As Korean shipbuilders wage an all-out campaign to win Canada's next-generation submarine program (CPSP) worth up to 60 trillion won ($44 billion), a new analysis suggests the time is also ripe to enter Canada's icebreaker and long-term maintenance, repair and operations (MRO) markets.
According to a report titled "Canada's Shipbuilding Industry and Korean Corporate Market Entry Strategy" published by the Korea Trade-Investment Promotion Agency (KOTRA) on Sunday, Canada's shipbuilding industry revenue is projected to grow at an average annual rate of 1.9% over the next five years, reaching C$3.3 billion (approximately 3.6 trillion won) by 2030. By segment, new warship construction and naval repair under the Canadian government's National Shipbuilding Strategy (NSS) is estimated to account for 87.5% at C$2.63 billion (approximately 2.8 trillion won), while commercial newbuilding and civilian repair is expected to make up 12.5% at C$370 million (approximately 400 billion won).
Canada's Department of National Defence has raised the bar for domestic shipbuilding promotion this year by establishing regulations through its Defence Industrial Strategy (DIS) requiring that defense procurement — including NSS contracts — be accompanied by value creation within Canada and technology advancement. However, major defense companies such as Lockheed Martin of the United States and BAE Systems of the United Kingdom have already entered Canada's next-generation frigate and naval vessel projects, targeting gaps in Canada's shipbuilding capabilities and intensifying global competition. Korea is also competing for the CPSP, which aims to replace Canada's aging submarines, with Hanwha Ocean (042660.KS) and HD Hyundai Heavy Industries forming a consortium to vie against Germany's ThyssenKrupp Marine Systems (TKMS) in a final-stage bidding race.
The Canadian government received proposals from both sides in early last month and is currently reviewing them. A final contractor is expected to be announced around the end of June. The CPSP is being conducted as a separate special platform program not included in the NSS general procurement program that covers surface combatants, icebreakers and support vessels.
The report finds that given the supply chain structure and limitations of Canada's shipbuilding industry, the timing is right for Korean companies to win NSS project contracts. Like other countries, Canada seeks to center NSS operations around its three major shipyards — Irving, Seaspan and Davie — but market opening for technology cooperation is inevitable due to shortages of skilled workers and saturated construction capacity.
In particular, the accelerating adoption of smart equipment such as robotic welding and automated cutting, along with the emergence of remote maintenance support solutions using augmented reality (AR), is expected to create market entry opportunities for Korean firms. Given Canada's geopolitical environment, Korean companies are also forecast to be able to enter the market through joint ventures (JVs) with local firms for high-value-added equipment supply specialized in Arctic icebreaking.
In the icebreaker segment, Hanwha Ocean has been building icebreaker construction expertise since 2008, when it began developing polar vessels in anticipation of Arctic shipping route potential. In the icebreaking liquefied natural gas (LNG) carrier construction segment, the company has built more than 20 vessels — 15 in 2014 and six in 2020 — holding the largest construction track record in the world. Hanwha Ocean is currently pursuing construction of a follow-up icebreaking research vessel in response to changing polar environments and tightening environmental regulations, and is expected to actively meet the Canadian government's demand for eco-friendly and icebreaking integrated solutions.
The MRO market, which offers higher profitability and stability compared to newbuilding, is another area attracting attention from Korea's shipbuilding industry. However, the report advised that since direct entry by foreign companies into MRO is likely to be restricted under Canada's defense and security regulations, Korean shipbuilders would benefit from establishing indirect entry strategies through local partners, including local manufacturing licensing and joint establishment of production facilities.
"While some low-cost Chinese products are being adopted for ship management and marine supplies, prompt delivery is critical for core components, and Korean companies with strengths in this area will be able to enter the market," the report said. "Local companies also view Korea's technology and procurement capabilities positively."
