring a U.S. shipyard. Due to low productivity, it recorded operational losses for seven consecutive years from 2018 to last year.
In the first quarter of this year, the operating loss decreased to around 2 billion won. Hanwha Group believes that it can achieve a profit transition if it eliminates the backlog from the National Security Multi-Mission Vessel (NSMV) and Subsea Rock Installation Vessel (SRIV) projects, which have grown due to delays and increased expenses after previous low-price contracts.
Hanwha Group plans to utilize the Philly Shipyard as a base for constructing commercial vessels such as liquefied natural gas (LNG) carriers and Aframax tankers. President Donald Trump noted last month in an executive order to revive U.S. shipbuilding that 'the U.S. currently cannot build even one ship a year.'
To target maintenance, repair, and overhaul (MRO) business for the U.S. Navy and ship construction, Hanwha Group will first cooperate with the Australian shipbuilding and defense corporation Austal. Austal builds support ships and surface vessels at two shipyards located in Alabama and California. Hanwha System and Hanwha Aerospace are currently pursuing management participation by acquiring a 19.8% stake in Austal this past March.
Efforts to secure additional shipyards in the U.S. are also underway. On the 30th of last month, Hanwha Group Vice Chairman Kim Dong-kwan told John Fallon, U.S. Secretary of the Navy, during a visit to Hanwha Ocean's Geoje Shipyard, that 'we will secure multiple shipyards in the U.S. to maximize synergy.' Secretary Fallon toured the U.S. Navy's 7th Fleet replenishment ship USS Yukon and the submarine and commercial vessel display area where Hanwha Ocean is conducting MRO work.
HD Hyundai Heavy Industries has partnered with the largest defense shipbuilder in the U.S., Huntington Ingalls Industries, to enter the U.S. Navy's warship construction market. Huntington Ingalls builds combat ships such as Aegis destroyers at the Ingalls Shipyard in Mississippi and aircraft carriers and nuclear submarines at the Newport News Shipbuilding in Virginia.
Unlike Hanwha Ocean, which has opted for acquiring local shipyards to establish bases, HD Hyundai Heavy Industries has chosen to first establish a foundation in the U.S. through cooperation with local shipyards. On the 7th of last month, HD Hyundai Heavy Industries signed a memorandum of understanding (MOU) with Huntington Ingalls for enhancing shipbuilding productivity, improving construction costs and delivery times, establishing digital shipyards, and collaborating on joint investments. Subsequently, Joo Won-ho, head of special ship business, visited Ingalls Shipyard to discuss cooperation strategies.
Ultimately, HD Hyundai Heavy Industries envisions developing a ship alliance with Huntington Ingalls to build combat ships. On the 30th of last month, Secretary of the Navy Fallon visited the Ulsan Shipyard of HD Hyundai Heavy Industries to board the Aegis destroyer, ROKS Jeongjo Dae Wang, which was delivered to the South Korean Navy last November, and observed the construction site for the second Aegis destroyer, ROKS Dasan Jeongyak Yong, which is set to launch by the end of this year. The ship technology research institute of HD Hyundai is also discussing collaborative research and development plans with the Office of Naval Research on next-generation advanced ship designs.
Recently, the South Korean and U.S. governments established a cross-governmental working group for shipbuilding cooperation and have begun formal discussions. It is known that comprehensive discussions will include MRO for the U.S. Navy, warship construction, and the Alaska LNG development project.