Shipbuilding and defense stocks, including Hanwha Ocean (042660.KS), fell sharply after South Korea's shipbuilding industry lost its bid in Canada's next-generation submarine project (CPSP). The setback in the large-scale defense project, estimated at around 60 trillion won, triggered a wave of short-term disappointment selling after Germany's ThyssenKrupp Marine Systems (TKMS) was named the preferred bidder.
According to the Korea Exchange, Hanwha Ocean was trading at 89,200 won as of 11:31 a.m. Friday, down 23.17% from the previous trading day. HD Hyundai Heavy Industries (329180.KS), which joined the bid as part of the "one team," fell 5.49% to 551,000 won. Other shipbuilding equipment and defense-related stocks also declined across the board, including Samsung Heavy Industries (010140.KS) (-5.91%), STX Engine (077970.KQ) (-9.83%), Hanwha Engine (082740.KS) (-7.28%), Hanwha Systems (272210.KS) (-7.07%), and Oriental Precision & Engineering (014940.KS) (-6.76%).
Canadian Prime Minister Mark Carney announced Thursday that TKMS had been selected as the preferred bidder for the CPSP at the Halifax naval base in Nova Scotia. Under the CPSP, the Canadian Navy will acquire 12 submarines and maintain, repair, and operate them over 30 years. The total project cost is reported to be around 60 trillion won. The Canadian side said it retains the right to negotiate with Hanwha Ocean, the next-ranked candidate, if negotiations with TKMS break down.
South Korea mounted a joint civilian-military response for the bid. It dispatched a submarine to Canada via a trans-Pacific route to highlight its technological capabilities and operational experience. Hanwha Ocean proposed a Canadian version of the KSS-III, while HD Hyundai Heavy Industries participated as part of the one team. However, Canada chose the German proposal, which emphasized joint operations with North Atlantic Treaty Organization (NATO) member states, response to Arctic operational environments, and the possibility of European-level support.
Some analysts say the result may shake short-term investor sentiment but is not a factor that would change the direction of the shipbuilding industry's core business. In a report the previous day, Samsung Securities said, "The Canadian submarine project would be a momentum driver if won, but even in the event of failure, the impact would be temporary and not particularly severe." The firm cited that investor expectations had already been conservatively lowered, and that core business indicators—such as the increase in global ship orders and recovery in ship prices in the first half—remain strong.
Hanwha Ocean said in a statement that day, "We did our best to win the Canadian next-generation submarine project but did not achieve the results we had hoped for," adding, "We will closely analyze the tasks identified through this bidding competition and devise a clear alternative." HD Hyundai Heavy Industries also said, "While it is disappointing that it did not lead to a result, the experience of South Korea competing as one team will serve as a stepping stone for K-defense to leap forward."
