New US Port Fees Target Chinese-Built and Owned Vessels

The United States Trade representative (USTR) has announced the implementation of port fees, or “Portpy,” targeting vessels either built in China or owned by Chinese entities. This measure, revealed on April 17th, is designed to address what the US perceives as unfair trade practices within the shipbuilding and shipping industries. The fees will be applied to shipping companies operating these vessels,including foreign car carriers (PCTCs),upon arrival at US ports.

Fee Structure Based on Cargo Volume

The newly introduced fees will be calculated proportionally to the volume of cargo onboard each vessel. This calculation will be based on the ship’s net tonnage, a measurement of the cargo space available, rather than the overall weight of the ship. Different types of ships, such as container ships, gas carriers, and bulk carriers, will have their net tonnage assessed accordingly.

This approach is seen as a more adaptable strategy compared to the previously considered flat fee of $1.5 million per vessel,initially proposed in February. The variable fee structure allows for a more nuanced response to the volume of trade being conducted.

South Korean Shipyards Poised to Benefit

Industry analysts suggest that South Korean shipbuilders stand to gain significantly from this policy shift. with China currently dominating the global shipbuilding market, securing approximately 70% of all orders last year, the new US port fees could level the playing field. South korea, holding the second-largest share at 16%, may see a surge in orders as shipping companies seek alternatives to Chinese-built vessels to avoid the additional costs.

The USTR’s announcement is expected to strengthen the negotiating position of South Korean shipyards in future contracts.This could lead to increased demand and possibly higher contract values for korean shipbuilding firms.

Examples of Shifting Contracts

Early indications suggest a potential shift in shipbuilding contracts. For instance, American energy giant ExxonMobil has reportedly paused a planned LNGBV (Liquefied Natural Gas Bunker Vessel) construction project initially slated for a Chinese shipyard. Furthermore, Capital Maritime, owned by Greek magnate Evangelos marinakis, is reportedly in discussions with HD Hyundai regarding a potential order for 20 vessels.

Impact on Shipping Companies and HMM

The new port fees are expected to impact global shipping companies operating routes to the Americas. Vessels typically deployed on these routes are large, frequently enough exceeding 10,000 TEU (Twenty-foot Equivalent Unit) capacity. Operating Chinese-built ships on these routes will now incur significant additional costs.

Korean shipping company HMM, which does not utilize Chinese-built vessels on its Americas routes, is also anticipated to benefit.Global shipping companies may increasingly favor HMM, potentially leading to higher freight rates to offset the new fees imposed on competitors using Chinese ships.

Industry Perspective

This is undoubtedly a burden for ship owners who operate vessels constructed in China.

Incentives for US LNG Carriers and Future Restrictions

In addition to the port fees, the US government has also unveiled plans to provide incentives for the construction of US-flagged LNG carriers within the next three years. This move signals a long-term strategy to bolster the domestic shipbuilding industry and potentially restrict the import of LNG carriers in the future.