Korean defense companies saw stock prices decline following recent contract losses while Korea Investment & Securities maintained an 'Overweight' rating on the defense sector on May 24. Hanwha Ocean lost Canada's 60 trillion won submarine procurement to Germany's ThyssenKrupp Marine Systems, and Hanwha Aerospace lost a Romania infantry fighting vehicle contract to Rheinmetall in June despite offering up to 80% localization. The securities firm cited intensifying global air defense missile supply shortages as drone warfare drives increased demand for missile defense systems. Experts identified Europe's preference for regional suppliers as a security barrier limiting Korean firms' access to NATO-member contracts.
Korean Defense Firms Lose Major European and North American Contracts
Hanwha Ocean lost Canada's 60 trillion won next-generation submarine procurement despite pan-governmental support efforts. Canada selected Germany's ThyssenKrupp Marine Systems (TKMS) as the contract partner. Hanwha Aerospace lost the Romania next-generation infantry fighting vehicle contract to Germany's Rheinmetall in June despite proposing a maximum 80% localization rate. Experts cited European nations' security barriers favoring regional defense firms as the primary factor in these losses.
Korea Investment & Securities Cites Air Defense Missile Supply Shortage
Korea Investment & Securities maintained an 'Overweight' investment opinion on the defense sector on May 24, diagnosing intensifying global air defense missile supply shortages. The report stated that Lockheed Martin formalized plans to develop the new PAC-3 ACE interceptor missile, with actual mass production expected after 2029, making short-term resolution of air defense missile supply shortages difficult. The report analyzed that European local production and supply chain establishment would only partially alleviate supply disruptions as a short-term response and would be insufficient to resolve structural supply-demand imbalances. The securities firm named LIG Defense & Aerospace as the top sector pick, stating that global demand for air defense missiles and related value chains would continue for several years and that Korean defense companies securing Middle East export references could expect expanded overseas orders.
FAQ
What contracts did Korean defense companies lose recently?
Hanwha Ocean lost Canada's 60 trillion won submarine procurement to Germany's ThyssenKrupp Marine Systems, and Hanwha Aerospace lost a Romania infantry fighting vehicle contract to Rheinmetall in June despite offering up to 80% localization.
Why did Korea Investment & Securities maintain an Overweight rating on defense stocks despite contract losses?
The securities firm cited intensifying global air defense missile supply shortages on May 24, noting that Lockheed Martin's new PAC-3 ACE interceptor would not enter mass production until after 2029, creating sustained demand opportunities for Korean defense companies with Middle East export references.
