Outlook rosy for Korean shipbuilders as US hints at purchasing vessels

Hanwha Group Vice Chairman Kim Dong-kwan, front row right, and Adm. Stephen Koehler, front row center, the commander of the U.S. Pacific Fleet, tour the overhaul site of the USNS Wally Schirra at Hanwha Ocean's shipyard in Geoje, South Gyeongsang Province, Feb. 17. Courtesy of Hanwha Ocean

Korean shipbuilders are seeing a wave of opportunity on the horizon as U.S. President Donald Trump said Thursday his administration will likely purchase vessels from countries with a competent shipbuilding industry to strengthen its maritime presence across the world.

Top-ranking U.S. Navy officials also said Wednesday the country needs vessels built by strong private shipbuilders overseas to bolster the country's navy firepower. The remarks have fueled speculation that Korean shipbuilders may log lucrative orders from the U.S.

Trump made the remark during a cabinet meeting as China's shipbuilding capability has grown to trigger U.S. concerns. Cooperation with Korea has emerged as a key countermeasure.

"We're going to be rebuilding our shipbuilding business. We may order ... would have to go to the Congress for this, but we may buy some ships from other countries that we're close to and that do great jobs with ships, but we're going to start the process of rebuilding," Trump said.

"We don't really essentially build ships anymore, which is ridiculous. It's going to be a very big business for us in the not-too-distant future, but in the meantime, we have countries that do very well at building ships, and we'll be dealing with those countries, and we may be ordering top-of-the-line ships from those countries."

John Phelan, then-U.S. President Donald Trump's nominee for secretary of the U.S. Navy, speaks during a Senate Armed Services confirmation hearing on Capitol Hill in Washington, Feb. 27. AFP-Yonhap

Trump's remark came after U.S. National Security Adviser Mike Waltz noted that Chinese shipyards received 1,700 shipbuilding orders last year whereas American shipyards had only five.

U.S. Secretary of the Navy John Phelan also said at the Sea-Air-Space Conference in Maryland that the U.S. will seek to cooperate with private shipbuilders for more efficient management of its navy.

The series of remarks are interpreted as a positive signal for the Korean shipbuilding industry because the "other countries" that Trump referenced will likely include Korea, given its top-tier technological competitiveness and second-highest global order share in the shipbuilding market.

During a phone call between Trump and Han Duck-soo, Korea's acting president, on Tuesday, Trump mentioned shipbuilding as a potential area of cooperation between the two countries.

In February, the U.S. Trade Representative proposed to the White House that the U.S. should impose fees on China-built vessels or those operated by Chinese shippers when entering U.S. ports. This means that more shippers may choose Korean shipbuilders to avoid risks.

At the center of these prospects for Korea is Hanwha Ocean, the operator of Hanwha Philly Shipyard in Pennsylvania, which it acquired last December together with defense affiliate Hanwha Systems.

The group currently plans to expand the shipyard’s capability to build defense vessels for the U.S. Navy. The group last month acquired 9.9 percent of the market interests of Austal, an Australian maritime defense contractor.

On the rosy outlook, Hanwha Ocean's stock closed at 77,600 won on Friday, up 6.16 percent from a day earlier. HD Hyundai Heavy Industries also climbed 5.4 percent, and Samsung Heavy Industries improved 3.73 percent during the same period.