Hyundai Rotem seals record $6.5 bn K2 tank deal with Poland

Hyundai Rotem Co., a South Korean defense system developer, will export its battle tanks to Poland in what would be the largest single export deal for the Asian country’s defense industry, valued at $6.5 billion.

According to Korea’s Defense Acquisition Program Administration (DAPA) on Wednesday, Hyundai Rotem has concluded negotiations with Poland’s Deputy Prime Minister and Minister of National Defense Władysław Kosiniak-Kamysz on the details of a deal to deliver its K2 tanks.

It will export 180 units of K2 tanks, valued at $6.5 billion, to the Central European country, which marks Korea’s largest single defense export deal since the $3.5 billion contract signed in 2022 to supply surface-to-air missile systems to the United Arab Emirates’ defense ministry.

This is Hyundai Rotem’s second export deal of K2 tanks to Poland. The Korean defense firm delivered 180 units of the battle tank to the country in a $3 billion contract signed in 2022.

Despite the same order volume, the latest deal value more than doubles the previous order as Hyundai Rotem is set to deliver both original and upgraded versions of the K2 tank.

The new package also includes maintenance, repair and operations (MRO) support, along with auxiliary vehicles like armored recovery and bridge-laying tanks.

Under the latest agreement, Hyundai Rotem will produce 117 units from home, while Poland’s state-run defense group PGZ manufactures the remaining 63 units – dubbed K2PL – a variant customized to the Polish Armed Forces, in partnership with the Korean firm at a local plant.  

The construction of the local manufacturing facility in Poland raises expectations for additional K2 orders from the country in the follow-up phases, as part of a broader $15 billion contract forged in 2022 between Korea and Poland, which includes shipments of 1,000 battle tanks to the European nation.  

The 2022 procurement deal also includes the sale of Korea Aerospace Industries Ltd.'s FA-50 light fighter aircraft and Hanwha Defense Co.'s K9 self-propelled howitzers.

The second K2 export agreement was initially expected by the end of last year, but was delayed following the ill-fated martial law decree declared by former South Korean President Yoon Suk Yeol last December.

ROSY OUTLOOK FOR KOREAN DEFENSE SYSTEM EXPORTS

With Hyundai Rotem clinching the long-delayed deal, exports of Korean-made defense systems are expected to rise further amid the escalating global arms race, fueled by the ongoing war between Russia and Ukraine and the recent Israel-Iran conflict.

Korea’s Ministry of National Defense and DAPA forecast that the country’s exports of defense systems will surpass $20 billion in 2025.  

In early June, KAI signed a $700 million contract to supply 12 FA-50 fighter jets to the Philippines.

Hanwha Aerospace Co. is also said to be in the final stage of negotiations with Vietnam for a contract to export its K9 Thunder self-propelled howitzers.

In May, Korea’s two warship builders – HD Hyundai Heavy Industries Co. and Hanwha Ocean Co. – joined forces to bid up to $24 billion for a Canadian project to modernize the country’s warships.  

On Wednesday, Korean credit rating agencies upgraded Hyundai Rotem’s rating.

Nice Investors Service and Korea Investors Service revised the credit rating upward to A+ from A0, each, while Korea Ratings upgraded the company’s short-term rating to A2+ from A2.

Write to Jung-Eun Shin and Hyun-Il Lee at newyearis@hankyung.com

Sookyung Seo edited this article.