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South Korean President Lee promotes $150 billion US

shipbuilding

investment

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Hanwha plans up to $5 billion expansion at Philly Shipyard

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Legal hurdles to foreign involvement in US shipbuilding

remain

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Shipbuilding key to South Korean investment promises to

limit US

tariffs

By Joyce Lee

SEOUL, Aug 26 (Reuters) - South Korean President Lee Jae

Myung is leaning on promises to "Make America Shipbuilding Great

Again" during his first official U.S. trip, as the two allies

wrangle over other details of their trade and security

agreements.

Lee met with U.S. President Donald Trump for their first

summit on Monday, and on Tuesday will visit a shipyard owned by

South Korea's Hanwha Group to highlight investment plans.

Under a South Korean pledge to inject $350 billion into

U.S. projects, shipbuilding has emerged as one of the most

concrete areas of investment, with $150 billion earmarked for

the sector.

Trump says he wants to revitalise shipbuilding to keep up

with China, the world's biggest shipbuilder and operator of the

world's largest maritime fighting force.

The potential - and pitfalls - of that project will be on

display when Lee visits Hanwha's Philly Shipyard in

Philadelphia, one of the largest U.S. shipyards.

Hanwha, which acquired the facility last year, plans to

spend as much as $5 billion to take its output from less than

two vessels a year to as many as 20, Lee's office said. In

comparison, Hanwha Ocean's shipyard in South Korea is 10 times

bigger and builds a vessel a week.

"The K-shipbuilding industry, equipped with the world's

strongest capabilities, will bring about a renaissance of the

U.S. shipbuilding industry and create a new historic turning

point for mutual prosperity," Lee said an event at Washington's

Center for Strategic and International Studies after the summit.

South Korea's industry ministry said 11 non-binding

agreements were signed between U.S. and South Korean companies

during Lee's visit, in shipbuilding, nuclear energy, aerospace,

gas and critical minerals.

In shipbuilding, HD Hyundai agreed with

state-run Korea Development Bank and Cerberus Capital to create

a multibillion-dollar joint investment fund aimed at

strengthening the maritime capabilities of the U.S. and its

allies, including shipbuilding, marine logistics infrastructure,

and advanced marine technology.

Samsung Heavy Industries agreed with Vigor

Marine Group to partner in fields such as maintenance and repair

of U.S. Navy vessels, shipyard modernisation and joint ship

construction.

LEGAL, MANUFACTURING HURDLES

During tariff talks in July, South Korea offered a package

dubbed "Make America Shipbuilding Great Again" partly to help

modernise U.S. shipyards, which officials in Seoul touted as

instrumental in reaching their unwritten trade deal.

U.S. shipyards, which had the world's highest production

capacity during World War II, saw their market share fall to

0.04% by 2024. China and South Korea are responsible for 83% of

global commercial shipbuilding, according to UN Trade and

Development data.

"We're going to go back into the shipbuilding business

again," Trump said during his Oval Office meeting with Lee.

Experts, industry sources and South Korean officials say

there will be a lot of work required to get there.

"I think the U.S. shipbuilding industry hasn't had to

compete very much. Facilities are old, and there's a shortage of

technicians," Steve SK Jeong, head of the Naval Ship Global

Business at Hanwha Ocean, previously told Reuters.

Training local workers could take four to five years, and it

is hard to find people willing to do difficult shipyard work,

South Korean industry sources told Reuters.

Jeong said Hanwha is working to modernise facilities, train

and equip workers, and transplant its manufacturing process that

can build ships much faster.

Hanwha has said it plans to make arrangements to use idle

docks owned by others near the Philly Shipyard to expand

construction capacity, as well as improve project management and

use automation such as welding machines to speed up production.

Issues obtaining parts like steel plates may also hinder

rapid progress.

Trump said some U.S. ships would still be built in South

Korea for now.

"We're going to be buying ships from South Korea," he said.

"But we're also going to have them make ships here with our

people."

South Korean officials said that unless some U.S.

protectionist policies are eased, construction of full ships or

modules to be delivered to U.S. shipyards may be limited.

The 1920 Jones Act requires goods moved between U.S. ports

to be carried by ships built domestically.

Similarly, the Byrnes-Tollefson Amendment prohibits the

construction of U.S. Navy vessels in foreign shipyards, although

the president retains the authority to waive its provisions for

national security. Some U.S. lawmakers have proposed changes

that would open the door for U.S. allies to participate more.

Wi Sung-lac, Lee's national security adviser, acknowledged

the legal restrictions.

"We're conducting various studies to increase cooperation

while taking into account various detours and institutional

improvements," he said.

(Reporting by Joyce Lee; Additional reporting by Heejin Kim and

Ju-min Park; Writing by Josh Smith; Editing by Lincoln Feast.)