Maritime Revival?

 

In February, a draft executive order was leaked that outlined a plan for the government to address the Navy and commercial shipbuilding problems as well as the inadequate supply of U.S. mariners. The effort was promoted as addressing a national security issue.

The Administration's efforts were mirrored in the bipartisan congressional SHIPS for America Act. To expedite its passage, the bill was divided into two parts, eliminating the need for the complete bill to be considered by two separate legislative committees. Instead, these committees would only need to deal with provisions related to their jurisdiction, thereby speeding up the process.

Trump's April Executive Order established the White House Shipbuilding Office under the National Security Council. Recently, the NSC underwent reorganization and downsizing. The head of the Shipbuilding Office departed for an industry position, and staff members either were transferred to other positions or resigned. The staff-less office now operates under the Office of Management and Budget.

JUST THE FACTS

We're reminded of the poor performance of the shipbuilding industry by the latest data from the U.N. Conference on Trade and Development. The 2024 data showed that the global shipbuilding industry delivered 71.7 million tons of new oceangoing ships. It included 30,782 tons built in the U.S. That represented four hundredths of a percent of the total tonnage built by the world's shipyards. This was not four percent or even four-tenths of a percent. It was just four hundredths of a percent!

The new tonnage represented a 1,469-vessel expansion of the world's merchant fleet. According to the UNCTAD data, the U.S. merchant fleet increased by just six ships. If we exclude ships in the "Other Types" category, the global fleet increased by 1,128 ships while the U.S. fleet remained unchanged.

A review of historical fleet data shows that 2024 was not an anomaly. Between 2011 and 2025, the global fleet increased by 35 percent. However, the U.S. fleet only increased by just 2.7 percent.

Is it possible the U.S. didn't need additional vessels? The UNCTAD data on global maritime trade suggests otherwise. From 2011 to 2023, global cargo volumes loaded and discharged increased by 22.5 percent while total U.S. maritime trade grew by 16.2 percent. That would certainly justify a larger U.S. fleet.

Equally interesting is the fact that between 2011 and 2023, the volume of U.S. cargo loaded increased by 58.8 percent while the amount discharged declined by 16.1 percent. Excluding the impact of the U.S. becoming a major oil exporter, U.S. cargo growth was 24.2 percent.

Overall, the UNCTAD data support the President's efforts to revive the U.S. shipbuilding and merchant marine industries. During World War II, the U.S. created a powerful industry that delivered ships in months, not years, and enabled the U.S. and its allies to secure victory in the European and Pacific theaters. Over time, however, the shipbuilding and maritime industries were allowed to atrophy.

How did this happen?

The downsizing of the U.S. defense industry following the end of the Cold War contributed to the atrophy. Moreover, military officials indicated to defense supplier executives that spending would continue to decline. Therefore, it made sense for the industry to contract, which it did through mergers and company acquisitions.

A shrinking industry, facing reduced defense spending, focused on cutting costs and eliminating inefficient businesses. That meant targeting the closing of shipyards that made large, oceangoing military and merchant ships. Furthermore, there was little incentive to invest in operating shipyards because they faced a shrinking market.

TURNING THE TIDE – DAVIE AND HANWHA

That tide may be turning. Earlier this month, Canada's Davie Shipbuilding announced that it aims to acquire shipyard assets in Galveston and Port Arthur, Texas, from Gulf Copper & Manufacturing. Davie's goal is to enter the market to build icebreakers that the President has ordered. As Davie's CEO, James Davie, said, the company's goal is "to make Texas a world-class hub for American icebreaker and complex ship production."

Davie's involvement in building U.S. icebreakers would expand with the acquisition, given its ownership of Helsinki Shipyard in Finland, one of the world's leading builders of icebreakers. It also owns a shipyard in Quebec that specializes in icebreakers.

