Trump Has a Shipbuilding Dream. Can South Korea Make It a Reality?

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1:51Visit BajaMar.com today and discover a vacation destination where memories are made for a lifetime. Bahamar. Life spectacular. Bloomberg Audio Studios. Podcasts. Radio. News. Earlier this year, Bloomberg reporter Weilun Soon visited Hanwha Ocean, one of the biggest shipyards in South Korea. They build everything from oil tankers to container ships that carry goods all around the world. Weilun, for people like me who've never been to a shipyard, what does it look like? So it's really actually a factory town. You arrive at the top of the hill and then you slowly drive down. And from there, you can really see this huge cranes called Goliath cranes.

2:40They're really tall, almost like a building. You see them rising up in front of your eyes. And then beyond that, you see a lot of workers' bicycles in their coveralls and their goggles and their helmets going around doing their daily work. And then when you cast your eyes across a shipyard, you see huge blocks of metal just sitting around on the ground. They look like huge Lego pieces. These Lego pieces will be assembled together over the next few weeks, months or even years to become gigantic ships. The largest ones can be as tall as the Empire State Building. Just imagine the entire building tilted sideways horizontally.

3:21You put them on the water and then off they go. This shipyard, Hanwha Ocean, and others like it across Korea are busier than they've been in years. Korean shipyards are fully booked till 2028. Workers are hurrying all around. The place is really buzzing with activity. Every single dock space is filled. Korean shipyards are busy these days as Seoul and Washington land a new trade deal. It includes a huge pledge from Korea to invest$150 billion in America's shipbuilding industry to boost U.S. maritime power. Here's Trump talking about the alliance at a meeting with South Korean President Lee Jae-myung earlier this week.

4:02You know, we really sort of need each other. We love what they do. We love their product. We love their ships. This newfound love affair between the two countries is driven by the U.S.'s goal to curb the dominance of the world's biggest shipbuilder, China. And boosting the South Korean shipbuilding sector is a key part of that plan. We're going to be buying ships from South Korea, but we're also going to have them make ships here with our people, using our people. And we're going to go back into the shipbuilding business again. Now you have Donald Trump trying to remake the global trade order through the use of tariffs.

4:43And for Korea, you also have this country that used to be a huge shipbuilding power, but lost its crown to China. Having American interests in the shipbuilders is also a good way for them to find new growth engines, for them to expand beyond Korea, to have that transfer of knowledge, and then maybe to even start building ships in the US.

5:13This is The Big Tech Asia from Bloomberg News. I'm Wan Ha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons, and businesses that drive this ever-shifting region. Today in the show, Trump has a shipbuilding dream. Can Korea make it come true?

5:37I want to ask about the MASCA project. MASCA, MASCA project. She's very great again. Shipbuilding. Yeah. Oh, yeah. We're going to do that. Yeah. I think we're going to do that very, very strongly. We're going to have a big... This week's meeting between Trump and South Korean President Lee Jae-myung at the White House was the first time the two met since Lee took office in June. And they discussed details of a trade agreement reached last month. The deal set a 15 % tariff rate on Korean goods imported to the U.S. It also included a pledge by Korea to invest$350 billion in the U.S., nearly half of that dedicated to shipbuilding.

6:18Bloomberg's Weilun Soon says the initiative even has a name that's likely to get the thumbs up from Trump. MASCA, make American shipbuilding great again. For Seoul and Washington, both do realize that shipbuilding is a big overlapping theme that they can at least see eye to eye on. Way before Trump came into office, the Biden administration was already looking at concerns over shipbuilding and having seen ships as a strategic national asset. Korea builds hundreds of ships every year. When completed, they join a global fleet that carries 80 % of the world's trade. And building these massive ships is a labor-intensive process.

7:02Hundreds of workers assemble the metal blocks together. Then there's all the electronic and mechanical equipment that has to be installed before the ships are finally painted. The whole process can take up to two years from start to launch. They have a little ceremony to see off the ship. And I remember distinctly one of the people that we interviewed, he did say that each time he sends off a ship, it's like seeing off your son or your daughter off at a wedding because it took so long to put them together. And it's a proud moment for them. Korea's modern shipbuilding industry really took off in the 1970s.

