China’s sanctions on US-linked units of shipbuilder Hanwha Ocean threaten to impact ambitious shipbuilding cooperation plans between Seoul and Washington by disrupting supplies of Chinese equipment and materials, officials in Seoul said on Friday.
Beijing announced the sanctions on Tuesday as the US and China began charging additional port fees on each other’s vessels, in the latest exchange in a protracted trade war ahead of a planned meeting between the two countries’ leaders.
South Korea has vowed to “Make America Shipbuilding Great Again” with a pledge of $150 billion in investment in the sector to help US President Donald Trump’s push to revitalise American shipbuilding and catch up with China.
Officials in Seoul said the decline of the US shipbuilding sector and the industries supporting it meant it would be impossible to supply all necessary materials and parts domestically.
“There is bound to be an impact,” said Seok Jong-gun, South Korea’s Minister of Defense Procurement Program Administration. “I don’t see how we can make all the materials and supplies for Philly Shipyard within the US. So if you’re going to get a lot of things to the US from South Korea, and you have sanctions and all kinds of obstacles to doing that, I’d say there’s going to be an impact on MASGA eventually.”
Hanwha also operates a shipyard in China’s eastern province of Shandong that builds ship component modules, according to a company filing. These modules are supplied to its shipyard in South Korea for final assembly.
While analysts said the Chinese sanctions would not have an immediate effect, they warned that they could signal tougher Chinese actions targeting South Korean shipbuilders cooperating with the US.
South Korean lawmaker Yu Yong-weon estimated the Chinese sanctions would cost Philly Shipyard $60 million over the next two years, citing potential supply disruptions and delayed vessel deliveries.
“This is not simply a trade issue but a grave matter that affects our economic security and industrial supremacy,” Yu said, adding that he visited the shipyard last month.
Philly Shipyard, based in Philadelphia, was acquired by Hanwha last year and is one of five subsidiaries in the US targeted by the new Chinese sanctions.
Hanwha’s South Korean competitors, HD Hyundai and Samsung Heavy Industries, are eyeing projects aimed at rebuilding US maritime capabilities, including work to build and maintain naval vessels.
Earlier on Friday, the US State Department condemned the Chinese sanctions as an “irresponsible” act that interferes with a private company’s operations and undermines South Korea–US cooperation on revitalising US shipbuilding and manufacturing.
“China’s actions...are the latest example in a long pattern of China’s attempts to coerce (South) Korea,” a spokesperson told Reuters.
Hanwha Ocean declined to comment on Yu’s estimate of potential losses.
China’s Commerce Ministry banned transactions and cooperation with Hanwha Ocean’s US-linked units, citing security risks stemming from their alleged involvement in US Government “investigative activities.”
South Korea’s investment plan in the US shipbuilding industry is the most concrete pledge yet in support of a trade deal aimed at cutting US import duties on South Korean goods.
(Reporting by Hyunjoo Jin, Jack Kim, and Heejin in Seoul, and David Brunnstrom in Washington; Editing by Chris Reese, Ed Davies, and Muralikumar Anantharaman)