South Korea's campaign to win Canada's largest defense contract in decades grew broader this week when HD Hyundai Group deployed three of its divisions — shipbuilding, oil refining, and construction equipment — at a government-level forum in Ottawa, days after a separate disclosure revealed Korea's plan to build a CAD $3.1 billion hydrogen-truck ecosystem in Canada should its submarine consortium win. With Prime Minister Mark Carney committed to naming a preferred supplier for the Canadian Patrol Submarine Project before the end of June, the Korean pitch has shifted from platform performance to a whole-of-economy offer spanning energy, heavy equipment, and defense manufacturing.
HD Hyundai Vice Chairman Cho Seok attended the Korea-Canada Energy Resource Supply Chain Cooperation Forum in Ottawa on June 2, co-hosted by South Korea's Ministry of Trade, Industry and Energy and Natural Resources Canada. At the event, he met with Senator Marty Deacon of the Senate's national security and defense committee, the body that oversees defense procurement policy, and made the case for Korean submarines and bilateral defense-industrial cooperation.
The delegation reached beyond HD Hyundai Heavy Industries, the group's submarine builder. HD Hyundai Oilbank, the group's refining subsidiary, said it plans to expand imports of Canadian extra-heavy crude and is reviewing refinery upgrades to handle the oil — extending a plan, developed in January, to import Canadian crude worth trillions of won over the submarine program's lifecycle. The construction-equipment unit proposed a matching fund to deploy autonomous and automated machinery as a testbed in Canadian government-funded mining and road projects.
The Ottawa forum took place the same week that Korea's presidential chief of staff, Kang Hoon-sik, visited Canada as a special envoy for strategic economic cooperation and disclosed details of "Project Beaver" — a proposal to establish a hydrogen mobility ecosystem in Canada using Hyundai Motor Group technology. If Korea wins the submarine contract, the plan would involve manufacturing hydrogen long-haul trucks locally in Canada starting in 2030 and building refueling infrastructure at dozens of sites, at an investment the Korea Herald reported at approximately CAD $3.1 billion. The proposal is separate from, and complementary to, HD Hyundai Group's shipbuilding and energy offers.
How Canada Will Choose Its CPSP Supplier
The approach reflects a structural feature of the Canadian Patrol Submarine Project competition that has shaped both competing bids. Secretary of State for Defence Procurement Stephen Fuhr has said explicitly that the outcome will turn on economic benefit to Canada rather than platform performance alone. "Now it's going to come down to economic benefit to Canada — that is what's going to drive the outcome," Fuhr said in a March 2026 interview. Both ThyssenKrupp Marine Systems and the Korean consortium have acknowledged as much; each has been assembling industrial packages that go well beyond the submarines themselves.
The Korean consortium is formed by Hanwha Ocean and HD Hyundai Heavy Industries, competing under the "One Team Korea" banner after the two shipbuilders set aside their usual rivalry following a failed joint bid for Australia's frigate program. Germany's entry is ThyssenKrupp Marine Systems, offering the Type 212CD. Carney has committed to naming a preferred supplier before June ends, ahead of the Canada-United States-Mexico Agreement review that begins July 1.
Critics have questioned whether the industrial-benefit framework serves Canada's long-term interests. The Centre for International Governance Innovation argued in March 2026 that Canada's approach showed "relatively short-term thinking," noting that South Korea's own foremost submarine expert recently criticized Canada for its overt focus on industrial gifts and that job creation was "now widely rumored to account for as much as 80 percent of the evaluation." The think tank also pointed out that when South Korea itself procured submarines from Germany in the 1980s, it insisted on fully building them domestically over time — a path that built lasting industrial expertise that Canada's current tender does not require.
HD Hyundai Heavy Industries' Submarine Track Record
HD Hyundai's shipbuilding arm brings verified credentials to the Korean consortium's case. In November 2000, the company — then known as Hyundai Heavy Industries — was selected to build South Korea's first three KSS-II boats under a technology-transfer agreement with Germany's Howaldtswerke-Deutsche Werft. When the first of those submarines, ROKS Son Won-il, was delivered to the Republic of Korea Navy in 2007, HD Hyundai became the first builder outside Germany to construct and deliver a Type 214, the design that underpins the current KSS-II class. The company built six of the nine KSS-II vessels in total. It has since won a contract to upgrade the integrated combat systems of the first three KSS-II submarines, including the combat management system, towed array sonar, mine avoidance sonar, and floating antenna system.
In the larger KSS-III program, HD Hyundai Heavy Industries delivered ROKS Shin Chae-ho, the third Dosan Ahn Chang-ho-class submarine, in 2024 — the first boat of that class completed on schedule. The KSS-III class represents a step-change in domestic industrial content: the class achieves a 76 percent localization rate, compared to roughly 38 percent for the license-built KSS-II, and is the first Korean submarine designed entirely with domestic technology rather than a foreign license.
