Perth-based shipbuilder Austal is at the same time moving to end a joint business venture in China, weeks after the ABC revealed faulty aluminium from Wuhan had forced delays to one of its Australian defence projects.

In a local media briefing, Australia's ambassador to the Philippines, Steven Robinson, confirmed Austal was closing in on a takeover of the Hanjin shipyard in the strategically important Subic Bay.

"I'm hopeful that there will be some progress made in the next month or two that [will] see a finalisation of all those negotiations," he said on Monday.

"It's still kind of commercially in confidence so I can't get too much into the details, but nevertheless, let's hope that there's a positive outcome, which will see Austal expand further here in the Philippines."

The harbour, once known as Naval Base Subic Bay, was home to thousands of American sailors and their families before the US Navy left in 1992.

Australian and American warships still regularly make port calls, and US marines practice beach landings nearby in Zambales province.

In 2019, a pair of Chinese companies signalled interest in Subic Bay, but the Austal bid — which is backed by US interests — has long been considered the strongest contender.

Subic's importance has grown in recent years with China's military expansion in the nearby South China Sea, where it has rapidly built-up artificial islands in the contested waters.

Tensions between Beijing and Manila over the South China Sea rose this week after the Philippines' Foreign Secretary published an obscene tweet to order Chinese ships to leave his nation's exclusive economic zone (EEZ).

Austal's bid for the Hanjin shipyard in Subic Bay has been welcomed by the Australian Strategic Policy Institute's Peter Jennings, a leading critic of the Chinese lease of Darwin Port.

"As Austal moves into Subic Bay it's not going to be there to promote the agenda of the Australian government, it's only going to be there to promote business and engineering interests and to run the port efficiently.

"There's a massive difference between how Australian business operates or American business operates and how China operates, and the difference is this thing called the Chinese Communist Party," Mr Jennings told the ABC.

In a statement, Austal declined to comment on the Subic Bay bid, but said it was "continually assessing opportunities to further expand its operations if they align with our growth strategy".

Austal moving to end Chinese business venture amid growing strategic concerns

Last week, Austal announced it had begun talks to sell its 40 per cent stake in a Chinese shipbuilding business set up five years ago, amid deteriorating relations between the two countries.

In 2016, Austal established Aulong Shipbuilding, a joint venture with Jianglong Shipbuilding, to build commercial passenger and non-military vessels for the Chinese market.

The ABC in March revealed poor quality aluminium imported from China by Austal had caused delays to the Royal Australian Navy's new $350 million evolved Cape Class patrol boats.

During a subsequent Senate estimates hearing, the Navy confirmed the "unacceptable" aluminium had been sourced from Wuhan in February 2020, at the time the COVID-19 pandemic was emerging.

In a recently recorded podcast, Austal's founder and chairman, John Rothwell, revealed the faulty product was incorrectly certified, and the Chinese supplier may have also provided poor quality material for other Australian defence projects.

"The supplier gets its aluminium from around the world, in this case it was from China, now I think with that it's also identified that the supplier has supplied other material for even other defence projects that's also now coming into question," Mr Rothwell told the No Limitations podcast.

Story By | Andrew Greene