The world’s second-largest shipping company, Maersk (Denmark), is igniting a bidding war between South Korea and China as it moves to order ultra-large container ships worth up to 4 trillion Korean won. Maersk is pushing to order up to 12 liquefied natural gas (LNG) dual-fuel propulsion container ships. The expected contract size alone is projected to reach $2.5 billion to $2.8 billion (approximately 3.47 trillion to 3.89 trillion Korean won).

This bidding war comes as the U.S. announced it will impose high port fees on ships owned by Chinese companies and Chinese-made vessels entering its ports starting October 14. South Korea’s shipbuilding industry expects to benefit from the U.S.-origin regulations, but the atmosphere remains that China is still ahead. This is because Chinese shipyards are diluting the adverse effects from the U.S. by emphasizing price, financial support, and quick delivery. South Korea’s shipbuilding industry, which emphasizes technological prowess, seems to find it difficult to respond.

◇U.S. ‘Port Fee Card’ Played, but Effect ‘Half-Hearted’
U.S. regulations on Chinese shipbuilding and shipping have been cited as the biggest variable in this year’s global ship order market. The U.S. Trade Representative, USTR, decided to introduce entry fees for ships owned by Chinese shipping companies and Chinese-made vessels entering the U.S. to check China’s dominance in shipbuilding and shipping. After a six-month grace period, it will take effect from October 14. Ships owned by Chinese companies will be charged $50 per ton, and ships built by Chinese shipyards will be charged $18 per ton. Ultra-large container ships of 24,000 TEU (1 TEU = 20-foot container) class must pay fees amounting to 4 billion Korean won.

Chinese state-owned shipping companies traveling to and from the U.S. will face a significant burden. According to global banking group HSBC, the burden on COSCO, China’s top shipping company, and its subsidiary OOCL alone is expected to reach up to $2.1 billion (approximately 2.7 trillion Korean won) this year. This corresponds to 5–7% of their sales.

Initially, the U.S. USTR considered imposing fees on all shipping companies with a high proportion of Chinese-made ships but shifted to imposing them only on Chinese-made ships. For global shipping companies, this allows them to respond by diverting Chinese-made ships to routes outside the U.S. It is known that Chinese COSCO proposed to its ‘shipping alliance’ partners, France’s CMA-CGM and Taiwan’s Evergreen, to replace ships built in South Korea and Japan on routes to the U.S.

◇Why the Expected Windfall for South Korea Remains Minimal
As the U.S. measures fall short of changing the global shipbuilding and shipping landscape, the windfall benefits South Korea expected have also weakened. In fact, the world’s third-largest shipping company, CMA-CGM, France, ordered 10 ultra-large container ships worth a total of $2.1 billion from Dalian Shipyard in China last month. The world’s top shipping company, MSC, Switzerland, also ordered 20 ships from five Chinese shipyards in July. Although South Korea participated in the bidding, it lost. South Korea’s strengths lie in eco-friendly technology and stable quality, but shipowners are currently more focused on cost reduction.

An industry source said, “The price difference reaches up to 20%, and financial packages like China’s loan support are so strong that it’s difficult to compete with technology alone.” If South Korea falls behind in this order, its strategy is to make up for it by securing orders in large LNG projects from Qatar and Mozambique.
Source: The Chosun Daily