As the possibility of South Korean shipbuilders winning contracts for U.S. warships and vessel construction arises, shipyards are caught in a dilemma over the use of Chinese steel. The shipbuilding industry has imported a significant amount of cheap Chinese thick plates (thick steel plates with a thickness of 6mm or more) to maintain price competitiveness over domestic products. However, there are observations that, due to the Donald Trump administration's policy of blocking Chinese products, the likelihood of being unable to use Chinese steel for U.S. shipbuilding or maintenance, repair, and overhaul (MRO) work is high.
On the 10th, some in the industrial sector reported that the U.S. government might prohibit the use of Chinese steel or equipment on U.S. vessels or regulate ships that have used Chinese steel. After President Trump declared the revival of the U.S. shipbuilding industry, legislators in the U.S. have introduced several bills aimed at strengthening U.S. shipbuilding capabilities and outsourcing vessel construction to allied nations. The core goal is to regain the competitiveness of the U.S. shipbuilding industry and counter the hegemony of the Chinese shipbuilding sector.
The Office of the United States Trade Representative (USTR) cited overproduction of steel as one of the reasons behind China's dominance in the global shipbuilding sector in a report released just before President Trump's inauguration in January.
Thick plates account for 20-30% of the shipbuilding cost and significantly affect the profitability of shipyards. Major shipbuilders such as HD Korea Shipbuilding & Offshore Engineering, Hanwha Ocean, and Samsung Heavy Industries use about 20% of Chinese thick plates, while smaller shipyards use around 50%. Chinese thick plates are sold at a price 15-20% cheaper than domestic thick plates. If shipyards increase their usage of domestic steel, the expense burden will increase.
If the U.S. strengthens regulations targeting Chinese steel, domestic major shipbuilders eyeing opportunities in the U.S. shipbuilding market will have no choice but to reduce their reliance on Chinese steel.
The Korea Trade-Investment Promotion Agency (KOTRA) mentioned in a report released on the 27th of last month that there is a possibility the U.S. government will impose sanctions on the use of Chinese steel, stating, "It is necessary to assess the impact of U.S. sanctions on Chinese steel on the domestic shipbuilding industry's use of Chinese products." At a seminar held on the 5th by the Korea Steel Association and the Korea Shipbuilding and Marine Engineering Association, discussions also arose about the likelihood of the U.S. restricting imports of Korean vessels that used Chinese steel or imposing tariffs.
An official from a shipbuilding company noted, "Usually, the shipowner who places an order dictates the proportion of the origin, but it is premature to predict; we cannot rule out the possibility that they might request to exclude Chinese products."