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(Bloomberg) — Shares of Hanwha Ocean fell more than 23% on Tuesday morning after Canada picked a German bid to replace its aging submarine fleet over the South Korean shipbuilder’s proposal.
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Prime Minister Mark Carney on Monday announced that Thyssenkrupp Marine Systems is the preferred supplier to build as many as 12 submarines for Canada, in a speech at a naval base in Halifax where he stopped en route to the NATO summit in Ankara, Turkey.
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HD Hyundai Heavy Industries, Hanwha Ocean’s partner on the bid, also saw its share price briefly slumped 10% in early trading. The benchmark Kospi index was down around 6% mid-morning after Samsung Electronics Co. slumped on post-earnings profit taking.
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The decision to select the German bid is a major disappointment for Hanwha after an extensive advertising campaign in Canada and solid support from South Korean President Lee Jae Myung’s administration. Seoul has been pushing to expand its presence as a global arms exporter and securing a foothold in the NATO market would have been a significant win for its shipbuilding industry.
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“We could not overcome the barrier of the NATO alliance despite our unwavering efforts to secure the contract, supported by the government’s full backing, the exceptional performance of our submarines, and the Navy’s proven record of successful submarine operations,” Hanwha Ocean said in a statement.
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The company said it would review the bidding process and make sure it can find a path forward for South Korea’s maritime defense industry.
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Lee looked to put a positive spin on the outcome before he departing Seoul to join the NATO summit.
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“Although we did not achieve the expected results in the Canadian submarine project, I believe we have once again clearly demonstrated our potential to the international community,” Lee said in a Facebook post.
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Despite the setback, Lee is expected to focus on expanding the Asian nation’s defense industry partnership with the NATO countries. South Korea has been pushing to become the world’s fourth largest weapons exporter after gaining a reputation for speed and reliability in recent years.
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Lee’s Turkey visit will mark “the beginning of a full-scale effort to promote defense industry cooperation with NATO allies which constitute the world’s largest defense market, accounting for 55% of global defense spending,” according to Lee aide, Wi Sung-lac.
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—With assistance from Hyonhee Shin.
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(Updates with President Lee’s comments, move in HD Hyundai Heavy.)
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English (US)