Movements to revive the declining shipbuilding industry in U.S. politics are gaining momentum. Following the request from President-elect Donald Trump for cooperation in shipbuilding and maritime defense with South Korea, a bill aimed at revitalizing the U.S. shipbuilding industry has recently been introduced in Congress. There are observations that South Korea and Japan will compete over U.S. shipbuilding orders as well as maintenance, repair, and overhaul (MRO) projects.
According to the shipbuilding industry on the 26th, two Republican members of the U.S. Congress (Todd Young and Trent Kelly) and two Democratic members (Mark Kelly and John Garamendi) introduced the "Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act of 2024" on the 19th. This bill aims to rebuild the U.S. shipbuilding base to counter China's maritime hegemony and strengthen the maritime industry and supply chains. The bill is likely to be automatically discarded as the congressional session ends, but given President-elect Trump's significant commitment to reviving the shipbuilding industry, it is highly probable that the Republicans will reintroduce it in the next session.
According to the bill, there are currently about 80 U.S. vessels used in international trade, which is about 1.5% of China's fleet of 5,500 vessels. The bill proposed a "strategic merchant fleet program" to establish 250 U.S. merchant vessels for international trade. While the principle is that U.S. flagged commercial vessels are built in the U.S., foreign-built vessels can participate as interim vessels until they can be replaced by U.S.-built vessels.
Once the bill is formulated, it is expected that South Korean and Japanese shipbuilders, which account for the 2nd and 3rd largest market share in global shipbuilding among U.S. allies, will have a significant chance of winning contracts for U.S. vessels. Considering that the backlog of orders for merchant vessels in U.S. shipyards is currently less than 30 and that annual construction capacity is minimal, it appears that a substantial volume will be passed on to allied or partner countries. The bill sets the deadline for foreign-built vessels to join the strategic merchant fleet as "interim vessels" to 2029. Therefore, if the bill passes, it is anticipated that South Korean and Japanese shipbuilders will compete for U.S. vessel orders over the next 3 to 4 years.
Forecasts indicate that the U.S. vessel MRO business will significantly increase next year. Currently, when U.S. vessels are repaired at allied countries' overseas shipyards, they must pay 50% of the expense in taxes. The bill stipulates that if a registered vessel has made a good faith effort to repair in the U.S. first, it will be exempted from taxes even if it is maintained at foreign shipyards. If the bill passes, overseas shipyards will have more opportunities to repair U.S. vessels.
The competition for the U.S. vessel MRO business is also expected to intensify between South Korea and Japan. Hanwha Ocean became the first South Korean shipbuilder to secure the MRO business for the U.S. Navy's support vessel (USNS Wally Schirra) in August this year. Earlier, in February, U.S. Navy Secretary Carlos Del Toro visited Mitsubishi Heavy Industries and Hanwha Ocean, and HD Hyundai Heavy Industries before Hanwha Ocean was selected. Hanwha Ocean also won the MRO contract for the U.S. Navy's replenishment ship (USNS Yukon) in November and plans to deliver it to the U.S. Navy after maintenance at the Geoje shipyard next year.
An official in the shipbuilding industry noted, "The fact that the U.S. Navy’s 7th Fleet has entrusted all ship MRO work that had been conducted at Japanese bases to South Korea shows a change in the landscape."
Domestic companies are also seeking to enter the U.S. local MRO market. Hanwha Ocean and its affiliate Hanwha Systems recently acquired 100% equity in Philly Shipyard in Philadelphia. Philly Shipyard has been involved in constructing coastal transport vessels and repairing and modifying U.S. Navy transport vessels. HD Hyundai is also reportedly looking for opportunities to acquire local shipyards in the U.S.
Mitsubishi Heavy Industries of Japan was recently selected as one of the two final candidates, along with Thyssenkrupp Marine Systems (TKMS) of Germany, for a bid for an Australian Navy frigate valued at 10 billion Australian dollars (approximately 10 trillion won), beating out HD Hyundai Heavy Industries and Hanwha Ocean. Mitsubishi Heavy Industries is preparing for the final contract with various government departments, including the Ministry of Defense of Japan.