President Donald Trump's push to revive U.S. manufacturing is being tested by high wages, hiring difficulties and a lack of price competitiveness, according to foreign media analysis. Reports pointed to the Philly Shipyard in Philadelphia, acquired by Hanwha (000880), as one such case, noting that the yard is struggling to attract customers other than its owner.
The Wall Street Journal reported on the 12th that while the Trump administration is promoting multibillion-dollar projects in Pennsylvania and Iowa, skepticism is mounting over whether the plans are feasible given the difficulty of securing workers and high production costs.
The investment in the Pennsylvania-based Philly Shipyard is part of MASGA, or Make American Shipbuilding Great Again, a $150 billion shipbuilding-only investment package South Korea pledged in trade talks with the United States. Since acquiring the yard, Hanwha has been working to raise commercial ship output from about two vessels to 20. The company plans to invest $5 billion to expand the shipyard and has doubled its workforce over the past two years to about 2,500 workers in preparation for the production increase. The Journal reported that the yard must secure additional space to build ships, and that no South Korean shipbuilder other than owner Hanwha has shown interest in investing in U.S. shipbuilding.
The Philly Shipyard builds vessels that operate along the U.S. coast. Under the Jones Act, a federal law, those ships must be built in the United States, crewed by American sailors, registered under the U.S. flag and insured domestically. Those requirements also push up construction costs. Excluding orders from Hanwha, the yard's main backlog consists of three container ships ordered by Hawaii-based shipping company Matson. Each costs $330 million, roughly double the price of large container ships built in South Korea or China. An official at Karatzas Marine Advisors, a shipping industry consultancy, said that on economic grounds alone it is difficult for foreign investors to assign a high valuation to a U.S. shipyard such as Philly.
Indian Company Building U.S. Steel Mill Amid Oversupply Concerns
In Iowa, Mesabi Metallics is building a large steel mill with a $15 billion investment. The goal is to begin initial production in 2030 and add up to 10 million metric tons of steel annually to the U.S. market. Whether that translates into demand is a separate question. With U.S. steel production rising, existing steelmakers were surprised by the scale of Mesabi's expansion plans, the Journal reported. CRU, a steel market analysis firm, said that an excessive increase in capacity could intensify competition among mills, driving down prices and eroding profitability.
Another concern raised is that while parent company Essar Group of India has experience building and operating steel mills in India, Mesabi itself has no proven track record in the U.S. steel industry. Mesabi previously took about 20 years to complete an iron ore mine in Minnesota, a process marked by construction delays and bankruptcy.
The Trump administration is touting the two projects as major investment wins. The White House cited the LG Electronics (066570) home appliance plant in Tennessee and the expansion of Japanese auto parts maker Denso's factory, both advanced during Trump's first term, in emphasizing that the president has succeeded in bringing manufacturing back to the United States.
But the Journal raised doubts about the Philly Shipyard and Iowa steel mill plans, citing the case of Taiwan's Foxconn display plant in Wisconsin, which was sharply scaled back because of supply chain problems and high costs. Part of that factory site was later converted into a data center.