HD Hyundai eyes foray into US navy ship repair market in June

HD Hyundai Heavy Industries Co., the world’s largest shipbuilder, is seeking to launch maintenance, repair and overhaul (MRO) services for the US Navy in June, which would pave the way for its foray into the US warship-building market, said its Chief Executive Park Seung-yong.

It aims to win MRO orders for two to three out of the four to five warship the US Navy will likely award this year, Park told analysts and institutional investors in a meeting on Monday.

HD Hyundai and its local peer Hanwha Ocean Co. signed a ship maintenance relations agreement with the US Navy last year.

The agreement qualifies the two Korean shipbuilders to bid for US armed forces' MRO orders. Last year, Hanwha Ocean secured two MRO orders from the US Navy.

HD Hyundai said it did not bid for the contracts at the time due to space shortages at its shipyards and the contracts' low margins.

Now the South Korean shipbuilder has secured enough space at its Ulsan shipyard for the construction and repairs of warships, including those equipped with the Aegis Combat System. In November, it delivered an Aegis destroyer to the South Korean Navy.

To bolster its competitiveness in the US market, HD Hyundai has teamed up with two US defense technology firms.

WAIVER OF RULE AGAINST FOREIGN SHIPYARDS?

Currently, South Korea is not allowed to build ships for the US Navy due to a Federal Law that bans US warships from being built abroad.

If the US president waives the regulation, however, Korean shipbuilders will be able to build US naval ships at their domestic shipyards.

Over the past century, Washington has never issued a waiver of the rule. But South Korea expects US President-elect Donald Trump to suspend it.

In November, he said the two countries need close collaboration for the shipbuilding industry not only in exports but also in MROs.

“American shipbuilding needs South Korea’s help. I am well aware of Korea’s world-class warship and vessel-building capabilities,” Trump told South Korean President Yoon Suk Yeol in a phone call after he won the presidential election.

HD Hyundai also expects to benefit from Trump’s energy policy, including lifting restrictions on liquid natural gas exports, which will likely boost demand for LNG carriers.

The president-elect also vowed to raise tariffs on all Chinese goods coming into the US, which would give Korean shipbuilders a competitive edge over Chinese competitors.

Meanwhile, HD Korea Shipbuilding & Offshore Engineering Co. plans to unload some of its HD Hyundai Heavy shares in the stock market within the year, HD Hyundai's Park added. The intermediary holding company is HD Hyundai’s largest shareholder with a 70% stake.

Write to Hyung-Kyu Kim and Woo-Sub Kim at khk@hankyung.com
 


Yeonhee Kim edited this article.