Carney tours Korean shipyard competing to build next sub fleet

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GEOJE — Prime Minister Mark Carney inspected a South Korean submarine Thursday during a visit to the shipyards of Hanwha Ocean, one of two companies competing to build Canada's next submarine fleet.

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On the same day that Canada and South Korea agreed to a new defense partnership, Carney was joined at the shipyard by Defense Minister David McGuinty, Vice Admiral Angus Topshi and South Korean Prime Minister Kim Min-suk.

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“This is a beautiful submarine,” said Topshi, commander of the Royal Canadian Navy.

Hanwha representatives demonstrated their manufacturing facility, which uses automated robotic welding.

Canada plans to buy up to 12 new submarines to replace its aging Victoria-class fleet, part of efforts to bolster its military presence in the Arctic.

Carney visited a rival submarine facility in Kiel, Germany, on Aug. 26, the day he announced two finalists for the bid: Hanwha and Germany's ThyssenKrupp Marine Systems (TKMS).

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Four Victoria-class submarines will be out of service within a decade and only one is currently operational, leaving the government in a race against time to choose a winner.

Topshi said a decision next year “would be fantastic.”

“Both submarines are excellent submarines and meet the requirements that we have,” he said.

David Perry, president of the Canadian Institute of Global Affairs, said the submarine project is “moving at the speed of light” compared to most defense procurements and competition for the multibillion-dollar contract is fierce.

The selection of the winner will also factor into Canada's industrial and trade strategy as both bidders and their home countries compete fiercely behind the scenes to offer Canada additional economic benefits.

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McGinty said Hanwha is a “very serious company.”

He did not give a time frame for making a decision. He said factors influencing the decision include delivery times, whether bidders will use Canadian resources such as steel and aluminum, and how promised industrial benefits stack up.

Perry said securing the contract would be “one of the most impactful things the Prime Minister can do to actually achieve the kind of trade diversification he's talked about.”

“The government of Canada can negotiate trade agreements, support access to trade, use the trade commissioner service to support business operations, but the government doesn't actually deal with trade directly, so Carney's influence in that regard is limited,” he said.

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“Buying a new submarine is a lever he can pull.”

Hanwha has talked about investing in Canadian lithium-ion battery manufacturing, liquefied natural gas, aerospace, steel and critical minerals, and is proposing to build two submarine support facilities on both coasts.

Hanwha is a vertically integrated conglomerate that positions itself as South Korea's seventh largest business group and is aggressively pursuing a global expansion strategy.

The company says if Canada signs the contract next year, it could use its massive shipyard capacity to beat any competitor's delivery schedule.

It says they could build four KSS-III submarines by 2035, with the first to be delivered in 2032. It says that once the first four are delivered, it will be able to ship a new one to Canada every year.

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Steve Jeong, Hanwha's head of global naval business development, said Hanwha could build submarines in Canada, but that could take another 10 to 12 years.

“I would prefer to build it here because we can get the submarine to the Canadian Navy faster,” he said.

The company says early delivery could allow Canada to avoid $1 billion in repair costs by decommissioning the Victoria submarines early. Hanwa says 12 submarines would cost an estimated $20 billion to $24 billion, not including the infrastructure to support them.

Hanwha's KSS-III, a larger boat than its German rival, uses lithium-ion batteries and is equipped with vertical launch tubes that allow submarines to launch ballistic missiles directly into the air. The submarine is currently in service with the South Korean Navy, but has not yet been exported.

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South Korea is committed to developing its domestic defense industry and is working hard to expand exports and shift away from over-reliance on the United States. Korea was the world's eighth-largest arms exporter in 2023 and aims to become the fourth-largest by 2027, according to an internal national defense document.

Earlier on Thursday, Carney and South Korean President Lee Jae-myung signed a defense partnership agreement. The agreement provides for more frequent joint exercises and training. It also commits the two countries to improve interoperability and exchange military personnel, equipment and materials.

“Ultimately we need to make sure that we are more involved in the region, and we chose Korea for a reason,” McGinty said.

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The South Koreans are positioning the submarine contract as the start of a broader industrial partnership between the two countries. Embassy officials in Ottawa noted at an event last week that South Korea is now the second-largest supplier of military equipment to NATO countries after the United States.

Germany and Norway have jointly ordered a dozen TKMS 212CD submarines, a design so new that no navy has yet launched one.

TKMS says it can beat Canada's tight deadline for delivery of the first submarine in 2035, but its delivery schedule cannot match Hanwha's aggressive pace.

TKMS management and the Ministers of Defense of Germany and Norway went to Ottawa last week in a charm offensive before Carney's trip to South Korea. They tried to convince the Canadian government to join a club of countries operating the same submarines, which would allow the pooling of resources and parts.

The German defense firm also tells Ottawa it's a less risky bet. TKMS, one of the world's oldest submarine manufacturers, has supplied about 70 percent of NATO's conventional submarine fleet.

— With files from Kyle Duggan in Ottawa.

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