HD Hyundai Heavy, Hanwha Ocean Set to Compete in Special Ship MRO Market

With HD Hyundai Heavy Industries declaring its entry into the US military special vessel MRO (Maintenance, Repair, and Overhaul) business worth 20 trillion won, competition with Hanwha Ocean is expected to intensify.

According to market research firm Modo Intelligence on the 6th, the global naval vessel MRO market size is estimated at $57.76 billion (approximately 77 trillion won) this year. Among this, the US naval vessel MRO market is worth 20 trillion won, accounting for one-quarter of the total. Due to the recent decline in the shipbuilding industry, the US Navy has been encouraging participation from allied companies like those from Korea in the MRO sector, which had previously been closed off. In particular, MRO contracts spanning the hull lifecycle are known to provide continuous revenue and higher profit margins compared to new construction.

HD Hyundai Heavy Industries plans to actively participate starting next year, considering production facility availability and profitability, as the market is expected to grow due to the increasing number of aging US Navy vessels. Jung Ki-sun, Vice Chairman of HD Hyundai Group, recently expressed his determination regarding the US Navy MRO business, stating, "We plan to participate after reviewing the operational status and profitability of the special vessel yard."

HD Hyundai Heavy Industries has secured production capacity by leasing shipyards in domestic hubs such as Ulsan, as well as the Subic shipyard in the Philippines and the Sima shipyard in Peru. They also have experience through an MRO contract for two frigates delivered to the Philippines in 2022. This is the background behind Vice Chairman Jung’s comment that "we are good at this" regarding their MRO business competitiveness.

The US Navy logistics support ship, the USNS Wally Schirra, docked at Hanwha Ocean's Geoje facility on the 2nd for ship maintenance. Photo by Hanwha Ocean

Competition with Hanwha Ocean is expected to be fierce. Both companies obtained certification from the US Navy Supply Systems Command in July for the MRO business, qualifying them to participate in US Navy vessel MRO bids for the next five years.

However, their strategies differ. Hanwha Ocean is focusing on North America, while HD Hyundai Heavy Industries is eyeing the Pacific Rim region. Hanwha Ocean recently acquired 100% ownership of the Philly shipyard on the US mainland for $100 million (approximately 139 billion won). HD Hyundai Heavy Industries has secured the Philippine frigate MRO project.

Currently, it is expected that there will be more work on the US mainland. Byun Yong-jin, a researcher at Hi Investment & Securities, evaluated, "Considering the US Navy’s situation, which is reportedly facing significant difficulties in construction and repair work, securing repair business work at the Philly shipyard is just a matter of time."