Choppy seas ahead for MASGA as Hanwha's Philly Shipyard struggles: WSJ

The Philadelphia shipyard that U.S. President Donald Trump has hailed as a symbol of America's shipbuilding revival faces shortages of space and customers, the Wall Street Journal (WSJ) reported Monday, raising questions about the viability of the landmark Korea-U.S. Make American Shipbuilding Great Again (MASGA) initiative.

“In Philadelphia, a $5 billion shipyard project needs more space for shipbuilding, and has challenges attracting more customers beyond its owner, Korean company Hanwha Shipping,” the WSJ said in an article titled “From Iowa Steel to Philly Ships, Trump’s Industrial Promises Face Big Tests.”

Hanwha's Philly Shipyard is a commercial shipbuilding facility in Philadelphia that was jointly acquired by Korean conglomerate Hanwha Group's affiliates Hanwha Ocean and Hanwha Systems for $100 million in December 2024, marking the first acquisition of a U.S. shipyard by a Korean shipbuilder. Hanwha Systems announced last month that it will sell its share to an affiliate of another Hanwha unit, Hanwha Aerospace.

Hanwha also announced last year its commitment to investing $5 billion in expanding its production capacity and modernizing its operations. The facility has since emerged as a centerpiece of Korea's $150 billion investment in the U.S. shipbuilding industry under the MASGA initiative.

Cost remains the biggest obstacle.

Philly Shipyard currently holds contracts to build three container ships for U.S. shipping company Matson, each priced at $330 million, roughly twice the cost of comparable large vessels built in Korea or China.

High U.S. labor costs and a weak domestic shipbuilding supply chain are driving up production expenses, according to the WSJ.

“Getting the projects up and running will mean clearing many of the same hurdles that drove heavy industry out of the United States,” the report said.

“Workers are hard to find. Wages in the United States are high. Pricing is uncompetitive. Customers have moved on, and space is tight.”

The shipyard's lack of cost competitiveness has also made it difficult to secure new orders.

Excluding vessels commissioned by Hanwha itself, the shipyard's entire commercial order backlog consists of the three ships ordered by Matson. Those contracts were signed before Hanwha acquired Philly Shipyard in 2024.

“It’s hard to justify a high valuation multiple for a U.S. shipbuilder like Philly from a foreign buyer, based on pure economics,” said Basil Karatzas, head of consulting firm Karatzas Marine Advisors, to the WSJ.

Labor shortages and limited facilities remain persistent challenges.

Hanwha has doubled the shipyard's work force over the past two years, bringing it to approximately 2,500 employees. However, key shipbuilding processes such as welding, pipe fitting and painting require extensive experience and training, meaning that simply hiring more workers cannot resolve the shortage of skilled labor.

Of the shipyard's two dry docks, only one is used to build new vessels, limiting its annual production capacity to approximately one to 1.5 ships.

These overlapping challenges have left Philly Shipyard struggling with chronic losses.

The shipyard recorded losses for seven consecutive years from 2018 to 2024. It has also posted operating losses for six consecutive quarters since Hanwha's acquisition, including an operating loss of approximately 19.2 billion won ($14.2 million) in the second quarter of this year.

The company has pushed back its anticipated return to profitability from this year to next year.

Other Korean shipbuilders, including HD Hyundai Heavy Industries, have yet to commit to direct investments in U.S. shipyards, instead taking a wait-and-see approach.

BY KIM KI-HWAN [[email protected]]