U.S. SHIPS Act Promises Major Boost for Merchant Shipping and Korean

On December 19, the U.S. Congress introduced the SHIPS for America Act, a significant piece of legislation aimed at revitalizing the U.S. merchant shipping industry. This bill proposes to increase the number of U.S.-flagged merchant ships from 80 to 250 over the next decade. The introduction of this act has generated optimism, particularly within the South Korean shipbuilding sector, which stands to gain from the proposed changes.

The SHIPS Act is designed to strengthen the U.S. supply chain and enhance domestic shipbuilding capabilities. It includes provisions that allow ships built abroad to qualify for the Strategic Merchant Fleet, provided the shipowner is a U.S. citizen. This opens new avenues for collaboration between U.S. shipowners and South Korean shipbuilders, potentially leading to increased orders and partnerships.

Bipartisan Support for Shipbuilding

The SHIPS for America Act reflects a growing bipartisan consensus on the need to bolster the U.S. shipbuilding industry. According to an analysis by the Financial Times, this recognition is crucial for the future of American maritime capabilities. Although the bill may not pass before the end of the 118th Congress, its introduction signals a commitment to reintroduce it in the next session. The likelihood of its passage is high, given the bipartisan support it has garnered.

One of the key features of the bill is its tax exemption for overseas repair costs related to ships in the Strategic Merchant Fleet. Currently, U.S. law imposes a 50% tax on repair costs incurred abroad. The SHIPS Act proposes to raise this tax to 70%, and even 200% for repairs in countries deemed a concern, such as China. However, it offers tax exemptions for shipowners who make a genuine effort to repair their vessels in the U.S. but end up needing to go abroad. This provision is expected to benefit South Korean shipbuilding companies, which are well-positioned to handle both the construction and repair of merchant ships.

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Industry experts believe that the SHIPS Act will have a positive impact on the Korean shipbuilding sector. The potential for increased cooperation with U.S. shipowners could lead to a surge in orders for South Korean shipbuilders, including major players like HD Hyundai Heavy Industries, Samsung Heavy Industries, and Hanwha Ocean.

Hanwha Ocean’s Strategic Acquisition

Among the South Korean companies, Hanwha Ocean is poised to gain the most from the SHIPS for America Act. Recently, Hanwha Ocean made headlines by acquiring the Philly Shipyard in Philadelphia. This acquisition marks a significant milestone as it is the first time a South Korean company has taken ownership of a U.S. shipyard. The Philly Shipyard specializes in constructing coastal transport merchant ships and has been a key supplier of large merchant vessels under the Jones Act, including petrochemical product carriers and container ships.

The U.S. government offers various incentives for foreign companies that invest in American shipyards and military equipment. This has prompted other South Korean firms, such as HD Hyundai Heavy Industries, to explore opportunities for investment in U.S. shipyard properties. The SHIPS Act not only opens doors for increased orders but also encourages foreign investment in the U.S. shipbuilding sector.

As the U.S. aims to expand its merchant fleet, South Korean shipbuilders are well-positioned to play a crucial role. The anticipated demand for new ships by 2029 could lead to a significant increase in orders from U.S. shipowners, further solidifying the partnership between the two nations in the maritime industry.