Hanwha Group: To acquire Philly Shipyard in the US

Hanwha Group: To acquire Philly Shipyard in the US

・US shipyards in decline, warship construction difficult

・South Korea expands business in MRO for US warships

Summary from the article published in the Japanese edition of the JoongAng Ilbo.

Hanwha Group:

The first Korean company to enter the US shipbuilding industry has been realized.

On June 20th, the company signed a contract to acquire 100% of the shares of Philly Shipyard in the US.

Hanwha Systems and Hanwha Ocean:

The two companies participated in the acquisition, and the acquisition price is 100 million dollars (16 billion yen).

Hanwha Systems: CEO Oh Seong-cheol

1. Traditionally, the Middle East, Southeast Asia, and Europe were the main export markets.

2. In the future, the company will expand exports to the US and secure new growth potential.

Philly Shipyard:

Originally a US subsidiary of the Norwegian company Aker.

Established in 1997 at the US Navy’s Philadelphia National Shipyard.

US Maritime Administration (MARAD):

1. They have built multipurpose training ships and conducted MRO for US Navy transport ships.

2. The US is seeing an increase in the demand for warships due to the growing conflict between China and Russia.

US is paying attention to Korean shipbuilding:

Hanwha Group has now opened the door to entering the US market.

Samsung Heavy Industries and others are also aiming to enter the US shipbuilding industry.

Shipbuilding industry and experts:

Philly Shipyard, acquired by Hanwha Group,

1. They are qualified to build warships upon orders from the US Navy.

2. They are close to the Philadelphia Naval Base, which is favorable for expanding the MRO business.

Hi Investment Securities: Byun Young-jin, researcher

We can expect to build US combat ships and even conduct MRO for core combat systems.

US annual defense budget:

The US budget exceeds 1,000 trillion won.

The environment is now in place for South Korea to export warships and other products to the US.

History of the US shipbuilding industry:

After World War I and World War II, the US built cutting-edge warships such as aircraft carriers and nuclear submarines, becoming a shipbuilding powerhouse.

Protecting the shipbuilding industry with the Jones Act:

In 1920, the US enacted the Jones Act to protect and develop the shipbuilding industry.

This law stipulates that ‘all ships operating or anchored in the US must be built in the US.’

1. US shipyards had a monopoly on shipbuilding without global competition.

2. They were able to reduce capital investment and maximize construction efficiency.

Japanese shipbuilding technology makes great strides:

1. In the 1960s, the US lagged behind Japan in modernizing shipbuilding technology.

2. In the 1980s, the US’s share of shipbuilding in the world dropped significantly.

Reagan Administration:

The emphasis on free competition led to the reduction of subsidies to the shipbuilding industry,

and the decline of the manufacturing base due to rising wages due to the economic boom.

Disadvantages of the Jones Act:

1. There is no appropriate investment in US shipyards even with aging equipment.

2. A significant decline in competitiveness due to delayed delivery and increased construction costs.

US Navy’s tender for next-generation escort ships:

In 2020, the US Navy tendered for the construction of next-generation escort ships.

US shipbuilding companies were lagging behind even Italy’s state-run shipyards.

Share of global ship orders:

As of last year, China had 59%,

South Korea had 23%,

Japan had 13%,

and the US had only 0.04%.

The shipbuilding industry has declined so much.

Center for Strategic and International Studies (CSIS)

In April, China operated 234 warships, more than the US Navy’s 219 (excluding military and support ships).

1. China’s shipbuilding capacity is about 230 times that of the US.

2. They can repair ships faster and build replacement ships faster.

It was determined that ‘the US needs to expand its shipbuilding capacity.’

US Navy: Secretary Carlos del Toro

In February of this year, the Secretary of the US Navy visited South Korea, visited shipyards, and explored the possibility of cooperation.

1. Visited HD Hyundai Heavy Industries’ Ulsan shipyard.

2. Visited Hanwha Ocean’s Geoje facility.

Secretary Toro expressed his opinion:

He commented on Hanwha Group’s recent acquisition of the Philly shipyard.

He expressed his welcome, calling it a “groundbreaking event.”

Han Seung-han, researcher at SK Securities

The US shipbuilding industry has been in decline for a long time.

Even if the US government provides full support, recovery will not be easy.

‘If the US sanctions China’s shipbuilding industry, South Korea will benefit,’ he analyzes.

https://news.yahoo.co.jp/articles/60f3c259d7d16057a9ac94a9a512786174195c8f