Industry is on edge after the Chinese government announced sanctions on five U.S. subsidiaries of Hanwha Ocean and hinted at additional investigations and follow-up measures.
China's Ministry of Commerce on the 14th (local time) announced sanctions against Hanwha Ocean and said it would "launch investigations into acts by the United States and some countries and corporations that endanger the security of industries such as shipping and shipbuilding and the development interests of Korea," signaling new probes to come. China's Ministry of Transport also said it would investigate whether corporations engaged in, cooperated with, or supported "discriminatory measures by the United States," adding, "Based on the progress of the investigation, we will introduce corresponding measures at an appropriate time as a follow-up."
Industry is watching whether China may ban exports of steel plate, a core shipbuilding material. Including Hanwha Ocean, shipbuilders such as HD Hyundai Heavy Industries and Samsung Heavy Industries use Chinese steel plate for about 20% of their total consumption. Chinese steel plate is 10%–30% cheaper than domestic product.
A shipbuilding industry official said, "Steel plate, a core material, is directly tied to revenue, so diversifying the supply chain is crucial. If China restricts exports, there is no way to avoid damage." If Chinese steel plate supply is blocked, smaller shipbuilders facing fierce price competition will be hit harder. By contrast, demand for domestically produced steel would rise, giving the domestic steel industry a boost.
On Mar. 23, China prepared implementing rules for the Anti-Foreign Sanctions Law, spelling out the legal basis to sanction discriminatory measures against China. It codified the authority to impose legal sanctions not only on "discriminatory measures against China" but also on "acts of cooperation and support."
Jin Sil, senior research fellow at the Institute for International Trade, noted in a report in Apr., "Even indirect cooperation with or support for (China's sanctions) could trigger counter-sanctions, so special caution is required of our corporations."
The Anti-Foreign Sanctions Law defines sanction targets as "foreign organizations and individuals that carry out, support, or endorse acts that harm China's sovereignty, security, and development interests," and the industry believes that, depending on the Chinese government's interpretation, corporations that merely invested in the United States could also be subject to sanctions.
Commissioner Jin Sil said, "Because the law was intentionally worded (ambiguously) so that targets can be included depending on interpretation, any industry could face additional sanctions. If you look at the detailed provisions, they even allow for lawsuits."
An industry official said, "All corporations that have invested in the United States can be targeted now, so the automobile, semiconductor, petroleum, and steel industries are all on edge," adding, "We are trying to discern China's intentions." Sanctioned corporations would face entry restrictions, asset freezes (seizure, detention, and freezing of real estate and other property in China), and bans on transactions related to China.
Senior Commissioner Jin Sil warned that a defense system should be put in place in preparation for possible additional sanctions. Jin said, "This Hanwha sanction is the first case against a large non-U.S. manufacturing corporation since China enacted the Anti-Foreign Sanctions Law in 2021," adding, "The government should activate consultation channels at the national level, and corporations should prepare defenses by including risk clauses on inter-state sanctions."