Yoon, Trump focus on shipbuilding amid China's warship buildup
Published: 08 Nov. 2024, 19:06
Updated: 10 Nov. 2024, 15:24
- LEE JAE-LIM
- [email protected]
- SARAH CHEA
- [email protected]
Audio report: written by reporters, read by AI
In the first phone call between President Yoon Suk Yeol and U.S. President-elect Donald Trump, the key industry discussed was not semiconductors or EVs, but rather shipbuilding, a focus that many say is intended to counter China’s rapid buildup of warships.
Experts even suggest that shipbuilding could become a new core link in the Korea-U.S. military alliance.
Trump noted that the U.S. shipbuilding industry requires support and cooperation from Korea as he expressed awareness of Korea’s capabilities in the sector, according to Seoul's presidential office.
The top office said the president-elect went on to stress a need for close collaboration beyond ship exports to areas such as maintenance, repairs and overhauls (MRO), and that Trump said he is looking forward to furthering discussions with Yoon.
Trump’s emphasis on the shipbuilding industry reflects concern regarding China’s military coercion in the Indo-Pacific region. China operates 234 warships, surpassing the 219 operated by the U.S. Navy, excluding logistics and support vessels, according to a June report from the U.S. think tank Center for Strategic and International Studies (CSIS).
The report noted that allies like Japan and Korea could help counter China’s numerical advantage.
Henry Haggard, a former political counselor at the U.S. Embassy in Seoul, pinpointed the shipbuilding sector as one of three — along with chips and steel — that can further strengthen the bilateral relationship in a CSIS newsletter published on Thursday.
Haggard proposed the establishment of a joint ownership structure between Korean and U.S. companies that could bring a three-pronged advantage: Korean companies will make significant investments in the country, the U.S. shipbuilding capacity will be preserved and thousands of new jobs will be introduced into the market.
The move could “help us retake a global leadership role in building the most advanced ships for our military and our industry,” Haggard wrote.
While legal restrictions within the Jones Act make it difficult for the United States to build naval vessels in foreign shipyards, the country can use support in MRO services — and Korea is one of the top contenders in the market.
Currently, the United States possesses five shipyards with MRO capabilities, with an average annual output of 1.3 ships per yard. A Congressional Research Service report last month stated that about 30 percent of U.S. submarines are lined up for repairs.
The U.S. Navy plans to outsource ship repairs to foreign shipyards as part of a pilot project from 2025, including Korea. In February, U.S. Navy Secretary Carlos Del Toro visited Korea to tour the shipyards of HD Hyundai Heavy Industries (HD HHI) and Hanwha Ocean, praising their shipbuilding capabilities, particularly in manufacturing digitization and real-time monitoring.
Efforts to institutionalize such cooperation have been in the works — mentions about MRO popped up repeatedly during bilateral defense talks this year.
A joint press statement for the 24th Korea-U.S. Integrated Defense Dialogue issued in April stated that “the U.S. side noted [Korea's] efforts to collaborate on MRO initiatives, and affirmed that such cooperation is in accordance with the direction of enhancing the alliance's posture and capabilities."
At the 56th Security Consultative Meeting Joint Communique between U.S. Secretary of Defense Lloyd Austin and Korea’s minister of national defense, Kim Yong Hyun, both leaders “welcomed progress under the U.S. Regional Sustainment Framework and welcomed [Korea's] participation” in MRO, also expressing satisfaction over the recent U.S. Navy contract with Korean shipyards to conduct MRO services for U.S. vessels.
The recent contract refers to Hanwha Ocean’s deal to overhaul the U.S. Navy’s logistics support ship, the Wally Schirra, marking the first service contract won by a Korean shipbuilder. The 40,000-ton vessel will undergo maintenance at Hanwha Ocean’s Geoje shipyard for four months to be delivered back to the U.S. Navy in January of next year.
“The U.S. Navy envisions scenarios where American aircraft carriers receive MRO services in South Korea before deploying for operations in regions of Indo-Pacific and Europe,” said a military official who requested anonymity. “This would not only boost the defense industry but also enhance the strategic and geopolitical value of the South Korea-U.S. alliance.”
The global market for naval MRO services is projected to be worth $57.76 billion this year, with the U.S. accounting for $14.4 billion annually, data from a British defense intelligence company shows. Domestic shipbuilders such as HD HHI and Hanwha Ocean are looking to tap into that enormous market.
HD HHI was the first Korean company to enter the overseas MRO business in 2022. Hanwha Ocean was a swift follower, wholly acquiring Philadelphia-based shipbuilder Philly Shipyard in June for $100 million along with Hanwha Systems. It was the first time a Korean shipbuilder acquired a U.S. shipyard.
Following the release of the details of the call between Trump and Yoon, shares of domestic shipbuilders spiked. Hanwha Ocean shares rose 21.76 percent to close at 33,850 won ($24) on Thursday, the highest surge this year. Shares of HD Hyundai’s shipbuilding affiliates — HD HHI, HD Korea Shipbuilding & Offshore Engineering and HD Hyundai Mipo — rose between 5.09 percent to 15.13 percent, while Samsung Heavy Industries shares rose 9.17 percent.
While shares were down the next day, Hanwha Ocean further spiked 6.94 percent to close at 36,200 won on Friday, followed by a 1.66 percent increase for Samsung Heavy Industries and a 0.48 percent surge for HD HHI.
BY LEE KEUN-PYUNG, LEE JAE-LIM [[email protected]]
with the Korea JoongAng Daily
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