AUKUS Sub Contract Props Up Australian Steelmaker Shares

Australian steelmaker Bisalloy shares have risen some 40% since December 2023, powered by defence deals signed as part of the AUKUS nuclear submarine deal between Australia, Britain and the United States.

Defence contractors large and small are looking at the $237 billion plan to build Australia a fleet of nuclear-powered submarines as a decades-long source of work. Australia will build the vessels to a British design with U.S. technology.

Bisalloy said earlier this month it had signed a deal to sell a shipment of steel to part of U.S. shipbuilder Huntington Ingalls Industries, maker of the U.S. Virginia-class submarine. Shares rose 6.7% on the day and are up just over 10% this month versus a 3.1% decline for the index.

Australia will buy up to 5 Virginia-class submarines from its close ally in the 2030s as a stopgap while it builds its new fleet.

In mid-December, Bisalloy also announced it had won a contract, worth up to A$15 million, to qualify its steel for use in Australia's AUKUS fleet. Shares are up 44% since the news.

BAE Systems won a 4 billion pound contract to design the AUKUS submarine last October and will also build the fleet in Australia, although it has not disclosed the size of that contract.

Bisalloy's steel will be used for training and testing at the U.S. shipyards, the company said.

(Reuters reporting by Lewis Jackson; editing by Miral Fahmy)