Canada has selected Germany's ThyssenKrupp Marine Systems (TKMS) to build up to 12 diesel-electric submarines in a landmark contract valued at an estimated $100 billion. Prime Minister Mark Carney announced the decision on Monday, ending months of intense competition with South Korea's Hanwha Ocean Co. Ltd.
Contract Details and Timeline
The submarines are expected to cost at least $20 billion, with the first vessels arriving in 2034. Maintenance and infrastructure support could add another $80 billion over the coming decades. The deal solidifies Canada's geopolitical and economic partnership with Germany for years to come.
TKMS beat out Hanwha in a bidding war that spurred numerous partnerships with Canadian companies across sectors from steel to quantum computing. Under Canadian procurement policy, the winning company must spend an amount equal to 100% of the contract's value in Canada.
Industrial Benefits and Side Deals
TKMS submitted a value proposition in March that included a commitment to invest in Calgary-based E3 Lithium Ltd., a startup harvesting battery-grade lithium from brine ponds in Alberta. Chris Doornbos, chief executive of E3, said the investment is “a meaningful amount for us,” though he was uncertain whether it would take the form of cash or other assets. He confirmed the agreement does not include an offtake arrangement for TKMS to receive lithium.
Since E3 is not yet in commercial production and is considered in the research and development stage, every dollar TKMS invests may be worth as much as $9 under Canadian procurement policy frameworks.
Expert Analysis
“The Germans right from the beginning said we’re only going to sign agreements that are real,” said Philippe Lagassé, an associate professor at Carleton University’s Norman Paterson School of International Affairs. “They were very sour and dour and grumpy about it, but they know their business. You’re dealing with a company that has done this in so many countries and it is tough to beat the top dog.”
Canada ultimately chose TKMS as the incumbent player in the submarine sector, despite Hanwha's aggressive bids and partnerships. The Canadian Patrol Submarine Project is expected to touch multiple domestic industries, from materials supply to quantum computing, as TKMS fulfills its industrial obligations.
