January 23, 2025
SEOUL – Anticipation for Korean shipbuilders continues to build up as the second Trump administration is actively seeking ways to revamp its naval fleet to countermeasure China’s overwhelmingly dominant shipbuilding sector and formidable maritime forces.
After the US president mentioned Korea’s cooperation in the maintenance, repair and overhaul, or MRO, business in a call with now suspended President Yoon Suk Yeol following his election victory in November, Trump then hinted early this month at potentially outsourcing the construction of US Navy ships to allies’ shipyards as the US lacks shipbuilding capacity with the American shipbuilding industry finding itself in a huge hole.
A leaked slide from a 2023 Office of Navy Intelligence briefing showed that China’s overall shipbuilding capacity is 232 times greater than that of the US. According to the US Navy’s 2025 shipbuilding plan and the Institute for National Defense and Security Research, the US Navy operated 295 battle force ships whereas the Chinese People’s Liberation Army Navy had 360 ships as of December last year.
Clarksons Research, a United Kingdom-based maritime shipping and shipbuilding information provider, released that China accounted for 53 percent of the global shipyard output by market share last year, followed by South Korea with a 28 percent share.
Korean shipbuilders on standby
Last year’s $100 million acquisition of the Philly Shipyard by Hanwha Group, Korea’s defense-to-energy conglomerate, and Hanwha securing MRO contracts from the US Navy have opened up possibilities for collaboration.
“Hanwha’s Philly shipyard acquisition and first MRO contract with the US Navy can be seen as pilot projects,” said Bence Nemeth, an associate professor at King’s College London, in an article posted on the Korea Institute for Maritime Strategy’s website.
“If they are successful, more opportunities will arise for South Korean companies… If Hanwha can demonstrate that it can build ships in Philadelphia more efficiently compared to other U.S. shipyards, it will already be a win for South Korea and the US Navy.”
Henry Haggard, senior advisor at the American Chamber of Commerce in Korea, highlighted that the US should take a far more sweeping approach and modify the Jones Act to allow the production of needed vessels outside the United States such as LNG vessels that have not been built here since the 1970s to save the country’s. The Jones Act is a 1920 law that requires goods shipped between US ports to be transported on ships that are built, owned and operated by US citizens or permanent residents.
“To encourage more shipbuilding in the United States, a joint ownership structure for a new, modern and automated shipyard(s) in the United States could allow innovative South Korean companies to make a significant investment in the United States that could not only preserve US shipbuilding capacity and introduce thousands of new jobs into the United States, but could also help us retake a global leadership role in building the most advanced ships for our military and our industry,” said Haggard in a newsletter to the Center for Strategic and International Studies.
Although no other Korean shipbuilders, namely HD Hyundai, have indicated possibilities of taking over a US shipyard yet as they closely monitor how Hanwha’s Philly Shipyard investment turns out, the US Navy’s plan to bulk up its fleet is likely to present opportunities they can explore.
Need for shipbuilding allies
According to the US Congressional Budget Office’s analysis of the US Navy’s 2025 shipbuilding plan, the US Navy has proposed to increase the number of battle force ships from the current 295 to 390 in 2054 with plans to acquire a total of 364 new combat ships and combat logistics and support ships.
“Over the next 30 years, the nation’s shipyards would need to produce substantially more naval tonnage than they have produced over the past 10 years,” said the analysis.
The CBO estimated that the average annual cost of carrying out the 2025 plan, which covers fiscal years 2025 to 2054, is $40.1 billion, including $35.8 billion for constructing new ships during that period.
Yang Seung-yoon, an analyst at Eugene Investment & Securities, noted in a report that even with the USC 8679 — a US prohibition that states “no vessel to be constructed for any of the armed forces and no major component of the hull or superstructure of any such vessel, may be constructed in a foreign shipyard — the US president could authorize exceptions if it is in the national security interest to do so.
“With geopolitical tensions high, the US is likely to increase foreign orders to close the gap with China, as the US shipbuilding industry is virtually defunct,” a report from ING Think said.
“South Korea, with the world’s second-largest combat ship-building capacity after China, is well-positioned to capitalize on this.”
According to shipbuilding industry sources, Korea’s Defense Acquisition Program Administration has begun discussing how to expand Korea-US cooperation in military vessels with the country’s shipbuilders by reviewing the availability of docks and workforces for potential outsourcing from the US.
“Trump said the US may ‘use allies in terms of building ships,’” said one of the sources. “He could really outsource building military ships at Korean shipyards because it’s almost impossible to revive the Naval forces with the current state of the American shipbuilding sector.”
Building on positive momentum
On top of the growing expectations for more collaboration with the US Navy, each of the top three Korean shipbuilding companies — HD Korea Shipbuilding & Offshore Engineering, Hanwha Ocean and Samsung Heavy Industries — are expected to log profits from last year’s earnings for the first time since 2011 as the shipbuilders have been enjoying a so-called “supercycle,” a period of demand-driven expansion, for the first time in almost 20 years.
According to the Ministry of Trade, Industry and Energy, the Korean shipbuilding sector secured $110 billion in backlog orders by the end of 2024, which was the largest since 2009 and an equivalent of workload for about four years.
The country’s shipbuilding sector logged $25.6 billion in exports last year, up 17.6 percent on year and the biggest in the past seven years. Korean shipbuilders also combined for 11.26 million compensated gross tonnages of newly built ships last year, the most since 2016 and up 22 percent on year.
The Korean government has pledged to provide utmost support for the country’s shipbuilding industry as the ministry laid out three major pillars: Aiding Korea-US shipbuilding cooperation through pan-governmental task forces, drafting measures to advance the competitiveness of materials, equipment and parts firms in the shipbuilding sector in the first half of this year and establishing strategies to develop next-generation growth engines such as hydrogen carriers and ammonia-powered ships in the second half of this year.