Chinese ship sales plummet due to impact of US port plan

Shipping companies have almost stopped buying bulk carriers manufactured in China. This is because the industry is cautious about whether the Trump administration will levy historic port fees on Chinese-made ships.

According to a report by Bloomberg on April 2nd, based on data from Clarkson Research Services Ltd., only 4 second-hand Chinese-made bulk carriers were sold in March, the lowest since at least 2022, about one-fifth of the monthly level last year. Meanwhile, transactions for transport ships from Japan and South Korea remained almost unchanged during the same period.

Burak Cetinok, Research Director at Arrow Shipping in London, stated that there is currently a stronger interest in purchasing ships built in Japan compared to those built in China.

“The transaction volume and asset value both reflect this. Most of the ships that have changed hands in recent weeks are Japanese-built,” Cetinok said.

This phenomenon indicates that the proposal by the United States Trade Representative’s Office (USTR) has already had an impact on the market before its finalization and implementation, putting pressure on Chinese vessels.

On February 21st, USTR announced a proposal to impose high fees on Chinese shipping companies and any Chinese-made ships entering US ports. The proposal includes three categories of fees: charges for Chinese operators, charges for operators using Chinese-made ships, and charges for operators ordering ships from China.

Shipowners and analysts have been evaluating the impact of this proposal. Ships meeting the three conditions mentioned may face new fees of up to millions of dollars each time they enter a US port.

Clarkson previously stated that under the initial proposal, in some cases, fees per ship could theoretically reach up to $3.5 million.

Owners and companies leasing ships are also adjusting lease contracts to address the possible millions of dollars in fees that may arise when ships depart from and arrive at US ports.

Preliminary signs indicate that buyer caution may have affected the value of Chinese-made transport ships. Data from Clarkson shows that last week, the selling price of a Chinese-made ship was approximately $5.8 million lower than a similar Japanese transport ship. Prior to the announcement of the US Trade Representative’s proposal to charge fees on Chinese ships, ships of similar size and age were sold at $4.8 million less compared to ships manufactured outside China. Data from brokerage firm SSY indicates that discounts on Chinese new bulk carriers compared to those built in Japan have reached the highest level since early 2023.

However, the impact of the potential US fee policy varies depending on the ships. Cetinok of Arrow Shipping stated that the impact on 300-meter long Cape-sized bulk carriers is not as significant because they do not frequently dock at US ports.

Bilal Muftuoglu, Dry Bulk Research Director at Howe Robinson Partners, noted that the number of orders for small Chinese bulk carriers has also slowed down.

“When it comes to new shipbuilding activities in China, only one handysize bulk carrier was ordered in February, with none confirmed for March, which is highly unusual,” he said. In the first quarter, China had 13 such ships ordered, while Japan had 21.

He added that the higher number of orders for Japanese ships compared to Chinese ones is also unusual in recent times.

The US Trade Representative’s proposal to impose high port fees on Chinese-made ships aims to curb the dominance of the Chinese Communist Party in the global shipping industry. In 1999, China accounted for less than 5% in the global shipbuilding market share, but by 2023, it had exceeded 50%.

Considering the global shipping industry’s heavy dependence on Chinese ships, commercial shipping is seen as a significant lever Beijing can control. Any disruption to this system – whether accidental or deliberate – could trigger supply chain disruptions, a risk the US is trying to avoid.

While the proposal has gained union support, retailers may hold opposing views, concerned that additional costs will be passed on to consumers.