Wave of New Orders Revitalizes Naval Shipyards
16 October 2025
- Intensifying geopolitical competition is reviving naval shipyards after years of consolidation.
- Leading naval shipbuilders have growing order books, giving them the certainty to expand.
- However, scaling up quickly enough to deliver orders may prove a challenge.
Key Risks: Government policy shifts, defense budget cuts, export controls and sanctions, political risk in client nations, trade policy volatility, dependence on government contracts, project delays and cost overruns, subcontractor and supplier reliability, cybersecurity threats, technological obsolescence, R&D failures. These factors can lead to significant losses, and past rallies may not be repeated.
When the UK defense sector agreed a £10 billion deal to export warships to Norway in September, the announcement appeared to herald a revival of the country’s dwindling shipyards. The Norwegian government signed the deal to purchase at least five Type 26 frigates from British shipbuilders, seeking to bolster security in the Arctic and North Atlantic.1
The frigates will primarily be built by BAE Systems, the UK’s largest defense contractor2, with first deliveries expected in 2030. Shortly afterwards, it was reported that Babcock International, another UK contractor, was in advanced talks to produce Type-31 frigates for Denmark and Sweden3.
After defense spending tapered off at the end of the Cold War in the 1990s, the number of British naval shipyards fell significantly4, with capacity also tapering off in other Western countries. Today, however, it’s expanding again in the UK as it is in the US and a number of other countries.
CBO’s Estimate of the Navy’s Total Budget Under Its 2024 and 2025 Plans
Billions of 2024 dollars
Source: CBO (Congressional Budget Office), An Analysis of the Navy’s 2025 Shipbuilding Plan, January 2025, www.cbo.gov/publication/60732
Amid intensifying geopolitical competition, many of the world’s bigger countries are expanding and modernizing navies. They’re doing so as trade routes become threatened in the Middle East and Arctic, digital undersea cables are cut in the North Sea and competition rises for undersea natural resources, including oil, gas and critical minerals5.
Surging Demand for Ships, Submarines and Drones
Illustrating the revival in naval shipbuilding activity, the navy defense spendings are expected to grow significantly. Let alone the United States, where the Navy Budget is proposed to increase to $339 bn by 2054 from $255 bn in 2025 (in current 2024 US Dollars).6 There’s a focus on multi-mission frigates and destroyers, as well as advanced submarines, unmanned systems and support ships.
China is rapidly expanding its navy, leading the United States, Australia, India and others to respond. China’s navy is expected to have 395 ships in 2025, growing to 435 by 2030, according to the US Congressional Research Service.7
Comparative Navy Fleet Sizes (2024 Est.)
Source: US Department of War, December 2024, US Congress, January 2025, IISS – The Military Balance 2024.
Notably, the US is responding with a major re-think of its navy. The number of ships is projected to rise from 287 in 2025 to 291 in 2029, before increasing to over 380 ships in the 2040s and 390 by 2054.8
US Navy Five-Year Shipbuilding Plan (FY 2025 – FY 2029)
| FY25 | FY26 | FY27 | FY28 | FY29 | Total | |
| Columbia (SSBN-826) class ballistic missile submarine | 1 | 1 | 1 | 1 | 4 | |
| Virginia (SSN-774) class attack submarine | 1 | 2 | 2 | 2 | 2 | 9 |
| Gerald R. Ford (CVN-78) class aircraft carrier | 0 | |||||
| Arleigh Burke (DDG-51) class destroyer | 2 | 2 | 2 | 2 | 2 | 10 |
| FFG-62 frigate | 1 | 2 | 1 | 2 | 1 | 7 |
| LHA amphibious assault ship | 1 | 1 | ||||
| LPD-17 Fight II amphibious ship | 1 | 1 | 1 | 3 | ||
| Medium Landing Ship (LSM) | 1 | 1 | 2 | 2 | 2 | 8 |
| John Lewis (TAO-205) class oiler | 2 | 1 | 2 | 1 | 6 | |
| Light replenishment oiler (TAOL) | 1 | 1 | 1 | 3 | ||
| Submarine tender (AS[X]) | 1 | 1 | 2 | |||
| TAGOS(X) ocean surveillance ship | 1 | 1 | 1 | 1 | 4 | |
| TOTAL | 6 | 11 | 14 | 13 | 13 | 57 |
| Projected total size of Navy | 287 | 283 | 280 | 286 | 291 | n/a |
Source: Congressional Research Service, based on 2025 Navy budget submission.
Just as in other areas of defense, navies are adding drones to the mix of equipment. Maritime drones are being used as force multipliers9: for surveillance, mine-hunting and kamikaze strikes. However, they are additions to frigates and submarines rather than replacements.
Nevertheless, we should keep in mind that surging demand has also its risks, for example, contract cancellations, geopolitical tensions easing, budget re-prioritisation, escalation of project costs, currency fluctuations and export-licence revocations could all materially reduce order volumes and profits.
Scaling up to Meet Order Book Growth
What does this mean for the West’s defense contractors with naval shipyards? In short, they are having to expand their capacity quickly.
Take Huntington Ingalls Industries, currently the largest US naval shipbuilder, the sole builder of US aircraft carriers10 and a VanEck Defense UCITS ETF holding. With surging order books, it’s modernizing shipyards, hiring thousands of new workers and automating areas of production11.
In the UK, Babcock International, another ETF holding, is expanding and upgrading its shipyards12. Meanwhile, the Swedish defense group Saab, also in the ETF, acquired metal forming company Deform in August 2025 to bolster its supply chain for specialty components used in the production of submarines13.