Last July, the Biden Administration negotiated a deal with Canada and Finland, known as the Icebreaker Collaboration Effort Pact, which allowed the parties to share their expertise. The Trump Administration reaffirmed this collaboration in March. By utilizing existing icebreaker designs and construction expertise, costs can likely be reduced. Perhaps more importantly, the construction experience might lead to shorter delivery times.

Davie hopes to complete the Gulf Copper acquisition later this summer. U.K.-based marine industrial group Inocea owns Davie. It plans to invest $1 billion in modernizing and expanding the Texas shipyards.

The move by Davie follows the December 2024 acquisition of Philly Shipyard, controlled by Aker Capital, by Hanwha Systems and Hanwha Ocean Co. of South Korea for $100 million. Hanwha Ocean was formerly known as Daewoo Shipbuilding & Marine Engineering Company. It's the only company that has built submarines for the Korean Navy. It's also built five Tide-class fleet oilers for the U.K. Royal Fleet Auxiliary. Hanwha is one of Korea's top three shipbuilders.

Last spring, the company completed a six-month refurbishment of a U.S. Navy vessel at its shipyard in Geoje, Korea. The need for the U.S. Navy to utilize a foreign shipyard for vessel refurbishment is a sign of the woeful state of the domestic shipbuilding and repair industries.

David Kim, Hanwha Philly Shipyard's new CEO, said, "Hanwha Philly Shipyard begins an exciting new chapter today. We plan to grow and build on a long tradition of success by expanding production using advanced technologies and supporting the national revitalization of U.S. shipyards." He went on to further explain the company's plan: "We intend to do that by pushing the boundaries of shipbuilding by combining people with technology to build best-in-class vessels."

Recently, Hanwha Philly Shipyard announced a contract to construct a Jones Act-compliant LNG carrier for a Hanwha Group subsidiary, with an option for a second vessel. According to reports, the vessel is expected to cost $250 million, which is an attractive price for a sophisticated ship like an LNG carrier. Hanwha is a world leader in LNG ships and will provide a technology transfer arrangement with Philly Shipyard.

Notably, this will be the first U.S.-built LNG carrier in 45 years.

Established in 1997 following the closure of the U.S. Navy's Philadelphia Naval Shipyard, Philly Shipyard has delivered around 50 percent of all large, oceangoing U.S. Jones Act-compliant commercial ships since 2000. These ships have primarily been tankers and container ships. It recently completed a second National Security Multi-Mission Vessel (NSMV) for the U.S. Maritime Administration, establishing the shipyard's credentials as a prime maritime supplier.

NSMVs are used as training ships for U.S. maritime schools. The first vessel was delivered to the State University of New York Maritime College last year. The second ship will go to the Massachusetts Maritime Academy.

Hanwha Group acquired a 9.9 percent stake in Australian shipbuilder Austal Ltd. for 183.3 million Australian dollars ($117 million) in March. This purchase followed an offer to buy Austal USA's shipyard in Mobile, Alabama, for $662 million, which was scuttled partly due to national security concerns over Korean ownership of a yard becoming more involved in U.S. submarine construction.

Austal specializes in building both commercial and naval vessels as a global defense prime contractor. It's one of four major suppliers to the U.S. Navy and has built a surface warfare combatant ship, the Independence-Class Littoral Combat Ship (LCS).

While headquartered in Australia, Austal operates shipyards in Alabama and Western Australia. It will be interesting to see the Hanwha Group's next moves in light of its acquisition of Philly Shipyard and its investment in Austal.

One wonders whether the uncertain fate of Trump's shipbuilding office and congressional inaction on the SHIPS Act will discourage further foreign investment in domestic shipyards.

NEXT STEPS?

The actions of Hanwha and Davie signal that maritime capital understands the serious condition of the U.S. shipbuilding and repair industries as well as what appears to be a commitment by the Trump Administration to revive the domestic maritime sector.

Navigating foreign policy and national security issues by foreign shipbuilders raises questions about the speed of the U.S. maritime revival. However, the UNCTAD data confirm both the challenges and opportunities awaiting policymakers and companies seeking to revive the maritime industry.