Hanwha Ocean Loses Out on 60 Trillion Won Canadian Submarine Deal

Germany's ThyssenKrupp Marine Systems (TKMS) has been selected as the contractor for Canada's next-generation submarine project, worth up to 60 trillion won, according to local media reports. Hanwha Ocean (042660.KS), which had competed for the order, was left disappointed.

The Globe and Mail, a leading Canadian daily, reported Monday, citing two sources, that the Canadian government had selected TKMS as the preferred negotiating partner for the Canadian Patrol Submarine Project (CPSP).

The CPSP is a program under which Canada will acquire up to 12 new diesel submarines to replace four Victoria-class submarines set to be retired in the mid-2030s. Adding maintenance, repair and operations (MRO) costs over the next 30 years to the vessel construction costs, the total project size is estimated to reach up to 60 trillion won.

Korea's Hanwha Ocean and HD Hyundai Heavy Industries had made the shortlist of qualified finalists and competed against Germany's TKMS, but ultimately came up short. As both the Jangbogo-III Batch-II proposed by Korea and Germany's "Type 212CD" submarine meet the operational performance requirements demanded by the Canadian military, geopolitical considerations and economic benefits such as offset trade were seen as key variables. Regarding this, the Globe and Mail reported that "TKMS has promised to add $86 billion (about 131.726 trillion won) to Canada's gross domestic product (GDP) over the course of the project and to create more than 650,000 jobs." TKMS is also known to have persuaded the Canadian government by intensively highlighting that, as a member of the North Atlantic Treaty Organization (NATO), it could maximize Arctic defense cooperation and the interoperability of military equipment. Hanwha Ocean presented an industrial cooperation package, pledging to invest more than $70 billion in Canada and to create more than 25,000 jobs annually from this year through 2044, but appears not to have been the final choice.