The Austal Limited (ASX: ASB) share price has been a strong performer on Wednesday.
In afternoon trade, the shipbuilder's shares are up over 4% to $1.95.
Why is the Austal share price charging higher?
The catalyst for the rise in the Austal share price today has been the release of an announcement.
According to the release, the company's US business has been awarded its first steel vessel construction contract by the United States Navy.
The US Navy contract is worth a total of US$145 million (~A$198.5 million) and is for the construction of two Towing, Salvage, and Rescue ships (T-ATS 11 and 12).
The release also notes that the contract includes options for up to three additional T-ATS ships. If these options were exercised, it would bring the total cumulative value of the contract to US$385 million (~A$528.6 million).
This contract award follows the initial award of a US$3.6 million contract by the United States Navy for the functional design of the Navajo-class T-ATS vessels.
Management notes that the T-ATS contract is the first steel ship construction program awarded by the United States Navy to Austal USA. It will also be the first program to be delivered in the new steel shipbuilding facilities, which are nearing completion at the shipyard in Mobile, Alabama.
The Navajo-class T-ATS has ocean-going tug, salvage, and rescue capabilities and a multi-mission common hull platform, capable of towing heavy ships. These ships will be able to support the US Navy in a variety of missions. This includes oil spill response, humanitarian assistance, and wide area search and surveillance.
"An exciting milestone"
Austal's Chief Executive Officer, Paddy Gregg, was very pleased with the news.
He believes the contract is an exciting milestone in the history of the company and a great demonstration of its new steel shipbuilding capabilities in the United States.
Mr Gregg added: "This is great news for Austal USA as they enter a new era of steel shipbuilding in the United States, supporting the Navy's requirements for steel ships."
Positively for the company, and potentially the Austal share price, this is just one of several steel shipbuilding programs Austal USA is pursuing as it diversifies its capabilities. Shareholders will no doubt be hoping the company has similar success with those submissions.
