As China and US impose rival port fees, global shipping industry braces for disruption
Analysts say Beijing has left room to negotiate and could adjust its fees based on Washington’s actions.
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BEIJING: As China and the United States begin charging additional port fees on Tuesday (Oct 14), analysts warn the global shipping industry faces growing uncertainty and turmoil – though Beijing’s exemption of domestically built vessels is expected to limit the impact.
China announced retaliatory port fees last Friday and released implementation details in the first hour of Tuesday – the same day the Chinese and US measures took effect. Fees will be waived for vessels built in China and for empty vessels arriving for repairs.
Analysts note that as China is a major importer of energy and grain, its fees will mainly affect tankers and dry bulk carriers, prompting cargo owners and carriers to rethink deployments.
This could increase volatility in shipping rates over the short term, while US port fees are more likely to impact container cargo shipping, they added.
China’s port fee policy targets US-built, flagged, owned or operated vessels, as well as those owned or operated by any entity in which US individuals or businesses hold 25 per cent or more of the equity, voting rights or board seats.
“It is this latter stipulation that is the real kicker,” Roar Adland, global head of research at brokerage SSY, wrote in an online post, adding that the share of the worldwide fleet potentially ensnared by the additional fees is substantial.
“The 25 per cent plus ownership rule in China’s retaliatory measures extends the policy’s reach to even third-country vessels owned and operated by entities that have financial ties to the US, thereby casting a wider net over the global fleet,” analysts said in a note by HSBC Global released on Monday.
China’s port fees are set to put US agricultural exports at a considerable cost disadvantage.
Major iron ore traders, including Vale, reportedly have a significant portion of their ownership held by US investors and could also be heavily impacted, according to the HSBC report.
However, the exemption of China-built vessels announced on Tuesday has provided relief to cargo owners and carriers, given Chinese shipbuilders’ dominant share in the global industry.
About 36 per cent of the global fleet consists of China-built vessels, with the share rising to 48 per cent for dry bulk carriers, as well as 30 per cent for container ships and 23 per cent for crude oil tankers currently in trade, Jayendu Krishna, director at Drewry Maritime Research, said on Tuesday.
This gives operators greater flexibility and allows them to adjust vessel deployment, but operational challenges remain as shipowners may not have enough time to revise schedules, Krishna added.
Tankers, especially very large crude carriers, will be hit hardest as most of those in service were built in South Korea or Japan. The port fee scheme is likely to boost short-term demand for China-built vessels, Haitong Futures shipping analyst Lei Yue said on Tuesday.
Meanwhile, US port fees could subject the world’s top 10 carriers to US$3.2 billion in charges by 2026, with China’s state-owned Cosco Group’s fleet the most exposed, according to calculations by shipping data provider Alphaliner.
But Beijing has left room to negotiate, as its rules state that “the scope, rates and effective dates of the special port fees will be dynamically adjusted as needed”.
“If the US cancels the port fee, China’s fee will also be withdrawn. If the US reduces the fee rates, China will follow suit accordingly,” Ren Yanbing, a maritime lawyer and partner at law firm Dentons’ Guangzhou office, said on Tuesday.
This story was first published on SCMP.
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