- ExxonMobil Cancels Chinese Ship Order Amid Looming U.S. Tariffs.
- China’s Shipbuilding Dominance Faces Threat as U.S. Weighs Port Fees.
- South Korea’s Shipbuilders Poised to Gain as U.S. Targets Chinese Ships.
As the United States proceeds with plans to charge Chinese-built ships and Chinese shipping companies with substantial port fees, some companies are already reconsidering their shipbuilding orders. On March 31, industry sources confirmed that ExxonMobil had cancelled an order for two liquefied natural gas bunkering vessels (LNGBVs) originally ordered to be built in a Chinese shipyard. While the company had acquired production slots, it eventually decided to void the order. This is the first reported cancellation of a Chinese shipbuilding order after a March 24 public hearing by the Office of the United States Trade Representative (USTR), reports The Chosun Daily.
Proposed Port Fees and Their Potential Impact
The U.S. is presently considering a plan that would charge Chinese ships and shipping companies between $1 million and $3 million in port charges when they call at American ports. Under the proposed system, a $1 million charge would be made on ships owned by Chinese shipping companies, and a $1.5 million charge on ships built by China.
At the USTR hearing, industry participants had differing opinions regarding the effect of the proposed fees. Some cautioned that the added expense would increase logistics costs and undermine U.S. exports of energy and agricultural products. Others welcomed the action, stating it would revive the domestic shipping industry.
Falling Demand for Chinese Ships
Industry analysts predict demand for Chinese-built ships will fall further. Although ExxonMobil has not officially explained its decision to cancel the order, most assume the impending tariffs were a major influence. With overall fees costing millions, firms might find few reasons to choose Chinese-built ships.
Shipping companies that have fleets dominated by Chinese-built vessels are now rethinking their sourcing strategy. As per U.K.-based Clarkson Research, almost 70 percent of ship orders worldwide in 2023 were placed with Chinese yards.
Opportunities for South Korean and Japanese Shipbuilders
A possible decline in Chinese orders would provide new opportunities for South Korean and Japanese shipbuilders. Statistics by the Congressional Research Service indicate that China delivered 51 per cent of the world’s ships in 2023, followed by South Korea at 28.3 per cent and Japan at 15.4 per cent. With the likelihood of U.S. tariffs on Chinese ships and shippers increasing, demand for non-Chinese ships is increasing.
“The large LNGBVs that ExxonMobil canceled can only be built in China and South Korea, so the orders may shift to Korean shipyards,” an industry official said. “But Korean yards are already facing a backlog that stretches several years, so securing a production slot won’t be easy.”
U.S. Market Prospects for South Korean Shipbuilders
Public comments on the new port fee policy are being accepted by the USTR until April 2. In a March 29 report, the Korea Trade-Investment Promotion Agency (KOTRA) indicated that the American shipbuilding sector is still far less competitive compared to China. The agency indicated the current scenario can potentially open opportunities for South Korean exporters in the American market, specifically in MRO services of naval vessels for the U.S. military and new shipbuilding contracts for the U.S. Navy and Coast Guard.
As port fees are debated, shipping companies around the world and shipbuilders will keep their eyes glued on how policies in the United States will direct the future of the maritime business.
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Source: The Chosun Daily
