Oil traders are avoiding hiring tankers built in China amid concerns that port fees could be coming for Chinese vessels at U.S. ports as part of a plan by President Donald Trump to revitalize the American shipbuilding industry.
Under the plan – not yet finalized – the Office of the US Trade Representative (USTR) proposes a per-port-entry fee of up to $1.5 million on Chinese-built vessels, and up to $1 million per-port-entry fee on any vessel (Chinese built or non-Chinese-built) for operators that have any Chinese-built vessels in their fleet or orderbook.
The proposal is up for consultation and discussion and has already drawn criticism from many companies and business sectors, including U.S. agriculture producers and the Agriculture Transportation Coalition.
Oil traders will also see an impact as chartering non-Chinese vessels – where and when available – could upend global supply chains at a time when trade wars begin.
Now, oil traders and charterers that are booking vessels to call, load, or discharge cargoes at U.S. ports are seeking vessels not built in China, market sources told Bloomberg.
When there are alternatives, the traders now prefer non-Chinese tankers, with South Korean ships being the preferred option. South Korea-built vessels are already being chartered at higher rates than the China-built ships, according to Bloomberg’s anonymous sources.
South Korea has more oil tankers as a proportion of the global tanker fleet, but China accounts for over 70% of the number of vessels under construction, per estimates from Clarksons Research.
The proposal of the port fees could backfire with threatening the survival of the U.S. cargo carriers, executives testified last month in hearings on the plan.
The World Shipping Council (WSC) CEO, Joe Kramek, said at the USTR hearing,
“These proposals will result in increased costs for U.S. exporters and consumers as well as supply chain inefficiencies, while failing to provide China with effective incentives to alter its acts, policies, and practices.’’
“Economic impacts would reverberate throughout the economy, adversely impacting businesses, consumers, and especially farmers who export price-sensitive commodities,” Kramek added.
By Charles Kennedy for Oilprice.com
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The plan under study proposes a per-port-entry fee of up to $1.5 million on Chinese-built vessels, and up to $1 million per-port-entry fee on any vessel (Chinese built or non-Chinese-built) for operators that have any Chinese-built vessels in their fleet or orderbook.
This is another brainless plan by Trump which is doomed to fail miserably. Moreover, oil traders will have to use Chinese built-tankers and other vessels whether they like it or not for the following reasons:
1- China has 1194 tankers of all sizes with total capacity of 1.1 million dwt. Being the world's largest importer of crude oil, it will use its own tankers along with many tankers from friendly countries and shadow fleets of oil tankers to bring its crude imports home.
2- China's shipbuilding market share accounts for 50% of the global market. It also controls 95% of shipping container production and 86% of the world's supply of intermodal classics.
3- Like trying to rebuild the United States' shrinking manufacturing sector, it will take years to rebuild its shipbuilding industry. The US doesn't have the luxury for that with being the world's largest importer importing in 2024 $4.0 trillion of goods.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert