As the United States increases trade barriers against China, the shipbuilding and shipping industry speculates that U.S. sanctions on Chinese-made ships could be on the horizon. Such sanctions would disadvantage South Korean carriers and shippers using Chinese vessels on routes to the Americas.
According to industry insiders, one of the primary topics at the Posidonia International Shipbuilding Exhibition 2024 in Athens in June was the U.S. government’s restrictions on the Chinese shipbuilding industry. Global shipbuilders and shipping companies expect potential U.S. tariffs on Chinese ships or, worst-case scenario, a complete ban on their entry to U.S. ports.
“Both parties in the U.S. have characterized Chinese shipbuilding as a risk, so it is likely that sanctions will be imposed regardless of the outcome of the election,” said a South Korean shipping industry official attending Posidonia. European carriers are reportedly delaying orders to Chinese shipyards or shifting their financing away from China.
The U.S. views China’s shipbuilding infrastructure as a significant risk. A June 5 report by the Center for Strategic and International Studies (CSIS), titled ‘Unpacking China’s Naval Buildup,’ noted that China’s warship fleet is now the largest in the world, with 234 ships, compared to the U.S. Navy’s 219 ships. China has been aggressively building warships, even in its merchant shipyards.
With global shipping companies distancing themselves from Chinese shipyards, Korea’s shipbuilding industry could benefit. For instance, Israeli shipping company Ray Shipping is reportedly only building new ships in Korean shipyards to avoid potential conflict between the U.S. and China.
Clarkson Research reports that at the end of May, China accounted for 51% of the global ship order backlog, with 67.84 million compensated gross tonnage (CGT), a unit of weight that considers a ship’s value-added and operational difficulties. Korea held 29% of the backlog or 39.07 million CGT.
Uncertainty is expected to grow for companies utilizing or ordering Chinese-built ships. Hyundai Glovis, which transports cargo for global automakers such as Hyundai Motor and Kia, ordered eight ships from Chinese shipyards in 2021 and about a dozen more between last year and early this year.
“Although Chinese ships are cheaper, it seems better to order ships from Korean shipyards to reduce geopolitical uncertainty,” a shipping industry insider said.
