DUBLIN, April 26, 2016 /PRNewswire/ --
France's DCNS Group has been awarded one of the world's biggest defense contracts to build 12 submarines for Australia. The USD 39 billion contract is expected to generate around 2,800 jobs in Adelaide, Australia, where the submarines will be built by Australian workers using Australian steel. DCNS's triumph has come as a disappointment to Japan, as both Mitsubishi Heavy Industries Ltd. and Kawasaki Heavy Industries Ltd. had made offers for the deal. Germany's Thyssenkrupp AG also made an unsuccessful offer. The deal will bolster the global submarine market, which is forecast to grow at a CAGR of 4.44% by 2020 according to a recent report from Research and Markets.
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DCNS's diesel-electric powered Shortfin Barracuda submarines will replace Australia's Collins Class models, and the 12 new submarines are expected to enter service by the early 2030s. The decision to award the contract to the French state-controlled DCNS was likely influenced by China's position as an economic partner of Australia. China and Japan are currently contesting territories in the South and East China Sea, and the disputes have led to somewhat of an arms race in Asia. A recent Australian Defense White Paper estimated 50% of the world's submarines will be located in the Indo-Pacific region by 2035.
The defense deal will likely influence other markets related to submarines. For instance, the global SONAR systems market is expected to grow at a CAGR of 7.01% by 2019, as noted in an industry report, but could be higher due to the contract. The SONAR systems market may also grow if neighbouring countries decide to improve their defense detection systems in response to Australia's 12 new submarines.
Similarly, the global high-voltage power cable market is forecast to grow at a CAGR of 7.25% by 2019, as predicted in a market report. High-voltage power cables are used extensively in submarines, and DCNS's contract may result in a higher demand for such cables.
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SOURCE Research and Markets