Hanwha Group will expand its shipbuilding capacity in the US far beyond earlier plans with a $5 billion investment in Hanwha Philly Shipyard as Seoul reaffirmed its commitment to the Make America Shipbuilding Great Again (MASGA) initiative, a centerpirce of the South Korea-US summit on Monday.
The pledged spending is 50 times the $100 million Hanwha paid in December to acquire the financially strained shipyard in Philadelphia.
The deal made the conglomerate, the parent of Hanwha Ocean Co., the first South Korean shipbuilder with manufacturing facilities in the US.
Kim Dong-kwan, vice chairman of the chemicals-to-defense group, announced the investment plan during the christening of a vessel for the US Maritime Administration at Hanwha Philly Shipyard on Tuesday.
“Hanwha will pay a pivotal role in making the US shipbuilding industry great again, while making investments and creating new opportunities in partnership with companies in the US,” Kim said in a welcome speech at the ceremony.
South Korean President Lee Jae Myung and Philadelphia Governor Josh Shapiro were among in attendance.
Hanwha’s $5 billion investment will be part of the $150 billion shipbuilding fund Seoul has pledged to create, a key element to its tariff deal with Washington reached in late July.
With Hanwha finalizing its US shipyard investment, the MASGA project is expected to gain fresh momentum.
Hanwha aims to transform Hanwha Philly Shipyard into a mid-to-large-sized shipbuilder and to be the first in the US to build liquefied natural gas (LNG) carriers.
Under the new spending plan, the US shipyard’s production capacity is set to rise from 1.5 vessels to 20 per year in the medium- to long-term, doubling its previous target of 10.
In May, Hanwha Group said it would ramp up production at the US shipyard to 10 per year by optimizing and upgrading four of the five existing docks, while reactivating an idle dock.
Industry sources have estimated the refurbishment would cost over 100 billion won ($71 million).
With a $5 billion spending, Hanwha now plans to add two additional docks and three new quays, while building a 120,000-pyeong block production base. One pyeong is equal to 3.3 square meters.
It will also introduce state-of-the-art automation systems, smart yard technologies and safety infrastructure to supply blocks and modules for naval vessels.
Hanwha aims to transform the US shipyard into a full-scale warship building facility.
US WARSHIP INDUSTRY
Its acquisition of Hanwha Philly Shipyard reflected its ambition to establish a foothold in the US warship industry.
South Korea is currently not allowed to construct ships for the US Navy due to a federal law that bans naval vessels from being built abroad.
The Trump administration has announced a plan to invest $1.1 trillion to build 364 new warships by 2054.
HIGH-STAKES GAMBLE?
For Hanwha, its bigger-than-expected commitment to the MASGA project is seen as both a bold bet and a high-stakes gamble as it is the only domestic shipbuilder with its own production base in the US.
High manufacturing costs, a weak value chain and a shortage of skilled labor in the US highlight the risks Hanwha is expected to take on.
However, if the investment pays off, Hanwha would position itself as a leading player in the US in step with the MASGA initiative.
On Tuesday, Hanwha Philly Shipyard secured an order for 10 medium-range tankers, along with one for an LNG carrier from Hanwha Shipping LLC. It marked the first contract the Philadelphia-based shipbuilder secured in relation to the MASGA project.
By Yeonhee Kim
yhkim@hankyung.com
Jennnifer Nicholson-Breen edited this article.
