The U.S. Trade Representative (USTR) has formally announced specific restrictions and charges following a 301 investigation into “China’s dominant position in the maritime, logistics, and shipbuilding industries” in an effort to curb the development of China’s shipbuilding industry. This move has triggered market turmoil and challenges for Chinese shipbuilders. However, industry organizations pointed out that due to the final version of the specific restrictions and charges “forced concessions”, the impact on China’s shipbuilding industry is limited.
HSBC analysis pointed out that based on the specific restrictions and charging measures announced by USTR, compared with the initial proposal, USTR decided to reduce charges on foreign shipowners who own Chinese-built ships, which will weaken the potential competitive advantage that Korean shipbuilders may have obtained. At the same time, it means that the investment decision-making risks of non-Chinese shipowners are significantly reduced, and they will continue to place orders with Chinese shipbuilders to build most types of ships.
In this regard, HSBC believes that “the strong competitiveness of Chinese shipbuilders in the global newbuilding market is largely unaffected.”
The reduction in port dues will reduce uncertainty in newbuilding decisions for non-Chinese shipowners, which is a major benefit for Chinese shipbuilders,” HSBC said. We expect Chinese shipbuilders to continue to lead in most market segments. In particular, newbuilding orders from Chinese shipbuilders are expected to see a rebound, given the recent price gap with Japanese and Korean shipbuilders.”
The latest order development of global liner giant Mediterranean Shipping Company (MSC) is the latest example of the above conclusion. The shipping company has ordered six 22,000 TEU liquefied natural gas (LNG) dual-fuel-powered ultra-large container ships from Chinese shipbuilder Hengli Heavy Industries, becoming one of the first international shipowners to return to China to place orders after the adjustment of the U.S. port fee, and releasing positive signals for more international shipowners to continue to choose Chinese shipbuilder for shipbuilding.
It is understood that USTR’s “forced concession” stems from the hearing on the proposed restrictive measures after the 301 investigation into “China’s dominant position in the maritime, logistics and shipbuilding industries” held from March 24 to 26. During the meeting, USTR’s proposed measures attracted a lot of criticism, so USTR decided to relax the restrictions on charges for non-Chinese shipowners and provide non-Chinese shipowners with a three-year fee exemption period when they meet the conditions.
The proposed U.S. port fees are scheduled to take effect on Oct. 14 and be phased in over three years, based on the results of a public hearing scheduled for May 19 and a subsequent final ruling.