‘K-Joseon’, Taking Charge of Repairs for US 7th Fleet Ships Too [Yang Nak-gyu's Defence Club]

President-elect Trump Mentions "Need for South Korea's Help and Cooperation"
Hanwha Ocean Expected to Benefit from Maintenance of All US Navy Ships

There is growing interest in whether 'K-Chosun' can secure the maintenance, repair, and overhaul (MRO) business for the US 7th Fleet vessels stationed in Japan. With Donald Trump elected as the 47th president, mentioning the need for South Korea's assistance and cooperation in the US shipbuilding industry, the possibility of taking over the 7th Fleet vessels, surpassing Japanese shipyards, is increasing.

Immediately after his election, Trump mentioned the need for South Korea's help and cooperation in the US shipbuilding industry during a call with President Yoon Suk-yeol. Analysts interpret this as stemming from a security concern that the US shipbuilding industry is collapsing and may fall behind China in the maritime hegemony competition. Although the US possesses cutting-edge technology such as nuclear submarines, the shipbuilding ecosystem for building and repairing vessels has virtually disappeared.

Earlier this year, the US Navy released a report revealing delays in major vessel programs. The Columbia-class ballistic missile submarines, jointly built by General Dynamics Electric Boat and Huntington Ingalls Industries, are delayed by 12 to 16 months. The Virginia-class submarines, blocks 4 and 5, are delayed by 36 and 24 months respectively. The situation is similar for the ocean surveillance ships built by Austal USA and the amphibious ships by Huntington Ingalls Industries. Statistics also show that about 40% of US submarines are either under repair or awaiting maintenance.

Hanwha Ocean acquired 100% of the shares of Philly Shipyard in Philadelphia, USA, in June for $100 million (approximately 138 billion KRW). This is interpreted as a strategy to enter the maintenance and repair of the 2nd to 4th Fleet forces, which must be serviced on the mainland under the US Jones Act. However, with Trump emphasizing cooperation, expectations for the US 7th Fleet MRO business are also rising.

The industry widely interprets that Trump’s call for help to the domestic shipbuilding industry to President Yoon is aimed at countering China’s rapid growth in the global shipbuilding market. Since his election, Trump has promised to strengthen so-called 'decoupling' and containment of China. Meanwhile, the US Congress recommended expanding alliances to overcome such challenges in the 'Restoring American Maritime Competitiveness' report published in April. In this regard, South Korea has been chosen as the optimal partner.

Among domestic shipbuilders, Hanwha Ocean is expected to be the biggest beneficiary. Hanwha Ocean became the first domestic shipbuilder to sign an MRO contract with the US Navy and is currently conducting major repairs on US naval support vessels at its Geoje facility. In July, Hanwha Ocean signed a Maintenance Services and Repair Agreement (MSRA) with the US Navy Supply Systems Command, qualifying it to officially participate in bids for MRO projects on vessels designated by the US Navy over the next five years. The MSRA is a certification agreement the US government signs with shipbuilders that have high-quality maintenance and technical capabilities.

Hanwha Ocean plans to enter the MRO market, which is worth about 20 trillion KRW annually. According to market research firm Modo Intelligence, the global naval vessel MRO market is expected to grow at an average annual rate of 1.95%, from $57.76 billion (about 77 trillion KRW) this year to $63.62 billion (about 84.9 trillion KRW) by 2029. Among this, the US naval vessel MRO market alone accounts for about 20 trillion KRW, roughly one-quarter of the total.

A Hanwha Ocean official said, "Entering the US 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," adding, "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."