A Major Shift in the US-Korean Shipbuilding Industry... Scale and Defense Cost Linkage Are Crucial [Yang Nakgyu's Defence Club]

Trump Signs Executive Order to Rebuild U.S. Shipbuilding Industry
Senior Officials from South Korea and U.S. Meet in Succession, Emphasize "Shipbuilding Cooperation"

The reconstruction of the U.S. shipbuilding industry under the Donald Trump administration is expected to gain momentum. Following President Trump’s signing of an executive order to rebuild the U.S. shipbuilding industry, discussions on shipbuilding cooperation have begun at various levels within the South Korean government, including the Ambassador to the U.S. and the Chief Trade Negotiator. While the U.S. is showing an active stance toward South Korea, raising expectations that the domestic shipbuilding industry could benefit indirectly, experts emphasize that continuous contract acquisition and negotiations linked to defense cost-sharing are crucial.

Yonhap News

According to the Embassy of the Republic of Korea in the U.S. on the 11th, Ambassador Cho Hyun-dong met with Ian Bennett, Senior Advisor of the newly established Maritime Industry Capability Office under the National Security Council at the White House, on the 10th (local time). Earlier, Acting Prime Minister Han Duck-soo and U.S. President Donald Trump discussed security and economic issues during a phone call, including shipbuilding cooperation. On the same day, Jeong In-kyo, Chief Trade Negotiator, who visited the U.S., also conveyed the intention for shipbuilding cooperation during consultations with U.S. trade authorities.

In particular, President Trump issued an executive order on the 9th to rebuild the U.S. shipbuilding industry, stating that "a lot of money will be spent on shipbuilding," signaling benefits for the South Korean shipbuilding sector. The details are specific. He announced plans to investigate unfair practices by China in the maritime, logistics, and shipbuilding sectors. Fees were also increased. Earlier, the U.S. Trade Representative (USTR) decided in February to impose fees on Chinese shipping companies and vessels for international maritime transport services.

Experts emphasize that for the U.S. interest in shipbuilding to translate into tangible benefits for domestic shipbuilders, the content of a ‘package deal’ negotiation between the South Korean government and the Trump administration is important. If the U.S. Navy continues to issue competitive bids for maintenance, repair, and overhaul (MRO) work for only one or two vessels, profitability cannot be guaranteed. Without securing long-term U.S. Navy ship MRO projects, commercial shipbuilding docks must be left idle frequently, ultimately reducing real profits.

Professor Choi Ki-il of the Department of Military Studies at Sangji University said, "In the case of ship MRO, it is not profitable to handle only one or two vessels, so it is necessary to coordinate the timing and quantity of new shipbuilding or MRO project orders."

There is also a need to better highlight the high value-added ship technology of South Korean shipbuilders. Although China ranks first in the world in terms of order volume, it cannot keep up with South Korean shipbuilding in high value-added sectors.

Negotiations linked to defense cost-sharing are also necessary. Japan conducts MRO projects worth about $6 million (7.2 billion KRW) annually for vessels assigned to the U.S. 7th Fleet, and these costs are paid from the U.S.-Japan defense cost-sharing funds. Kim Jong-ha, Director of the Defense Strategy Graduate School at Hannam University, said, "In the process of negotiating defense cost-sharing between South Korea and the U.S., we should consider proposing the amount first and securing the number of MRO shipbuilding projects corresponding to the increased contribution amount."

Domestic shipbuilders are also accelerating their efforts. Hanwha Ocean entered the U.S. market early by acquiring Philly Shipyard located in Philadelphia, Pennsylvania, in June last year. They are also pursuing overseas shipyard acquisitions, including acquiring shares in Australia’s Austal, which holds qualifications for U.S. warship construction, investing about 800 billion KRW by 2026. HD Hyundai recently signed a Memorandum of Understanding (MOU) with Huntington Ingalls, the largest U.S. defense shipbuilder, for ‘ship productivity improvement and advanced shipbuilding technology cooperation.’