Earlier this month, HD Hyundai Heavy Industries entered the U.S. ship maintenance, repair and overhaul (MRO) market by signing a Master Ship Repair Agreement (MSRA) with the U.S. Naval Supply Systems Command. Not to be outdone, its competitor Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering) successfully signed a similar agreement in order to secure a share of the market.
Hanwha Ocean announced on the 22nd that it has signed an MSRA with the US Naval Supply Systems Command.Under the agreement, Hanwha Ocean will be eligible to bid on MRO projects for designated US Naval Supply Systems Command ships over the next five years.
The MSRA is reportedly an agreement between the U.S. government and private shipyards to provide MRO services for U.S. warships, and prior signing of the MSRA is required in order to participate in MRO programs for U.S. warships in service.
Hanwha Ocean applied for the MSRA in January 2024 and completed due diligence on Hanwha Ocean’s Geoje Shipyard by the end of April 2024. Normally, it takes more than a year for a shipping company to go from applying for an MSRA to officially signing a contract, but Hanwha Ocean shortened the process to seven months. In response, Hanwha Ocean said, “The company’s ship technology and maintenance infrastructure were among the factors that earned it high marks from the U.S. Navy.”
In addition to Hanwha Ocean, its competitor HD Hyundai Heavy Industries announced earlier on July 11 that it had signed an MSRA with the US Naval Supply Systems Command, making it the first South Korean shipbuilder to sign an MRO agreement with the U.S. Navy. Under the agreement, HD Hyundai Heavy Industries will be eligible to bid for MRO programs for support ships belonging to the U.S. Naval Supply Systems Command and U.S. Navy combat ships in the next five years.
HD Hyundai Heavy Industries said it applied for the MSRA in May 2023; completed the facility and quality due diligence in January 2024; and completed the safety due diligence and financial due diligence in March and May 2024, respectively, taking one year and two months to complete the signing of the definitive agreement. In comparison, Hanwha Offshore’s process cycle was shortened by nearly half.
With the two shipbuilding giants obtaining MSRAs one after another, the MRO market in the U.S. naval defense market, which is worth 20 trillion won (about $14.5 billion) annually, will become a “new battlefield” for Hanwha Ocean and HD Hyundai Heavy Industries.
In order to capture the U.S. maritime defense and shipbuilding business, Hanwha Group’s Hanwha Ocean and Hanwha Systems have announced the acquisition of Philadelphia Shipyard in the U.S. for $100 million and have signed a 100 percent equity purchase agreement, the first acquisition of a U.S. shipbuilder by a Korean company. The transaction is expected to close in the fourth quarter of 2024.
In recent years, Hanwha Group has sought to strengthen its presence in the global shipbuilding industry. The acquisition of Philadelphia Shipyard is Hanwha Group’s entry into the U.S. merchant marine and defense markets, and the shipyard’s largest yard is expected to become Hanwha Group’s MRO base in the United States.