Shipbuilding stocks surge to year high as U.S. considers outsourcing its fleet

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Shipbuilding stocks surge to year high as U.S. considers outsourcing its fleet

Published: 12 Feb. 2025, 18:27

LEE JAE-LIM
[email protected]

Audio report: written by reporters, read by AI

A general view of the US Capitol Building behind temporary security fencing in Washington, DC on Jan. 15. [EPA/YONHAP]

Korean shipbuilding stocks surged on the Kospi bourse on Wednesday after two bills were introduced to the U.S. Congress on Feb. 5 proposing outsourcing ship manufacturing to allied nations to counter China’s rapidly growing naval fleet.

Shares of HD Hyundai Heavy Industries rose 15.36 percent compared to the previous trading day to close at 353,000 won ($242.90) on Wednesday. Shares surged to a 52-week high, jumping 16.01 percent midtrading to 355,000 won.

Shares of other domestic shipyards and related component manufacturers, such as STX Engine, HD Korea Shipbuilding & Offshore Engineering, HJ Shipbuilding & Construction and Samsung Heavy Industries climbed 11.96 percent, 5.64 percent, 8.62 percent and 5.98 percent respectively.

Shares of Hanwha affiliates, Hanwha Ocean and Hanwha Systems, soared 15.17 percent and 29.64 percent, respectively, both closing at 52-week highs. The surge was driven by heightened anticipation that earnings from Philadelphia-based shipbuilder Philly Shipyard, jointly acquired by the two affiliates in June 2024, will be reflected in their financial results this year.

The two bills, titled the Ensuring Naval Readiness Act and the Ensuring Coast Guard Readiness Act, were proposed by Republican senators Mike Lee and John Curtis of Utah.

The legislation proposes allowing the construction of vessels and vessel components at foreign shipyards, provided that the shipyards are located in either a NATO member or an Indo-Pacific nation that has signed a mutual defense treaty with the United States.

The Byrnes-Tollefson Amendment to the DOD Appropriations Acts of 1965 and 1968 mandates that major components of U.S. Navy and Coast Guard vessels must be constructed at shipyards within the country's borders. The Jones Act also requires that sea cargo traveling between two U.S. ports do so on a vessel built, owned and crewed by U.S. citizens.

U.S. President-elect Donald Trump speaks after a meeting with Republicans in Congress at the U.S. Capitol building in Washington, U.S. on Jan. 8. [REUTERS/YONHAP]

“Both bills are about leveraging our diplomatic relationships and the comparative advantages of our allies to ensure America remains at the forefront of maritime security,” said Lee said in a statement. “By modernizing our approach to shipbuilding and repair, we can enhance our readiness and maintain our military edge, all while ensuring fiscal responsibility.”

Both bills emphasize that the costs of assembling ships at foreign shipyards should be cheaper than construction at a U.S. shipyard and that involved shipbuilders are not to be owned or operated by a Chinese company or a multinational company that is based in China.

Anticipation has been brewing that Korean shipbuilders could be at the receiving end of the U.S. President Donald Trump’s stance on the country’s lagging shipbuilding capabilities with the beginning of Trump 2.0.

In the first phone call between President Yoon Suk Yeol and Trump after Trump’s win in November, the U.S. President reportedly emphasized that the U.S. shipbuilding industry requires support and cooperation from Korea.

Trump continued to voice concerns about the country's lack of shipbuilding capability, comparing the country to China in another radio interview in January before his term began.

“We don’t build ships anymore. We used to build a ship a day. We don’t build ships anymore. We want to get that started. And maybe we’ll use allies, also, in terms of building ships. We might have to.

“China’s building, from what I’m hearing, every four days, they’re knocking out a ship,” he added. “We’re sitting back and watching, and we’ve suffered tremendously.”

BY LEE JAE-LIM [[email protected]]