Hanwha Ocean Targets US Warship Market [Yang Nak-gyu's Defence Club]

CEO Eo Seong-cheol and Executives Advance Positions
Challenging Drying Following Maintenance Business

Hanwha Ocean is targeting the shipbuilding business following its entry into the U.S. naval vessel maintenance and repair business. The company plans to deploy executives in advance to expand its special-purpose ship business division and intends to actively compete for shipbuilding orders starting at the end of this year.

[Image source=Yonhap News]

According to Hanwha Ocean on the 30th, Eo Seong-cheol, CEO of Hanwha Systems, will move to a position responsible for Hanwha Ocean's special-purpose ship business. CEO Eo previously served as head of Hanwha Aerospace’s aircraft engine division, head of Hanwha Systems’ management support division, and vice president of Hanwha Systems’ defense division before being appointed CEO in 2021. He has developed new business models in areas such as unmanned and smart defense, discovering new growth engines for the company.

Considering CEO Eo’s extensive experience in the defense sector and the fact that the previous head of Hanwha Ocean’s special-purpose ship division was at the vice president level, this personnel move is interpreted as a group-level commitment to expanding Hanwha Ocean’s special-purpose ship business division.

Hanwha Ocean also secured a contract for the maintenance and repair of a 40,000-ton U.S. Navy logistics support ship. This marks the first time a domestic shipbuilding company has won a U.S. Navy vessel maintenance contract. Under the contract with Hanwha Ocean, the U.S. Navy logistics support ship will dock at Hanwha Ocean’s Geoje shipyard for comprehensive maintenance and inspection. Additionally, onshore maintenance work using the shipyard’s floating facilities will be carried out.

This project is a regular maintenance and repair business for large U.S. Navy vessels that can only be performed by companies certified under the "Maintenance and Ship Repair Agreement (MSRA)." MSRA is a certification agreement between the U.S. government and shipbuilders with high-quality maintenance and repair capabilities. Hanwha Ocean signed the MSRA with the U.S. Navy Supply Systems Command on the 22nd of last month.

Through this contract, Hanwha Ocean has entered the U.S. Navy’s maintenance, repair, and overhaul (MRO) market, which is worth approximately 20 trillion KRW annually. Furthermore, with the MSRA agreement, Hanwha Ocean can officially participate in bids for MRO projects on vessels regulated by the U.S. Navy for the next five years. According to market research firm Modo Intelligence, the global naval vessel MRO market is expected to grow from $57.76 billion (about 77 trillion KRW) this year to $63.62 billion (about 84.9 trillion KRW) by 2029, at an average annual growth rate of 1.95%. The U.S. naval vessel MRO market alone accounts for about one-quarter of this, valued at around 20 trillion KRW.

Hanwha Ocean views this project, which the U.S. Navy is conducting as a pilot in the Asia region, as a crucial turning point for future changes in the U.S. Navy’s vessel MRO market. In particular, Hanwha Ocean plans to utilize the Philadelphia shipyard in Pennsylvania, U.S., which it acquired in June, as a facility for shipbuilding and MRO operations when entering the U.S. naval vessel market. Once the acquisition process of the Philadelphia shipyard is completed in December this year, the company plans to apply for shipbuilding certification from U.S. authorities.

A Hanwha Ocean official stated, "Entering the U.S. Navy maintenance business will be a stepping stone for a new leap in the global naval vessel MRO market, which is expected to exceed 80 trillion KRW annually. We will also contribute to revitalizing related industries through win-win cooperation with small and medium-sized maintenance companies in the Busan and Gyeongnam regions."