As the United States implements a policy imposing millions of dollars in fees on Chinese vessels and shipping companies traveling to and from its ports, there have been instances of canceled orders for Chinese vessels. Analysts suggest that a decline in demand for Chinese vessels could benefit the South Korean shipbuilding industry.
According to the shipbuilding industry on the 31st, ExxonMobil, an American energy corporation, canceled an order for two liquefied natural gas bunkering vessels (LNGBV) in China. They had secured slots for the construction of the vessels but did not place the final order, leading to the termination of the contract. This is the first instance of a canceled order for a Chinese vessel following a public hearing held by the United States Trade Representative (USTR) on the 24th (local time).
The U.S. government is pushing forward with a policy to impose fees of $1 million (approximately 150 million won) on vessels from Chinese shipping companies entering the U.S., and $1.5 million (approximately 220 million won) on Chinese vessels, totaling fees of $1 million to $3 million (approximately 150 million to 440 million won). Prior to the implementation of the policy, the USTR held a meeting to gather opinions from industry stakeholders. During the public hearing, concerns were raised that imposing fees on Chinese vessels and shipping companies would increase logistics costs and negatively impact exports of energy and agricultural products. However, there were also voices supporting the fee imposition in anticipation of the growth of the U.S. maritime industry.
The shipbuilding industry expects that demand for Chinese vessels will decline further in the future. While ExxonMobil has not disclosed the reason for canceling the vessel construction, analysts suggest that the policy of imposing fees on China may have influenced the decision. If the U.S. actually imposes millions of dollars in fees, there would be no incentive to choose Chinese vessels.
Currently, companies with a high proportion of Chinese vessels need to consider diversifying their fleets. According to Clarkson Research, approximately 70% of new vessel orders last year were won by China.
If demand for Chinese vessels decreases, South Korean and Japanese shipyards could benefit. According to the Congressional Research Service (CRS), as of 2023, China accounted for 51% of global ship deliveries, followed by South Korea (28.3%) and Japan (15.4%). With the increasing likelihood of fees being imposed on Chinese shipping companies and vessels, there is also a growing trend for premiums on non-Chinese vessels.
An individual in the shipbuilding industry noted, "The large LNGBV that ExxonMobil canceled was only feasible to build in China and South Korean shipyards, which could lead to orders coming to South Korea. Currently, South Korean shipyards have accumulated several years' worth of orders, making it difficult to secure slots."
The USTR plans to gather additional opinions until the 2nd of next month and will formulate a policy on port fees for China. The Korea Trade-Investment Promotion Agency (KOTRA) stated in a report on the 29th of last month that "the competitiveness of the U.S. shipbuilding industry is significantly lower than that of China, and there are expectations for the activation of South Korea's shipbuilding exports to the U.S.," adding that contracts for the maintenance, repair, and overhaul (MRO) projects of U.S. military vessels and new construction markets are also anticipated.