China Imposes Sanctions on US-Linked Units of Hanwha Ocean

China has imposed sanctions on five US-linked subsidiaries of South Korean shipbuilder Hanwha Ocean, escalating trade tensions between the two largest economies. This announcement, made on October 14, 2023, has resulted in a significant decline in Hanwha’s share prices. The Chinese Ministry of Commerce stated that organizations and individuals within China are now prohibited from engaging in any transactions or cooperation with these Hanwha entities.

The sanctions come on the same day that both China and the US enacted additional port fees targeting each other’s vessels. Notably, ships built by Hanwha will be exempt from these fees. The Chinese government accused Hanwha Ocean’s US-related subsidiaries of supporting the US government’s investigative activities, which they claim threaten China’s sovereignty and security. The statement did not provide further details on these allegations.

Hanwha did not immediately respond to requests for comment from Reuters. Earlier this year, the company announced a substantial investment of US$5 billion in the Philly Shipyard, which it acquired in 2024 for US$100 million. This investment was part of a broader commitment by South Korea to inject up to US$150 billion into the US shipbuilding industry.

The US, under the administration of former President Donald Trump, has sought assistance from allies like Japan and South Korea to revitalize its shipbuilding sector, which has struggled against Chinese competition, particularly in the manufacturing of warships. In September, reports indicated that Hanwha’s domestic rival, HD Hyundai Heavy Industries, the world’s largest shipbuilder, is also pursuing acquisitions of US shipyards.

Hanwha operates a shipyard in Shandong, China, where it builds modules for ship components. These modules are then sent to South Korea for final assembly. Following the announcement of the sanctions, Hanwha Ocean’s shares fell by 5.3 percent to 4.17 at GMT 04:00, while shares of HD Hyundai Heavy dropped by 4.4 percent.

Earlier this year, the Trump administration introduced plans to impose fees on ships linked to China, aiming to counter Beijing’s influence on the global maritime industry and strengthen US shipbuilding capabilities. In retaliation, China announced its own port fees on US-linked vessels to coincide with the implementation of US fees. Chinese officials have characterized these US measures against their maritime sector as violations of international law and fundamental norms of international relations.

The ongoing trade disputes and sanctions could have lasting impacts on the shipbuilding industries in both nations, raising concerns among stakeholders about the future of international maritime trade.