The government has decided to impose a provisional anti-dumping tariff of up to 38% on Chinese thick plate (a thick steel product used in ships and vehicles), and this is expected to inevitably impact the domestic shipbuilding industry. Domestic steel manufacturers can breathe a sigh of relief, but small and medium-sized shipbuilders are likely to face a decline in price competitiveness due to rising costs.
According to the shipbuilding industry on the 21st, major shipbuilders are discussing countermeasures in response to the government's decision to impose anti-dumping tariffs on Chinese thick plates. The previous day, the Ministry of Trade, Industry and Energy held a meeting and decided to impose provisional anti-dumping tariffs on Chinese thick plates in the range of 27.91% to 38.02% based on preliminary survey results. After review by the Minister of Strategy and Finance, provisional tariffs on Chinese thick plates will be applied within a maximum of 50 days.
Domestic thick plates account for about 70% of usage in the shipbuilding industry. Thick plates make up about 20% to 30% of the shipbuilding cost, indicating their significant importance. They are used throughout the ship manufacturing process, including as exterior materials and internal equipment.
Until now, domestic shipbuilders have used Chinese thick plates to lower shipbuilding costs. The price of domestic thick plates is around 900,000 won per ton, while the price of Chinese thick plates is distributed at 750,000 to 780,000 won. If anti-dumping tariffs are imposed on the Chinese product, the price will become more expensive than domestic products.
A representative from a large shipbuilding company said, "In the case of liquefied natural gas (LNG) carriers, the price per vessel is about 360 billion won, and if the thick plate price rises by only 10%, production costs will increase by approximately 7.2 billion to 10.8 billion won."
The shipbuilding industry believes that small and medium-sized shipbuilders, which have a higher proportion of Chinese thick plate usage compared to large shipbuilders, will face greater impacts. The proportion of Chinese thick plates in total usage is about 20% for large shipbuilders and 40% to 50% for small and medium-sized shipbuilders. Small and medium-sized shipbuilders may find it difficult to secure orders if their cost competitiveness declines due to competition with Chinese companies over low-priced ships.
Some analysts argue that shipbuilders could effectively benefit from a duty-free status by utilizing the bonded factory system, suggesting that the impact of the anti-dumping tariffs may not be significant. A bonded factory is a designated zone where imported foreign raw materials are used under tax suspension conditions and exported without tariffs. Most shipyard yards are designated as bonded zones.
However, the tariff application methods vary by company depending on the customs clearance process for raw material imports. HD Korea Shipbuilding & Offshore Engineering, HD Hyundai Heavy Industries, and HD Hyundai Mipo, which are part of the HD Hyundai group, use a declaration method that allows them to work in bonded areas while deferring tariffs when importing materials and exporting them. If they import Chinese thick plates and manufacture ships in bonded areas for export, they do not incur tariffs. Therefore, even if anti-dumping tariffs are imposed on Chinese thick plates, it is expected that there will be no significant impact on export volumes.
In contrast, Hanwha Ocean and Samsung Heavy Industries use a method of reporting raw materials as general imports and paying tariffs. In the case of the import reporting method, almost no tariffs were applied due to the Korea-China Free Trade Agreement (FTA), but if anti-dumping tariffs are imposed, they will not be able to receive refunds after exporting vessels, resulting in the loss of the duty-free effect.
The industry expects that shipbuilders who previously used the import reporting method will switch to the usage reporting method like HD Hyundai to obtain duty-free treatment. Small and medium-sized shipbuilders, which have a higher proportion of domestic ship production, have lower utilization of bonded factories compared to large shipbuilders.
There are also observations that the anti-dumping tariff measures on Chinese thick plates may lead to an increase in ship orders for Chinese shipbuilders in the long term. This is because if domestic shipbuilders forgo orders due to rising thick plate prices, the corresponding quantities may shift to Chinese shipyards.