China’s largest ocean carrier already began ponying up significant fees just a week into the implementation of the U.S.-levied port docking fees on Chinese-owned and -built ships.
According to data from S&P Global’s maritime tracking database Sea-Web, Cosco Shipping and its subsidiary Orient Overseas Container Line (OOCL) paid $42.8 million in fees from Oct. 14-20.
Across a span of a full year, that would amount to a shade under $2.2 billion—coming close to projections that expected roughly $2.1 billion in total fees in the first year of implementation.
Sea-Web’s vessel tracking data indicated that eight Cosco-operated container ships and seven operated by OOCL made a U.S. port call in the week’s span. Those 15 ships carried a combined 855,718 net tons.
The U.S. Trade Representative’s (USTR) punitive measures first went into effect Oct. 14, and require vessel operators to pay surcharges of $50 per net ton for every individual voyage that stops at U.S. seaports. That charge will increase next April by $30 per net ton, which will be tacked on each year through 2028 until the fee reaches $140 per net ton.
Chinese-built ships owned by other carriers are incurring an $18 per net ton fee, with annual fee increases of $5 over the same period.
The fees vary for each ship depending on size and cargo carried. Cosco Shipping Jasmine, which carried 13,800 20-foot equivalent units (TEUs) from China to the Port of Savannah, had to pay a $4.25 million fee based on its net tonnage. Cosco’s 4,253-TEU Felixstowe forked over $1.2 million due to its smaller size.
Nine of the Cosco and OOCL ships were built in South Korea, while four were built in China and one in Japan.
Cosco and OOCL have always been anticipated to feel the largest impacts due to their size and Chinese state ownership. Competing carriers including Mediterranean Shipping Company (MSC), Maersk, Hapag-Lloyd and CMA CGM had all felt some level of initial concern, but those liners have switched out most of their Chinese-built ships on U.S. routes and have said they would not pass along the fees to U.S. customers.
Despite enduring the penalties, Cosco Shipping committed to maintaining “stable and reliable” service to meet the demands of the U.S. market. Both revenue and margins are expected to take hits from the new costs, especially the latter.
Projected EBIT margins are expected to take a 74 percent hit at Cosco, with OOCL’s being cut down 65 percent, according to a report from HSBC Global Investment Research.
China United Lines is the one other Chinese carrier that faced the fees in the first week, according to Sea-Web, when the 4,395-TEU, Korea-flagged SM Tianjin called at the Port of Seattle on Oct. 16. Based on its net tonnage, the vessel likely incurred a $1.3 million fee for that call.
Another four Chinese-built vessels at Israeli container shipping company ZIM docked at U.S. ports after Oct. 14, with the ships able to carry between 4,230 and 7,000 TEUs. Based on the total net tonnage, the carrier likely incurred fees between $450,000 and $700,000, Sea-Web said.
A U.S.-based carrier recently indicated that the port docking fees are cutting into their business as well. Atlantic Container Line (ACL) paid a $1.4 million tariff on Oct. 14 due to its unique container vessel construction and now forecasts a full-year bill of $34 million.
ACL’s ships carry 80 percent shipping containers, 10 percent roll-on/roll-off freight (such as tractors, construction equipment and passenger cars), and 10 percent oversized cargo like aircraft wings and data center machinery.
The company’s vessels travel along the trans-Atlantic shipping route, with five of the ships servicing the U.S. trade lane weekly.
American ports are dealing with their own problems and concerns over the wider effects of the ongoing tit-for-tat between the U.S. and China.
A report from World Cargo News indicated that multiple U.S. ports have already begun to pay tariffs on Chinese-operated ship-to-shore cranes ahead of an expected 100 percent duty increase starting Nov. 9.
Ports America in Gulfport, Miss. and Port Freeport in Texas are currently paying 30 percent tariffs on new cranes from Shanghai Zhenhua Heavy Industries (ZPMC) that arrived in September. Both port operators said they considered their options before receiving the cranes, but both ultimately decided to pay the tariff and take delivery of the equipment.
U.S. ports have spoken out against the impending triple-digit tariffs, urging the Trump administration to reconsider their decision. The protectionist measure, which targets China for violating Section 301 U.S. trade laws, is designed to bolster national security at American ports and incentivize domestic manufacturing of cranes.
Credit: Source link
