As the operator of the Subic Shipyard in the Philippines, HD Hyundai Heavy Industries Philippines (HHIP) has currently deployed more than 1,000 employees, most of whom are Filipino employees, to fully advance the preparations before the shipyard’s normal operations.
South Korean media reported that HHIP has received orders for seven tankers, including four 115,000-dwt LR2 tankers and three product tankers, and is expected to deliver four in 2027 and three in 2028. After the Subic shipyard resumes operations, HHIP’s annual production capacity is expected to be four LR2 tankers. Therefore, the company is committed to achieving full recovery by 2026.
Korea Investment & Securities predicts that HHIP is expected to achieve operating income of 200 billion won, 418 billion won and 421 billion won in 2026, 2027 and 2028. The data assumes that the construction of LR2 tankers will start in 2026 and full production will start in 2027.
However, Korean shipbuilding experts pointed out that considering the order size of seven tankers and the shipbuilding process, HHIP needs to increase the number of employees at the Subic Shipyard to 5,000 to 6,000. The quality of manpower is also a key factor. Industry insiders estimate that the manpower productivity of the Subic Shipyard is only 30% to 40% of its heyday.
An industry insider revealed: “The local wage level in the Philippines is 500,000 won (about US$ 363) to 600,000 won (about US$ 435) per month, so a large number of workers are flowing to Japan and Europe.”
It is reported that HHIP is a wholly-owned subsidiary of HD Korea Shipbuilding & Offshore Engineering (HD KSOE) established in the Philippines between February and April 2024. HD KSOE has signed a 10-year lease contract for Dock No. 1 with Subic Shipyard. The operating rights of Subic Shipyard are held by Cerberus Capital, a US private equity fund (PEF) management company.
Subic Shipyard was established in 2006 by the Korean shipbuilding company Hanjin Heavy Industries & Construction (now HJ Heavy Industries). It has developed into one of the top five shipyards in the world and was the largest shipyard in Southeast Asia at that time. Located on the north side of Subic Bay, the shipyard mainly builds large container ships, gas carriers and oil tankers. The first new ship was delivered in 2008. At its peak, the shipyard had more than 20,000 employees.
After a long downturn in the shipbuilding industry, Hanjin Heavy Industries & Construction Philippines announced in 2019 that it would suspend operations and file for bankruptcy in court due to a default of US$1.3 billion in loans. In April 2022, Cerberus acquired the Subic Shipyard for US$300 million on a 50-year lease, three years after the shipyard went bankrupt. In May 2022, the Philippine Navy agreed to lease one-third of the shipyard to provide maintenance services for the Philippine Navy’s large ships, calling it the “Subic Naval Operations Base.”
In April this year, there were rumors that South Korean shipbuilders HD Hyundai Group and Hanwha Group were both interested in acquiring shares in the Subic Shipyard in the Philippines, but these rumors were unanimously denied by the two shipbuilders.
Although HD Hyundai has denied the acquisition rumors, it still intends to build Subic Shipyard into an overseas shipbuilding base. Since HHIP has been allocated 7 oil tankers, it means that HD Hyundai has entrusted the construction of new ships to shipyards other than HD Hyundai Heavy Industries, HD Hyundai Samho and HD Hyundai Mipo for the first time.