Hanwha Ocean Shipyard in Okpo, Geoje, South Korea. Source: Hankookilbo, Hanwha Ocean
Developing Alaskan gas fields requires icebreakers while U.S. is unable to build Ice class vessels and asks for help from Korea. The Republic of Korea needs to fulfill U.S. icebreaker order to increase tariff negotiation power. The problem is that shipbuilders are behind schedule until 2028 and existing contracts need to be adjusted. The restrictions imposed by the Jones Act must be removed also in some way.
In relation to the development of Alaskan liquefied natural gas (LNG) gas fields, which has emerged as a negotiation card to ease the impact of the ‘tariff bomb’ thrown by U.S. President Donald Trump toward the world, ‘icebreakers’ have emerged as a key variable. In order to lay a 1,300 km long gas pipeline, an icebreaker is needed to break through the ice of Alaska, and the U.S. government wants help from Korean shipbuilders. Whether domestic shipbuilders can supply icebreakers at the request of the U.S. will affect tariff negotiations.
Korean shipbuilders are willing to send icebreakers to Alaska. It is an unprecedented situation of comprehensive tariffs and a good opportunity to enter the North American market. However, as the shipbuilding industry is booming, the schedule for building ships that have already been ordered is full until 2028, and they have to overcome the complicated equation of local U.S. laws and regulations.
As one of the largest LNG projects in the world, the Alaska LNG Project will relocate the vast natural gas reserves from the Alaska North Slope to a tidewater LNG facility in south central Alaska. Source: Exp Global
This massive undertaking transitions the Alaska Pipeline Project from a pipeline-only solution to a project that will process, transport, and liquefy natural gas for shipment to markets in Asia — adding an 800-mile, large-diameter gas pipeline to the natural gas pipeline system in Alaska. Upon completion, Alaska will have a liquefaction facility in its Southcentral region, a gas treatment plant on the North Slope, and gas transmission pipelines connecting adjoining and remote gas production facilities.
According to the Ministry of Trade, Industry and Energy and the shipbuilding industry, President Trump publicly mentioned Korea as a country participating in the ‘Alaska gas field development’ in his speech to the U.S. Congress on March 4. He is trying to attract investment in gas field development by pressuring Korea with tariffs. The cards that Korea can use to participate in the development of gas fields are supplying icebreakers and supporting the construction of gas pipelines. Of these, icebreakers are the most urgent for the U.S. They must penetrate the Alaskan sea ice and move close to the gas fields. The construction of gas pipelines comes after that.
Ice class ships construction is a very special area, and U.S. shipbuilders do not have the ability to do it. On the other hand, all three domestic shipbuilders (HD Hyundai Heavy Industries, Hanwha Ocean, and Samsung Heavy Industries) have sufficient technology to build ice going vessels, and Hanwha Ocean and Samsung Heavy Industries have experience selling them to the global market. This is why the US is consistently sending love calls to the Korean shipbuilding industry.
The Ministry of Trade, Industry and Energy believes that whether domestic shipbuilders can sufficiently handle the U.S. icebreaker orders when the Alaska development begins will be the key to increasing their tariff negotiation power. In fact, Minister of Trade, Industry and Energy Ahn Deok-geun visited the U.S. in February and suggested, “If the U.S. orders an icebreaker, Korea is ready to manufacture and deliver it first”. An official from the Ministry of Trade, Industry and Energy added, “Minister Ahn’s proposal was made after communication with the shipbuilding industry,” and “We tried to give the impression that we can do what the U.S. needs most.”
Shipbuilders are also in the mood to do what they can for the industry and the national economy amid the tariff situation. An official from the shipbuilding industry said, “There is a request from the government, but it is also an opportunity to enter the North American market, so we will actively engage in supplying icebreakers.”
The problem is that it is not easy for all three domestic shipbuilders to make time to build new ships until 2028, so it is not easy to fulfill U.S. orders right away. Here, the Jones Act, which states that ships operating off the coast of the United States must be built in the United States, is also a major variable.
In order to resolve these two variables, the shipbuilding industry mentions methods such as adjusting the existing construction schedule to build the icebreaker in Korea in several parts and then completing it in the United States, or purchasing a U.S. shipyard and building it locally. There is also a method in which the U.S. government recognizes Korean icebreakers as an exception to the Jones Act and builds them all in Korea, but this also requires adjusting the existing construction schedule.
However, both methods incur costs for adjusting existing contracts and purchasing U.S. shipyards, so there are voices calling for a cautious approach. Another shipbuilding industry insider said, “The shipping companies that ordered ships from shipbuilders will be planning their operating schedules according to the construction schedule, but it is not easy to get their understanding on this part,” and “It is true that we need to accept the U.S.’s request at the national level, but private companies will have no choice but to weigh the profits they will gain from dealing with the U.S. against the costs they will have to bear.”
Source:
- Hankookilbo (in Korean)
- Alaska LNG Project
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