7:39The government developed the sector by pouring subsidies into it and importing foreign tech. The sector got a boost from a surge in global trade and demand for affordable ships. By 2000, Korea had become the world's biggest shipbuilder. They had the workforce, and crucially, they were economies that were turning outwards. They were looking to export a lot of their manufactured goods to the rest of the world. As the economies of scale wore off, as labor costs went up, Korea stepped up to become the world's top shipbuilder in the late 90s. It's also partly driven by its own need for national security because you have this persistent threat from the north itself.

8:25So both military and commercial shipping, the needs in those two aspects really drove Korea to become a bigger shipbuilder. But the tide started to turn after China joined the World Trade Organization in 2001. If we were to take the year 2000 as a baseline, during that year, Korea commanded a 29 % share of the global order book for ships. Japan was not far off. It was around 28.5%. And China was under 9%. And if we fast forward by just a few years, you can tell that in the year 2008 or 2009, China overtook Korea and Japan in just a short span of eight or nine years. Then in 2008, the financial crisis brought global trade to a halt.

9:15New ship orders collapsed. Korean shipbuilders were now struggling to compete with Chinese rivals, who began flooding the market with cheap vessels. One by one, they were forced to close. Workers lost their jobs. And some of the biggest shipbuilding companies reported record losses. Today, China is by far the biggest shipbuilding country in the world. They're building 60 % of all the ships under construction now. That's why you see the U.S. being concerned about China's dominance. Because let's say in a time of crisis, what would happen to all these strategic resources that they might need to rely on to get goods and commodities flowing to U.S.

9:57shores. And that's where a lot of the content comes from. After the break, as Korea and U.S. join forces to revive American shipbuilding, could that topple China's maritime dominance?

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13:00After Trump took office earlier this year, the U.S. took aim at China's grip on the shipbuilding industry. It announced that ships owned, operated, or built by Chinese companies would have to pay additional fees to the U.S. government to dock at American ports. Ship owners were looking at paying millions of dollars more for each port visit. When it first came out earlier this year, it caused a lot of confusion and chaos in the global shipping industry because so many ship owners have bought Chinese ships. Korean shipbuilders, including Hanwha Ocean, were suddenly back in demand. They got phone calls from some of the larger container liners saying that they were willing to pay upwards of 10 % or more in premiums just to secure an earlier slot at their shipyards, which are already booked till 2028, if I may add.

13:56I imagine that's probably millions of dollars, no? Exactly. A container ship can cost up to tens of even hundreds of millions and a 10 % premium. It's a really staggering amount for just one ship. In the first half of this year, 25 % of the world's global ship orders went to Korea. That's up from 17 % last year. And the U.S. did eventually lower the levies on Chinese ships. The short-term chaos faded and Korean shipbuilders got fewer calls. But Weilun says the U.S.'s message to the global shipping community was received loud and clear. It's using that leverage that it has in economic power to tell the rest of the world that wants to trade with the U.S.

14:40that, hey, you shouldn't rely too much on Chinese ships. because we are concerned that China could be a competitor to us. We are also concerned that China is subsidizing a lot of these excess capacity and building ships that is at the detriment of not only your own economies, but also the US economy. So what is forcing the rest of the shipping world is to make a choice that either you trade with us without Chinese ships, or you can continue buying cheaper Chinese ships, but just don't trade with us. And that's the message they're trying to put across to the rest of the world. By targeting China's shipbuilding dominance, the U.S.

15:21is making it clear that reliable maritime supply chains are critical to national security. And here's an important stat. Right now, the U.S. builds less than 1 % of the commercial shipping fleet. Korea's$150 billion investment is aimed at helping the U.S. increase that market share. And Weilun says it could help Korea too. For these Korean shipbuilders, it actually gives them a way to secure more contracts and deals for the services that they can potentially provide for the U.S. And already we see that happening. like some of them are inking contract deals with the US Navy for maintenance and repair and overhaul.

