S Korea’s Hanwha buys US’ Philly Shipyard for $100mn

Market: Freight
21/06/24

South Korean conglomerate Hanwha's subsidiaries have signed a contract to buy US-based Philly Shipyard for $100mn, marking Hanwha's entry into the US shipbuilding industry.

The deal is expected to be finalised by this year's fourth quarter, subject to regulatory approvals and fulfilment of other conditions, Philly Shipyard said on 20 June. This acquisition will make Hanwha the first South Korean firm to enter the US market, according to Hanwha.

Hanwha Ocean plans to diversify its sales by securing overseas production bases. "We will expand beyond the Middle East, southeast Asia and Europe to the US market," said Hanwha Systems chief executive Sung-chul Eoh.

Philly Shipyard is a subsidiary of Norwegian industrial investment company Aker, specialising in building commercial ships that operate off the coast of the US mainland in accordance with the US' Jones Act. The Jones Act is a longstanding US law that requires shipments between two US ports to be done on US-flagged, US-built and US-crewed ships. Philadelphia-based Philly Shipyard has built about 50pc of all large Jones Act-compliant commercial vessels, such as tankers and container vessels, in the US since 2000.

Rising demand for new vessels, particularly LNG carriers and oil tankers, and limited shipyard capacity have driven investments in shipyards and newbuild vessels.

Higher freight because of shifting trade flows, stretched voyage times because of Cape of Good Hope reroutes in response to the Red Sea conflict have also encouraged tanker shipowners to increase their orders for new builds.

Argus-assessed freight rates for 75,000t Long Range 2 shipments from the Mideast Gulf to Japan year-to-date average rose to $54.64/t on 20 June compared with an average of $40.29/t in 2023.

Expectations of rising tanker demand, a limited order book until recently and an ageing tanker fleet further encouraged shipowners to renew their fleet, a market participant said. Around 18pc of the world tanker capacity is likely to be over 19 years old by 2025, according to shipbroker Braemar. Crude tanker demand in 2024 will increase by 6.5-7.5pc compared with a 5.5pc increase in 2023, shipping association Bimco forecasts.

By Sean Zhuang

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