US Congress Opens Door to Submarine Construction Market [Yang Nakgyu's Defence Club]

Two Bills Including the "Coast Guard Readiness Assurance Act" Introduced
Allied Countries Allowed to Build Naval Vessels... Hanwha Ocean Expected to Benefit

Domestic defense companies can now build U.S. Navy vessels. As the U.S. Congress allows naval vessels to be constructed at foreign shipyards, it is expected to boost defense exports along with maintenance, repair, and overhaul (MRO) services.

Yonhap News

According to the U.S. Congress on the 11th (local time), Senators Mike Lee (R-Utah) and John Curtis (R-Utah) introduced two bills on the 5th aimed at strengthening the readiness of the Navy and Coast Guard, including the "Coast Guard Readiness Assurance Act." During the Trump administration, emphasis was placed on Korea-U.S. shipbuilding cooperation, proposing to allow allied countries like Korea to build U.S. Navy vessels. If this bill passes, shipyards in NATO member countries or Indo-Pacific countries with mutual defense treaties with the U.S. will be permitted to build naval vessels.

There are conditions. According to the bill, the cost of building at foreign shipyards must be lower than that at U.S. shipyards. Additionally, the Secretary of the Navy must confirm that the foreign shipyard is not owned or operated by Chinese companies or multinational corporations headquartered in China.

The two senators who introduced the bill pointed out that the U.S. Navy needs 355 vessels to maintain readiness but currently operates only 291. They argued that while the U.S. can increase the number of vessels by building domestically or upgrading old ships, these methods are too expensive and time-consuming. Therefore, options should be created to allow trusted allied shipyards to handle all or part of the shipbuilding process.

Although the bill does not specify particular countries for cooperation, among Indo-Pacific countries with mutual defense treaties with the U.S., only Korea and Japan have the capacity to build advanced naval vessels more cheaply than the U.S. In the U.S. Congress, voices continue across party lines that to strengthen the Navy needed to win the strategic competition with China, cooperation with shipbuilding powerhouses and allies Korea and Japan is essential.

Among domestic defense companies, Hanwha Ocean is expected to benefit the most. Hanwha Ocean has already secured new MRO orders from the U.S. Navy and aims to secure an additional 5 to 6 orders this year. Following President Donald Trump's request for shipbuilding cooperation with Korea, the domestic shipbuilding industry has accelerated its efforts.

Last year, Hanwha Ocean won MRO projects for two U.S. Navy vessels. After the military support ship Wally Schirra, it took on the repair project for the fleet replenishment oiler USNS YUKON assigned to the 7th Fleet. These projects are scheduled to be delivered to the home country within this year.

The outlook is also bright. The naval MRO market is estimated at 20 trillion won annually. Submarines and vessels have operational lifespans of up to 40 years and require periodic maintenance, repair, and overhaul. When a submarine is delivered, decades of MRO demand follow. Going further, Hanwha Ocean is considering bidding for U.S. Navy warship construction projects. The U.S. is expected to increase warship orders to counter China’s expanding maritime dominance. This year, the U.S. Navy is expected to place orders for around 10 vessels. Depending on future naval power enhancement plans, there is potential for MRO, combat ship, and military support ship orders worth up to 1,600 trillion won.

The domestic shipbuilding industry plans to expand its scope starting with the U.S. Navy market. According to market information analysis firm Bizwit, the global naval MRO market size is expected to grow from approximately $56.6 billion in 2020 to $70.5 billion by 2030. Additionally, large-scale submarine and vessel projects are underway in major countries such as Canada (60 trillion won), Saudi Arabia, and Poland (100 trillion won), indicating further expansion of the global MRO market.