What Canada's CPSP Industrial Benefits Rules Require
Canada's requirements, laid out in its Industrial and Technological Benefits Policy and reinforced by the Defence Industrial Strategy, mandate that winning contractors undertake Canadian business activity equal in value to their contract. The Defence Investment Agency's March 2026 Request for Information on submarine sustainment made the practical condition explicit: submarine sustainment must be performed in or near Canadian homeports, supported by a domestic supply chain. That structural requirement applies to whichever bidder wins.
Fuhr has also said that both bidders have indicated they can now deliver the first submarine to Canada by 2032, three years earlier than the original 2035 deadline — an acceleration driven by the procurement path Canada chose rather than any new engineering development.
What the Korea-Canada Energy Forum Produced
The June 2 Ottawa forum produced a broader bilateral agreement that extended beyond HD Hyundai's corporate pitch. Canada's Minister of Energy and Natural Resources, Tim Hodgson, and Korean presidential chief of staff Kang Hoon-sik reached a government-to-government agreement to expand energy and critical minerals cooperation, including a joint plan on critical minerals stockpiling to be developed by the end of 2026. South Korea committed to expanding Canadian crude oil imports 3.3-fold — from approximately 4.88 million barrels in 2025 to as much as 16 million barrels in 2026 — with a target of up to 20 million barrels annually if planned investments proceed. The Korea Institute of Geoscience and Mineral Resources and the Geological Survey of Canada also signed a memorandum of understanding on the sidelines, agreeing to cooperate on natural-hydrogen supply chain security.
The government-level energy agreement and HD Hyundai Oilbank's corporate crude-import plan are distinct but mutually reinforcing. Both serve Canada's interest in diversifying oil exports away from near-total dependence on the United States, which absorbs approximately 80 percent of Canada's crude output.
Defense scholars tracking the competition have noted the geopolitical weight attached to the choice. Philippe Lagassé of Carleton University has written that Ottawa is effectively selecting a strategic partner for 40 to 50 years — a choice that will signal whether Canada is deepening its Atlantic and NATO alignment or making a genuine Indo-Pacific pivot. Jeffrey Collins of the University of Prince Edward Island has noted that Canada's future submarines will need to share secure sensor and communications data with U.S. counterparts under existing NORAD obligations, a requirement that complicates any platform not already integrated into Western alliance frameworks.
HD Hyundai officials stated that the group is proposing a range of industrial-cooperation packages tied to the CPSP and, as part of Team Korea alongside Hanwha Ocean, intends to deliver fully proven submarines on Canada's preferred timeline.
Frequently Asked Questions
When will Canada announce the Canada submarine contract winner?
Prime Minister Mark Carney has committed to naming a preferred supplier before the end of June 2026, ahead of the Canada-United States-Mexico Agreement review that begins July 1. That announcement will identify a preferred supplier but will not itself be a binding contract; a formal contract award is anticipated around 2028, with the first submarine required no later than 2035.
What is the Canadian Patrol Submarine Project?
The Canadian Patrol Submarine Project is a procurement initiative launched in 2021 to replace Canada's four aging Victoria-class submarines, which are scheduled for retirement in the mid-to-late 2030s, with up to 12 new diesel-electric vessels capable of under-ice operations in the Arctic. The full program, including acquisition and 30 years of maintenance and sustainment, is valued at approximately CAD $60 billion. Two qualified suppliers remain in competition: South Korea's Hanwha Ocean and HD Hyundai Heavy Industries, and Germany's ThyssenKrupp Marine Systems.
What CPSP industrial benefits has South Korea offered Canada?
The Korean consortium and associated Korean government entities have proposed a package that includes submarine construction with technology transfer, crude oil imports through HD Hyundai Oilbank, autonomous mining equipment deployment through HD Hyundai Construction Equipment, hydrogen truck manufacturing and refueling infrastructure through Hyundai Motor Group's Project Beaver at approximately CAD $3.1 billion, defense vehicle manufacturing through Hanwha's Project Arrow Defence joint venture, and a USD $250 million Algoma Steel supply deal. Korea's projections, if all commitments materialize, point to CAD $94 billion in GDP contribution and more than 22,500 Canadian jobs annually through 2044; those figures come from bidder-commissioned modelling and have not been independently verified.
How does the KSS-III differ from Canada's current submarines?
Canada's Victoria-class submarines, acquired secondhand from the United Kingdom in the late 1990s, rely on lead-acid battery technology and face severe availability challenges, with the Royal Canadian Navy often able to keep only one of four boats at sea. The KSS-III Batch-II displaces approximately 4,000 tonnes submerged and uses lithium-ion batteries developed by Samsung SDI — enabling more than 21 days of submerged endurance — and carries 10 vertical launch system cells, giving it both torpedo and submarine-launched missile capability. Korea is one of only two countries, along with Japan, to power its submarines with lithium-ion batteries.
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