Korea’s Hanwha wins US Navy MRO deal as Trump seeks deeper shipbuilding ties

Hanwha Ocean Co., South Korea’s third-largest shipbuilder, secured another vessel repair contract from the US Navy, expanding its defense business, as President-elect Donald Trump said he expects to strengthen cooperation with Korea's shipbuilding industry.

Hanwha said on Tuesday it has won a regular maintenance deal to provide maintenance, repair and overhaul (MRO) services for US Naval Ship (USNS) Yukon, a 31,000-ton replenishment oiler of the US Seventh Fleet.

The shipbuilder of South Korea’s chemicals-to-defense conglomerate is scheduled to deliver the vessel to the US Navy by April next year.

In August, the company formerly known as Daewoo Shipbuilding & Marine Engineering Co. bagged an MRO deal for USNS Wally Schirra, a 40,000-ton dry cargo and ammunition ship, becoming the first South Korean shipbuilder to provide MRO services for the US Navy.

Hanwha said it swept the two MRO contracts by the Seventh Fleet’s office in Singapore.

“We aim to contribute to the improvement of US naval power and the Korea-US relationship through timely delivery based on the world’s best MRO technology,” said Kim Dae-sik, head of the special ship MRO business at Hanwha.

STRATEGIC BASE FOR DEFENSE COOPERATION

The deal came as Trump is seeking cooperation with South Korea, one of the US closest allies, in the defense maintenance sector, spurring the country’s shipbuilders to target the 20 trillion won ($14.2 billion) MRO business with the US Navy.

“American shipbuilding needs South Korea’s help. I am well aware of Korea’s world-class warship and vessel-building capabilities, and I believe we need close collaboration with Korea not only in exports but also in maintenance, repairs and overhauls,” Trump told South Korean President Yoon Suk Yeol over the telephone after he was elected.

The US Department of Defense considers the Asian country a strategic base for cooperation as it seeks to build a military maintenance hub in five core Indo-Pacific allies under the Regional Sustainment Framework, which aims to optimize regional MRO works.

Last month, US Pacific Fleet Commander Admiral Stephen Koehler visited Hanwha’s shipyard in South Korea to inspect work on USNS Wally Schirra along with Hanwha Group Vice Chairman Kim Dong-kwan, the conglomerate’s heir apparent.

CORE PARTNERS FOR US NAVY

South Korean shipbuilders are expected to become core partners for the US Navy as the American shipbuilding industry is virtually nonexistent.

The number of shipyards in the world’s top economy has shrunk to 21 from 414, while last year they won deals to build only two vessels out of 1,910 ship orders worldwide.

The US has 219 warships, fewer than the 234 of China, adding to hopes that South Korea, with the world’s second-largest battleship capability after China, will be a key ally for the US Navy, sources in Seoul said.

“Trump mentioned close cooperation as the US needs South Korea to contain China,” said one of the sources. “Korea-US shipbuilding cooperation is expected to grow stronger and stronger.”

HD Hyundai Heavy Industries Co., Hanwha’s larger rival, also aims to win MRO deals from the US Navy.

Hanwha plans to expand the defense business into warship construction based on Philly Shipyard Inc. in the US, which Hanwha Group acquired in June.

The company is set to invest more in the shipbuilder to build warships there to meet Washington’s requirements to manufacture battleships for its Navy on US soil.

The Navy is set to spend $146.8 billion by 2028 to build 55 warships including fleet oilers, salvage vessels, guided-missile destroyers and others.

Write to Woo-Sub Kim at duter@hankyung.com
 
Jongwoo Cheon edited this article.