The fire buried "Hong Beom-do". Korea will not rebuild the submarine

South Korean submarine Hong Beom-do (SS 079) was declared completely incapable of further operation after the fire that occurred during the major renovation at HD Hyundai Heavy Industries shipyard in Ulsan. The conclusions of the investigation completed on 22 April are clear: the unit is not worth rebuilding.

The fire itself was widely distributed by the media in the first hours after the incident, as it is hard to be surprised when a fire breaks out on a submarine during the renovation. At the time, no one had ever imagined that the conclusions of the investigation would be so devastating.

It is only an official communication that allows us to look at this issue more widely and from the beginning. It is no longer just about a dramatic accident at the shipyard, but also about costs, responsibility, limitations on the shipbuilding industry and how one fire can trigger an avalanche of consequences for the contractor and the Navy.

Fire during the renovation and the end of the ship's history Hong Beom-do

To fire on board Hong Beom-do April 9, at 13:58 p.m. The ship underwent major repairs at HD Hyundai Heavy Industries in Ulsan during this time. There were 40 workers from shipyards and subcontractors on board.

30 fire brigades were sent to the site, but firefighting operations started only at 14:38 p.m. The action was carried to 15:56 when the fire control was confirmed. However, the balance of tragedy proved far more serious than the material damage itself. One person failed to save. The body of the woman who was on the ship at the time of the fire was only found 33 hours after the fire was put out.

A completed April 22 investigation revealed that the ship should be considered completely unfit for further service. In practice, this means that the unit will no longer return to service because its repair would be considered economically unjustified.

Hong Beom-do – one of Sohn Won-yil ships

Hong Beom-do was the seventh of nine submarines of the Sohn Won-yil type, or South Korean variety of units built on the basis of the German Type 214 licence. The construction stamp was laid in 2011 at Ulsan shipyard. Launching took place on 5 April 2016, and admission to service took place on 19 January 2018.

This is an important context because we are talking about a relatively young ship that has not yet entered the second half of the lifecycle of the ship. All the more impressive is the scale of losses, especially since it is not a unit withdrawn from service, but a ship that remained an important element of the submarine forces of the Republic of Korea.

There's no point in rebuilding. The problem is the closed production line

At the time when the decision to consider an entity as a total loss was made, a fundamental question arose: what next? Theoretically the simplest solution would be to recreate a lost ship. In practice, the matter is much more complicated.

The cost of building a single ship of type KSS-II was originally around 500 billion KRW, or about 454.5 million USD. The problem is that the production line of these units has already closed. The last ship of this type was transferred to the recipient on January 31, 2020. It means that in place of the lost Hong Beom-do you should build an individual newer type of KSS-III, whose unit cost is estimated at approximately 1 trillion KRW, or about $900 million.

This is where we see the real scale of the problem. It's not just about the fire and its immediate effects. It also means that the loss of one ship is very quickly turned into a budget problem not counted in tens but in hundreds of billions of won.

However, the loss of this unit means not only the removal of one ship from the fleet state. The problem is that the Sohn Won-yil unit program has already been closed, and the South Korean industry is working on newer designs today. In practice, this means that the possible completion of the post- Hong Beom-do would require the construction of a next generation ship, much more expensive and subject to another schedule. Thus, from a naval perspective, it is not only about the hardware loss but also about the distortion of submarine planning. And this effect may be more important than the fire itself in the longer term.

Non-insurance of shipyards can be a financial blow

The situation is even more serious HD Hyundai Heavy Industries. It turns out that the insurance held by the shipyard covers only 50% of the value of the unit. According to the disclosure, this is due to the budgetary constraints applied to renovations which force cost cuts.

In the event of total damage, this means that the maximum compensation payment will be around KRW 250 billion. If so Polish Navy The Republic of Korea will require the construction of a new ship, the value of which was estimated to be 1 trillion KRW, the remaining amount, or around 750 billion KRW, will charge the contractor as a real loss.

It is here that we see how much a technical disaster can translate into the financial condition of the company. The fire on April 9 doesn't have to end just by losing one unit. It could have long-standing consequences for one of the pillars of the South Korean shipbuilding industry.

Losses may be even greater

This does not end with a catalogue of threats to the Ulsan shipyard. Contractual penalties for delays in the renovation may be an additional burden. The rate was set at 0.075 % per day, which translates rapidly into significant amounts at high contract value.

In addition, there is the cost of the repair work itself, which usually absorb about 10–20% of the construction value of the new ship with such units. In this case, this means between 50 and 100 billion KRW. These measures may remain lost again. The obligation to reimburse advances previously paid by the State is also excluded.

In the background, there is also the South Korean Act on Serious Industrial Accidents, the Serious Accident Punishment Act. Its application may mean high fines and criminal liability for management staff. Neither can the administrative consequences for the company itself be excluded, including the loss of the possibility of participating in public tenders after it has been declared unreliable.

One fire, much bigger problem

Case Hong Beom-do So it's not just a spectacular fire at the shipyard. This event exposed several weaknesses at once: the risks associated with the renovation of complex units, the problem of under-insurance, the effects of the closure of the production line of older submarines and the financial scale of responsibility that falls on the contractor today.

That's why it's worth looking at this disaster not only through material losses. For the South Korean Navy, it's the loss of an important unit. For HD Hyundai Heavy Industries is potentially one of the most serious crises in the warship area of recent years. And for the entire South Korean ship industry, this is a hard reminder that even a single incident during the renovation could trigger the effects counted in billions.