Hanwha, Poongsan, LIG Nex1 clinch $989 mn Saudi defense deals

South Korea’s three defense-related companies have signed a combined 3.71 billion Saudi riyal ($989 million) contract to supply ammunition and other defense systems to Saudi Arabia.

The announcement came as part of the participation by Saudi Arabia’s defense ministry and global weapons makers in the World Defense Show (WDS) 2022 in Riyadh.

According to the Saudi ministry and the Korean companies, the Korean deal is part of 10 deals worth 7 billion riyals ($1.8 billion) that the Saudi government signed with local and international companies on Tuesday.

Under the multilateral deals, Hanwha Corp. signed a 3 billion riyal ($800 million) contract to support Saudi Arabia’s defense capabilities and supply chain services. Both sides declined to specify the weapons type, citing a confidentiality agreement.

Under a 460 million riyal contract, Poongsan Corp. will supply various types of ammunition to the Saudi defense ministry.

LIG Nex1 Co., another major Korean defense exporter, clinched a 250 million riyal deal to supply electro-optical defense systems to the Royal Saudi Naval Forces.

According to industry watchers, Hanwha Defense Co., an affiliate of Hanwha Group, is tapping extra exports of weapons such as Biho II, an anti-aircraft defense system, to Saudi Arabia.

LIG Nex1 is also seeking to sell a mid-range surface-to-air missile system dubbed Cheongung II to the Middle Eastern country.

UKRAINE WAR TO OFFER OPPORTUNITY

Analysts said the ongoing war between Russia and Ukraine will offer a good opportunity for Korean defense companies to expand their weapons exports amid international sanctions against Russia, a major exporter of weapons systems to Middle Eastern countries.

Saudi Arabia, banned by the Biden administration from importing US weapons, could be seeking imports of defense systems from other countries, including South Korea, industry officials said.

South Korea’s exports of weapons systems nearly tripled to a record $7.3 billion last year from $2.6 billion in 2016, according to the Korean government.

Korea’s overseas sales of its weapons are expected to top $10 billion this year with hopes for more supply contracts in the Middle East, Europe and Australia.

As a growing number of Korean defense firms are clinching major supply deals with other nations, analysts said those companies are poised to become one of the “K-industry” stocks coveted by foreign investors, mirroring the stellar performance of Korean shares associated with K-drama or K-content.

In January, LIG Nex1, Hanwha Defense Co. and Hanwha Systems Co. agreed with the United Arab Emirates (UAE) to supply their mid-range surface-to-air missile (M-SAM) system to the Middle Eastern country.

Write to Kyung-Min Kang at Kkm1026@hankyung.com
In-Soo Nam edited this article.