- China’s Shipbuilding Dominance Faces US Regulatory Pushback.
- Chinese-Built Ships Under Fire as US Weighs New Trade Measures.
- Global Shipping Faces Uncertainty as US Proposes Chinese Ship Levies.
China is unquestionably the leading power in dry bulk trade volumes and shipbuilding. Yet, the US also contributes considerably to world dry bulk trade. In 2024, the US was the fifth-largest dry bulk exporter in the world, shipping 311.6 million metric tons (mt), and the seventh-largest importer, at 124.9 million mt. China was the leading destination for US dry bulk exports, taking 16.9% of all shipments. The EU (including Britain) was in second place with 10.9%, while Japan and India each had a share of 9.3%, reports Break Wave Advisors.
Chinese-Built Ships’ Role in US Trade
In various ship sizes, Chinese-built dry bulk ships are an essential component in carrying US exports. Overpanamax, Kamsarmax, and Ultramax segments have over 50% of their US export cargo dependent on Chinese-built tonnage. Even in smaller ship types, including Panamax, Supramax, and Handysize, Chinese-built vessels are popular, although older versions.
The same trend is true for US dry bulk imports, as AXSMarine data indicate that most dry bulk commodities offloaded at US ports are carried by Chinese-built ships. This indicates the dominance of Chinese shipyards, which initially dominated dry bulk carrier production before moving on to more sophisticated ship types like tankers and container ships. Concentrating on mid-range bulkers (68,000-100,000 DWT), Chinese-built ships now represent 43.8% of the active fleet. But in the current order book, this proportion has risen to 80%, highlighting China’s growing dominance in this market.
Proposed US Sanctions on Chinese-Built Vessels
The US proposals against Chinese-built and owned vessels are in response to issues raised by US unions regarding the prevalence of shipbuilding by China. The suggested measures are as follows:
- Port fees of a maximum of $1 million per call for Chinese-owned vessels (or $1,000 per metric ton cargo capacity).
- An up-to-$1.5-million-per-call fee for a non-Chinese firm that has a Chinese-built vessel.
- A tiered port charge regime for firms that have fleets that consist of Chinese-built ships.
These proposals are still on the table, with a formal hearing planned on March 24 to discuss their possible implementation.
Legal Ambiguities and Industry Uncertainty
The shipping sector is left in the dark as to how these proposals would be drafted and implemented. Critical areas of confusion are:
- What constitutes a Chinese operator — if and how it will encompass subsidiaries and joint ventures involving minority Chinese equity.
- How will it handle ships under sale-and-leaseback schemes now that Chinese leasing companies are such significant figures in global shipping finance?
- Whether the ships operated by Chinese companies but owned by others who are not Chinese (and vice versa) would be included.
- Whether the Hong Kong firms and Hong Kong-registered vessels are included within these rules.
These doubts resonate with previous fears of Chinese control over strategic maritime infrastructure, including Hutchison Ports’ previous ownership of strategic ports on both sides of the Panama Canal. This resulted in a $22.8 billion transaction where Hutchison Ports sold control to a US-headquartered consortium led by BlackRock Inc.
Potential Market Disruptions and Alternative Beneficiaries
If these proposals are forced through suddenly, industry analysts predict serious disruptions to US trade volumes, reduced transactions, and the development of a two-tier freight market. But some groups would stand to gain from these regulatory changes:
- Non-Chinese Shipbuilders – Being the only feasible option for dry bulk shipbuilding outside of China, Japanese shipyards are the only alternative left to capture more demand. Still, they are at their full capacity until 2028.
- Japanese-Built Bulk Carriers – Even older Japanese-built bulkers might experience higher demand in the time charter market for US grain and coal exports. During a downturn in freight, such vessels might hold their value as shippers look for alternatives to Chinese-built vessels.
- Specialized Ship Operators – Some operators might position “non-Chinese” freight services, much in the same way that some operators have branded “green” freight services during the decarbonization phenomenon.
- Transshipment Business Expansion – Businesses might relocate operations to other neighbouring nations, employing Chinese-associated boats for the first leg and non-Chinese vessels for the second leg. Yet US officials are already shutting down such loopholes in commerce.
Impact on Liner versus Tramp Shipping
The suggested constraints would have a varied impact on liner and tramp shipping. Liner shipping lines might transfer port fees and extra charges to consumers in the form of surcharges, such as Peak Season Surcharges (PSS) and Bunker Adjustment Factors (BAF).
Tramp shipping operators, however, do not have direct contractual arrangements with cargo owners, which will make it more difficult to recover these added expenses.
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Source: Break Wave Advisors
