Concern of maritime industry for Tump Tariff on Chinese ships

Contents

1.        Introduction

2.        Monetary Impact on shipping lines

3.        Impact of the imposition of charges

4.        Economic contribution of Chinese shipbuilding industry to China

5.        Shift of shipbuilding industry

6.        Conclusion

   
   

   Let’s begin

1.       Introduction

In this blog we will discuss how shipping lines will be impacted by trade war between America and China and by the US sanctions in Chinese ships.

As discussed in our earlier blog- USTR (United states Trade Representative) has proposed US sanctions on Chinese ships either built by Chinese agencies or directly handled by Chinese shipping lines(like COSCO). The charges proposed are approx. 1 million USD for ships handled by Chinese shipping lines and up to 1.5 million USD for ships manufactured by Chinese agencies. The next meeting will be held on 24th Mar’ 2025 by USTR to discuss further on the implementation of the charges.

This is an outcome of increase of Chinese dominance in the maritime industry in last 25 years, presently China builds approx. 50% of Global commercial ships, America builds less than 1% of the Global commercial ships. In our earlier blogs we have already shown the increase of shipbuilding in China as in below image

Apart from above, China has already secured 66% of global ship building orders which will increase its share further .

2.       Monetary Impact on shipping lines 

Below is the analysis for the increase in Ocean Freight per TEU for both US East  coast and US West Coast, it’s a comparison of cargo flow from Asia for Europe

Asia for US East coast shipments

•        Average TEU capacity per vessel – 8000 – 15000 TEU

•        Average number of port calls in USA per vessel on a rotation – 4 ports

•        Present CCFI (China Container Freight Index) per TEU – 3500 USD

•        Additional Freight increase per vessel / per port – 1.5 million USD

•        Additional Freight increase TEU for 4 ports – 400 USD

  
  

  Asia to US West Coast

•        Average TEU capacity per vessel – 8,000 – 10,000 TEU

•        Average number of ports calls in USA per vessel on a rotation – 4 ports

•        Present CCFI (China Container Freight Index) per TEU – 3500 USD

•        Additional Freight increase per vessel / per port – 1.5 million USD

•        Additional Freight increase TEU for 4 ports – 1000 USD

   

Above data is as per the answer given in an interview by MSC CEO Soren Toft on question of US tariff on Chinese ships

3.       Impact of the imposition of charges

·       Effect on shipping line for US trade lanes - Ripple effect on vessel disruption / freight increase and supply chain disruption.

·       Effect on adaption of shipping lines – If implemented then it would be sudden and shipping lines wont able be able to adapt so quickly thus a sudden freight increase will be seen, few shipping lines might also cut the route to USA to avoid loss due to higher freight loss.

·       Increase in consumer price – The higher ocean freight charges will be passed on to USA importers.

·       Escalation of global trade war – It will be a ripple effect and both USA and China will keep on adding tariff which will be impacting both the nations as they are heavily dependent on each other on many factors.

Below is the approx. share for only top 5 Shipbuilding countries for 2023 with approximate value as per  market data. ( Since it shows the share of only top 5 countries thus there is a small variance in the share of each country which is on higher side) 

Source - https://www.visualcapitalist.com/countries-dominate-global-shipbuilding/

4.       Economic contribution of shipbuilding industry to China

As per the data shared by The state Council of The People’s Republic of China, the China association of national Shipbuilding industry grew by 20% in 2023 and the revenue increased to approx. 88 billion USD.

Also for CSIC (China Shipbuilding Industry Company Limited) one of the largest state owned company in this sector the revenue for 2023 was 58.8 Billion USD.

Source - https://english.www.gov.cn/archive/statistics/202402/14/content_WS65cc54bcc6d0868f4e8e4020.html?utm_source=chatgpt.com