For many of these companies, as with much of the wider defense industry, growth in order books provides greater confidence about revenues over the years to come. Set against that, though, is the risk that they will struggle to scale up sufficiently to deliver the ships and submarines that navies need on time. Labour shortages, supply-chain bottlenecks, penalties for late delivery, overruns in automation spending and adverse changes in ESG-related procurement rules may impair margins and share-price performance.
Broadly speaking, the wave of new orders and expectation of more to come has been driving share prices higher. Whether that continues depends on expected further orders arriving, despite budget constraints in some countries, and on the companies scaling up successfully.
3 Navy Lookout, September 2025.
5 Stiftung Wissenschaft und Politik, July 2025.
6 Source: CBO, An Analysis of the Navy’s 2025 Shipbuilding Plan, January 2025.
7 Source: US Congress, April 2025.
8 Source: CBO, An Analysis of the Navy’s 2025 Shipbuilding Plan, January 2025.
9 Equipment that significantly increases the effectiveness of existing military assets without replacing them.
10 Source: HII, July 2025.
11 Source: HII, March 2024.
12 Source: Defence Journal, September 2025.
13 Source: SAAB, August 2025.
IMPORTANT INFORMATION
This is marketing communication. Please refer to the prospectus of the UCITS and to the KID/KIID before making any final investment decisions. These documents are available in English and the KIDs/KIIDs in local languages and can be obtained free of charge at www.vaneck.com, from VanEck Asset Management B.V. (the “Management Company”) or, where applicable, from the relevant appointed facility agent for your country.
For investors in Switzerland: VanEck Switzerland AG, with registered office in Genferstrasse 21, 8002 Zurich, Switzerland, has been appointed as distributor of VanEck´s products in Switzerland by the Management Company. A copy of the latest prospectus, the Articles, the Key Information Document, the annual report and semi-annual report can be found on our website www.vaneck.com or can be obtained free of charge from the representative in Switzerland: Zeidler Regulatory Services (Switzerland) AG, Stadthausstrasse 14, CH-8400 Winterthur, Switzerland. Swiss paying agent: Helvetische Bank AG, Seefeldstrasse 215, CH-8008 Zürich.
For investors in the UK: This is a marketing communication targeted to FCA regulated financial intermediaries. Retail clients should not rely on any of the information provided and should seek assistance from a financial intermediary for all investment guidance and advice. VanEck Securities UK Limited (FRN: 1002854) is an Appointed Representative of Sturgeon Ventures LLP (FRN: 452811), which is authorised and regulated by the Financial Conduct Authority (FCA) in the UK, to distribute VanEck´s products to FCA regulated firms such as financial intermediaries and Wealth Managers.
This information originates from VanEck (Europe) GmbH, which is authorized as an EEA investment firm under MiFID under the Markets in Financial Instruments Directive (“MiFiD). VanEck (Europe) GmbH has its registered address at Kreuznacher Str. 30, 60486 Frankfurt, Germany, and has been appointed as distributor of VanEck products in Europe by the Management Company. The Management Company is incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM).
This material is only intended for general and preliminary information and shall not be construed as investment, legal or tax advice. VanEck (Europe) GmbH and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Information provided by third party sources is believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed.
VanEck Defense UCITS ETF (the "ETF") is a sub-fund of VanEck UCITS ETFs plc, an open-ended variable capital umbrella investment company with limited liability between sub-funds. The ETF is registered with the Central Bank of Ireland, passively managed and tracks an equity index. The product described herein aligns to Article 6 Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector. Information on sustainability-related aspects pursuant to that regulation can be found on www.vaneck.com. Investors must consider all the fund's characteristics or objectives as detailed in the prospectus or related documents before making an investment decision.
The indicative net asset value (iNAV) of the UCITS is available on Bloomberg. For details on the regulated markets where the ETF is listed, please refer to the Trading Information section on the ETF page at www.vaneck.com. Investing in the ETF should be interpreted as acquiring shares of the ETF and not the underlying assets.
The MarketVector™ Global Defense Industry Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Associates Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH (“MarketVector”), Solactive AG has no obligation to point out errors in the Index to third parties. VanEck’s ETF is not sponsored, endorsed, sold or promoted by MarketVector and MarketVector makes no representation regarding the advisability of investing in the ETF. It is not possible to invest directly in an index.
Investing is subject to risk, including the possible loss of principal. Investors must buy and sell units of the UCITS on the secondary market via an intermediary (e.g. a broker) and cannot usually be sold directly back to the UCITS. Brokerage fees may incur. The buying price may exceed, or the selling price may be lower than the current net asset value. The Management Company may terminate the marketing of the UCITS in one or more jurisdictions. The summary of the investor rights is available in English at: summary-of-investor-rights_sept2025.pdf. For any unfamiliar technical terms, please refer to ETF Glossary | VanEck.
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.
© VanEck (Europe) GmbH ©VanEck Switzerland AG © VanEck Securities UK Limited
Important Disclosure
This is a marketing communication. Please refer to the prospectus of the UCITS and to the KID before making any final investment decisions.
This information originates from VanEck (Europe) GmbH, which has been appointed as distributor of VanEck products in Europe by the Management Company VanEck Asset Management B.V., incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). VanEck (Europe) GmbH with registered address at Kreuznacher Str. 30, 60486 Frankfurt, Germany, is a financial services provider regulated by the Federal Financial Supervisory Authority in Germany (BaFin).
The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice VanEck (Europe) GmbH, VanEck Switzerland AG, VanEck Securities UK Limited and their associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results. Information provided by third party sources is believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. Brokerage or transaction fees may apply.
All performance information is based on historical data and does not predict future returns. Investing is subject to risk, including the possible loss of principal.
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.
© VanEck (Europe) GmbH / VanEck Asset Management B.V.
Related Insights
Related Insights
18 November 2025
12 November 2025
18 November 2025
12 November 2025