President Lee Jaemyung Pledges to Foster Special Vessel Construction and MRO Industry
Shipbuilding Cooperation Expected in Korea-US Trade Negotiations
With Lee Jaemyung elected as the 21st President, the domestic defense shipbuilding industry is expected to gain further momentum. This is because the shipbuilding industry's pledge to pursue global eco-friendly policies aligns with the Donald Trump administration's request for cooperation in shipbuilding and maintenance, repair, and overhaul (MRO).
According to the shipbuilding and shipping industries on June 4, President Lee presented "regional growth and national spatial innovation" as one of his five key strategies in his campaign policy book. To achieve this, he proposed two main measures: ▲ intensive development of strategic bases for advancing into the Northern Sea Route ▲ promotion of global eco-friendly policies in the shipbuilding industry. Given that over 90% of Korea's exports are transported by sea, the plan is to link shipbuilding and shipping to revitalize both industries and foster growth in the Busan, Ulsan, and Gyeongnam (Bu-Ul-Gyeong) region.
During the presidential campaign, on the 14th, President Lee also visited the southern coastal shipping belt, starting with Busan, Changwon, Tongyeong, Geoje, and Hadong. Hanwha Ocean and Samsung Heavy Industries are based in Geoje. While visiting the shipping belt, Lee announced via Facebook, "The Korean shipbuilding industry is a core sector responsible for exports and employment and is a national asset that competes for first and second place in the world. Now, it must lead a major leap forward in line with the era of climate crisis and digital transformation," unveiling the "Five Strategies for the Future Development of the Shipbuilding Industry."
The five strategies are summarized as follows: ▲ securing leadership in the future ship market centered on eco-friendly and autonomous ships ▲ fostering the ship industry linked to offshore wind power ▲ establishing smart yards through digitalization of all processes, including design, production, logistics, quality, and safety ▲ supporting small and medium-sized shipbuilders by strengthening refund guarantees (RG) and expanding special guarantees by the Korea Trade Insurance Corporation ▲ nurturing the special vessel and MRO industries.
The most notable points are the construction of special vessels and the development of the MRO market. Donald Trump, President of the United States, previously mentioned shipbuilding as an area of Korea-US cooperation. In response, President Lee stated, "The MRO market, including warships, represents a new opportunity for Korea's shipbuilding industry," and promised, "We will actively foster the special vessel MRO industry and support the discovery of new demand sources."
With the launch of the new administration, if Korea and the United States immediately begin trade negotiations, it is expected that shipbuilding cooperation issues will be discussed in earnest. As the expansion of LNG exports in the US and the increase in the US defense budget coincide, the shipbuilding industry anticipates tangible results in areas such as MRO for US Navy vessels, new shipbuilding for naval vessels, LNG carrier exports, and investment in the US mainland.
Hanwha Ocean has already secured the US Navy's Military Sealift Readiness Agreement (MSRA), making it highly likely that MRO cooperation with the US Navy will be discussed during intergovernmental consultations. In addition, as legislative improvements accelerate in the US, the possibility of new investments in merchant and naval vessel construction in the US and the local entry of Korean shipyards is increasing.
Hanwha Ocean aims to secure orders for five to six ships this year, following last year, and has also presented a "total MRO solution" based on the entire life cycle. As a system integrator, the company plans to differentiate itself from competitors by offering integrated maintenance solutions covering everything from design to performance upgrades, maintenance, and operational support. Hanwha Ocean has set the US Navy's annual MRO market, worth about 20 trillion won, as a strategic target. At the end of last month, US Secretary of the Navy John P. Fillion visited Korea to assess the technical capabilities of domestic shipyards, raising expectations for more concrete cooperation between the two countries in shipbuilding and expanded collaboration in naval vessel MRO.
Meanwhile, President Lee announced in his policy book that the responsibility for defense industry affairs within the National Security Office will be transferred to the Senior Secretary for Economic Affairs, and that regular meetings chaired by the president will be held to promote defense exports. He also added that a dedicated team will be formed to secure global competitiveness in shipbuilding orders and to support the construction and MRO orders for naval vessels.
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