US Maritime Act Boosts South Korean Shipbuilders’ Shares

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Mfame Editor
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  • South Korean shipbuilders’ shares are rising due to anticipated benefits from the US Ships for America Act.
  • The act includes incentives for foreign shipbuilders, like South Korea, to construct new vessels and handle repairs for the US strategic commercial fleet.
  • Restrictions on foreign-built vessels entering the US fleet after 2029 and increased tariffs on foreign ship repairs are key provisions impacting the industry.

The announcement of the Ships for America Act has sparked optimism in South Korea’s shipbuilding sector, driving a surge in share prices of major players like Hanwha Ocean, HD Hyundai, and Samsung Heavy Industries. As the US seeks to revitalize its maritime industry, South Korean shipbuilders are positioned to benefit from newbuilding contracts and repair opportunities linked to the strategic commercial fleet initiative, reports Lloyd’s List.

Rising Shares Amid Anticipated Opportunities

The announcement of the Ships for America Act has boosted the stock prices of major South Korean shipbuilders:

  1. Hanwha Ocean: +7.04%
  2. HD Korea Shipbuilding Offshore Engineering: +8.24%
  3. Samsung Heavy Industries: +2.77%

The act underscores the urgency to counter China’s dominance in the global maritime industry and to enhance America’s capacity to transport goods and military cargo.

Key Provisions of the Act

Strategic Commercial Fleet Program:

  1. Goal: Expand the US-flagged fleet to 250 vessels by 2035.
  2. Includes foreign-built “interim vessels” until US-built ships are ready.
  3. Restrictions: No foreign-built vessels (other than interim ones) allowed in the fleet post-2029.

Ship Repairs and Tariffs:

    1. Increased duties on ship repairs conducted in foreign countries to 70% for allied nations and 200% for countries of concern (e.g., China.)
    2. Waivers available if repairs are first attempted in the US.
    3. South Korean shipyards could be exempted from duties for repairs on the US strategic fleet.

Support for Domestic Shipbuilding:

    1. Emphasis on building US-flagged and US-crewed merchant ships domestically to compete internationally.

Implications for South Korean Shipbuilders

Newbuilding contracts: US shipowners are expected to place orders with South Korean and Japanese shipbuilders to deliver vessels before the 2029 cutoff.

Maintenance, Repair, and Overhaul (MRO): South Korea’s shipyards will likely secure strategic fleet repair opportunities, leveraging duty exemptions.

Analyst Insight

According to Kang Kyung-tae of Korea Investment & Securities, South Korean shipbuilders are set to benefit from both new building and repair work stemming from the act.

The urgency to replace interim vessels by 2029 makes South Korea attractive for US shipowners seeking high-quality and timely deliveries.

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Source: Lloyd’s List