Beijing [China], October 19: China's sanctions on U.S.-linked units of shipbuilder Hanwha Ocean threaten to impact ambitious plans for shipbuilding cooperation 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 U.S. 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 of the two countries' leaders.
South Korea has vowed to "Make America Shipbuilding Great Again" with a pledge of $150 billion of investment in the sector to help U.S. President Donald Trump's push to revitalise American shipbuilding to catch up with China's.
The decline of the U.S. shipbuilding sector and the industries needed to support it made it impossible to supply materials and parts from within the U.S., officials in Seoul said.
"There is bound to be an impact," South Korea's Minister of Defense Procurement Program Administration Seok Jong-gun said.
"I don't see how we can make all the materials and supplies for Philly Shipyard within the U.S.," Seok said in a parliamentary hearing on Friday.
"So if you're going to get a lot of things to the U.S. 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 (042660.KS), opens new tab also runs a shipyard in China's eastern province of Shandong that builds modules of ship components, a company filing showed. It supplies the modules to its shipyard in South Korea for final assembly, according to the firm.
While analysts said the Chinese sanctions would not have an immediate impact, they may be a harbinger of tougher Chinese actions that could hit South Korean shipbuilders cooperating with the United States.
'NOT SIMPLY A TRADE ISSUE'
South Korean lawmaker Yu Yong-weon estimated the Chinese sanctions would cost Philly Shipyard $60 million over the next two years. Yu did not give a breakdown of the estimate but cited likely disruptions of supplies to the shipyard and delayed delivery of vessels.
"This is not simply a trade issue but a grave matter that affects our economic security and industrial supremacy," said Yu, adding he visited the shipyard last month.
Hanwha Ocean declined to comment on the lawmaker's estimate on losses, but a statement from Hanwha USA, a subsidiary, said it was reviewing the details of the Chinese announcement and added: "Hanwha will continue to provide world-class maritime services to our customers, including through our investments in the U.S. maritime industry and via Hanwha Philly Shipyard."
Philly Shipyard, in Philadelphia, was bought by Hanwha last year and is one of five subsidiaries in the U.S. hit by the new Chinese sanctions.
Hanwha's South Korean competitors, HD Hyundai (267250.KS), opens new tab and Samsung Heavy Industries (010140.KS), opens new tab, are eyeing projects envisioned for rebuilding U.S. maritime capabilities including work to build and maintain navy vessels.
Earlier on Friday, the U.S. State Department criticised the Chinese sanctions as an "irresponsible" act that interferes with a private company's operations and undermines South Korea-U.S. cooperation on revitalising U.S. shipbuilding and manufacturing.
"China's actions . are the latest example in a long pattern of China's attempts to coerce (South) Korea," a spokesperson said in a statement to Reuters.
China's Commerce Ministry banned transactions and cooperation with Hanwha Ocean's U.S.-linked units, citing security risks stemming from what it said was their involvement in the U.S. government's "relevant investigative activities".
South Korea's investment plan in the U.S. shipbuilding industry is the most concrete of pledges made to support a trade deal aimed at cutting U.S. duties on South Korean goods.
Source: Fijian Broadcasting Cooperation