16:06Some of them have even bought over shipyards in the US to establish a base for shipbuilding in the US. And further down the line, we can actually think of ways that the Koreans can forge more ways of collaboration with the shipbuilders in America. And I think ultimately, when you see the U.S. shipbuilding sector growing, the Korean yachts will be very good partners for them. But for the moment, the Make American Shipbuilding Great Again plan is just a handshake agreement. Details are still scant at this moment, but we do know that these will go into various segments of the shipbuilding sector.

16:47It's not just about building docks or like ports in the US, but it also involves doing maintenance projects, building ships and also training some of the workers in the US. So that overall, not only do you see ships being built in the US, you also have the technical know-how and expertise being transferred from Korea to the US. So that the US can start really think about having domestic ships being built. So best case, this deal is a rising tide that lifts shipbuilding in both countries. And even if it does pay off, Korean shipbuilders will still face serious headwinds. Wages are rising in Korea, and the country is dealing with a labor shortage, one that's made worse by the lowest birth rate in the world.

17:35If you think about shipbuilding, not only it requires a large pool of labor, of workers, upstream, you also need a strong supply of steel. At the same time, they're stuck in a country that's quite small. And China has the edge in almost all those areas. China had a good pool of labor. They had cheap steel. And of course, you have the really strong Beijing government. And I think in one of the five-year plans, they did say explicitly during this period of time that they want to build up shipbuilding. And parts are important to China's vision of a global economy. So, Weilun, China is at the moment dominating the shipbuilding market.

18:18What edge then does Korea have to compete with China? From our conversations with the shipbuilders in Korea, we came to realize that they're way past the stage of competing with China on the cost of building ships. In today's shipbuilding, it's really the need for more advanced ships and also newer forms of energy. If we talk about cleaner fuels, you have at the global level, the International Maritime Organization, trying to push for a vision to decarbonize the maritime sector. And with that, you need to burn different kinds of fuel. It's not just fossil fuels, but you're talking about methanol, ammonia.

18:56These are fuels that are quite new to the industry, and you need to find a way to burn them efficiently but safely. And so this is where Korea is trying to innovate on in designing engines and also the entire ship structure. Now, Weilun, since we're talking about shipbuilding in the sea, I'm going to try to use as many sea puns as I can think of. Sure. Now, with this new US push to steer the shipbuilding industry in a new direction, will this be smooth sailing for South Korea or could it put shipbuilders in a tricky spot where they're having to just tread water? I think it's going to be choppy waters for the Korean shipbuilders in the weeks and months to come, because we do see that President Donald Trump can be quite unpredictable at times in bilateral negotiations.

19:45We already see the commitment that Korean shipbuilders have with regard to finding ways to collaborate with the Americans. But the question is, how willing are the Americans in seeing this in the long term? because ultimately building a ship, as we've discussed earlier, it's beyond just two or five years. It takes a long time for the entire industry to be built. You are taking something that takes decades to build and you're trying to crunch it down into a four-year US presidency, right? You have the US president trying to push a building to the top of his agenda. but at the same time, what are steps needed to turn this vision into a sustainable one beyond this term in office?

20:33And that's where a lot of the details need to be ironed out. These are partnerships that can potentially bring a lot of benefits to both economies and it can create a lot of jobs and also bring a lot of revenue. But the question is, how do we get there in 10 years' time? And that's a big question for all the shipbuilders and the experts that we've been talking to.

21:01This is The Big Take Asia from Bloomberg News. I'm Wan Ha. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. If you liked the episode, make sure to subscribe and review The Big Take Asia wherever you listen to podcasts. It really helps people find the show. Thanks for listening. See you next time. Thank you. prescriptions that are easier to get and care that looks at the whole person how you need it. Optum is helping make health care work as one for everyone. Learn more at business.optum.com. Some so-called SUVs feel more like toys.

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