In a significant move for Canada’s naval capabilities, Prime Minister Mark Carney is expected to announce on Monday in Halifax the results of a high-stakes competition for a contract to build 12 submarines for the Royal Canadian Navy. This decision will mark a monumental shift in Canada’s maritime defence strategy, providing it with enhanced capabilities to patrol its vast coastal waters. The announcement is the culmination of a fierce contest between Germany’s ThyssenKrupp Marine Systems (TKMS) and South Korea’s Hanwha, both vying to secure a deal projected to be worth between $20 billion and $30 billion, with additional operational costs potentially reaching up to $50 billion.
A Strategic Shift for Canadian Defence
Carney had previously indicated that a decision would be finalised by the end of June, though the specific timing remained unclear until now. Sources familiar with the process, who spoke on condition of anonymity, highlighted that while the announcement will name a preferred bidder, it does not guarantee an immediate contract. Ongoing negotiations will likely prolong the finalisation of a deal, a common scenario in significant military procurements, as noted by defence policy expert Philippe Lagassé from Carleton University.
This submarine initiative is part of Canada’s broader strategy to increase defence spending to levels unseen since the Cold War, with a commitment to allocate 5% of its GDP to defence by 2035, aligning with NATO targets. Ottawa has indicated that both competing models—the KSS-III Batch-II submarine from Hanwha and the 212CD from TKMS—are suitable for its needs. However, the decisive factor will be the economic benefits that each bidder can deliver to Canada.
Economic Implications and Job Creation
The bids present substantial economic advantages. Hanwha has pledged over $70 billion in trade and investment within Canada, promising to create more than 25,000 jobs annually from 2026 to 2044. In contrast, TKMS, alongside Norway, has projected that its bid could contribute an impressive $86 billion to Canada’s GDP over the life of the contract, generating over 650,000 job years of employment. These competing offers underscore the dual nature of this procurement: while enhancing military capabilities, it also serves as a catalyst for economic growth.
Rumours of splitting the contract between the two companies had surfaced but have been downplayed by government officials in recent months. This procurement is unprecedented in its scale; Canada has not ordered new submarines since the Cold War, and currently, only four second-hand submarines are in operation, with just one typically available for deployment. Experts suggest that a fleet of 12 submarines is essential for a robust defence strategy, enabling Canada to maintain three operational vessels at any given time.
The Race for Public Support
Both Hanwha and TKMS have engaged in an aggressive campaign to secure Ottawa’s favour. The South Korean firm has notably dispatched a submarine to Canada, showcasing its technological capabilities in a bid to win public and political support. This effort has been more visible than typical Canadian military procurement initiatives, prompting a response from the German side to ramp up their outreach.
In addition to the competition for the submarine contract, both countries have been forging partnerships with Canadian businesses to enhance their bids. Hanwha has committed to invest $200 million in revitalising the Algoma steel mill in Ontario, further solidifying its case by promising to source $50 million worth of steel from the facility for the submarine project.
The International Context
The absence of a U.S. defence contractor in this competition is noteworthy, as Canada has ruled out nuclear propulsion options, and the United States no longer manufactures conventional diesel-electric submarines. This scenario reduces the pressure from Canada’s closest ally to favour one bidder over another. The significance of this contract extends beyond mere procurement; it represents a potential pivot in Canada’s defence relationships, particularly if Hanwha emerges victorious. This would be the first major arms deal with a non-Western supplier, signalling a shift in procurement dynamics within Canada’s military strategy.
Seoul’s aggressive push to secure this milestone contract is reflective of its broader ambitions to elevate its defence industry to rank among the world’s top four. From 2020 to 2024, South Korea was among the top ten defence exporters globally, as per the Stockholm International Peace Research Institute, highlighting its growing influence in the sector.
Why it Matters
The upcoming announcement by Prime Minister Carney holds considerable weight for Canada’s national security and economic landscape. Securing a modern fleet of submarines will not only enhance Canada’s ability to safeguard its maritime borders but also fortify its industrial base against external pressures. The outcome of this competition could redefine Canada’s military procurement strategy and signal a willingness to embrace non-traditional partners in defence procurement, potentially reshaping alliances and economic relationships for years to come.
