Chinese shipping sector marred by operational, financial and tariff problems
China’s shipping sector which had hit rough seas in recent years due to operational and financial challenges is now being dragged into deep water by US-imposed tariffs. This has also caused losses to Chinese manufacturers and exporters. A steep decline in containers from China to the US and other parts of the world is reported as the local shipping industry loses its comparative advantage.
Hong Kong-based HLS group has cancelled at least 80 freight ship while the alliance of Ocean Network Express, HMM and Yang Ming Marine Transportation has suspended shipment “until further notice.” Alan Murphy, CEO of Sea-Intelligence, a global supply chain industry analysis firm, said the Chinese companies will be hurt as they dominated the vessels servicing the Asia to US trade routes. “We won’t go to zero containers, but we will see a decrease in containers and as a result, in the future, we will see a massive raft of blank sailings announced.”
Chinese state-run shipping company COSCO, the world’s largest shipping group, doubled its earnings in 2024. However, its fortunes are set to reverse now. It stares at a dip in the profit by 67 percent and 62 percent in 2025 and 2026 respectively. Orient Overseas International (OOCL) warned of uncertainties saying the effects of US tariff should not be underestimated. “The reshaping of the global supply chain will undoubtedly affect the container shipping market in the long term,” the company said.
Moreover, the newly announced docking fees up to USD 1.5 million per port call on China-built or Chinese-flagged vessels by the Trump government would make things worse for the Chinese shipping sector. “The Trump administration’s actions will begin to reverse Chinese dominance,” said US Trade Representative Jamieson Greer All this has become worrisome for China which has had 81 percent global market share for container vessels as Chinese ship manufacturers lose the contracts for building ocean carriers for major cargo firms.
The reduction is Chinese sea voyages is going to dump the export prospects of the local manufacturers. Zhang Haiyun, overseas sales director for a Chinese air purifier maker, said her company exports had to halt shipments after the US raised baseline tariffs on Chinese imports to 145 percent. “Basically, there are no freight companies willing to take orders because no one knows what will happen to the tariffs when the goods arrive,” Zhang said.
Notably, the Chinese shipping sector was grappled with operational and financial challenges even before the tariff war began. Things became tough after the Covid-19 pandemic caused massive disruption in the supply chain, leading to a surge in costs. “Everyone is in a difficult position. The intensity of the blow depends on their capacity to weather and manage risk and pressure,” said Jiang Tianqing, an exporter from Zhejiang province, expressing concern over the three times increase in the freight prices. Moreover, there are issues like shortage of skilled workers, port congestion and delays in shipments.
“Overcapacity and rising input turned many shipping companies into zombie firms as they were artificially kept alive by public money and beneficial credit schemes, said Organisation for Economic Co-operation and Development (OCED). “Overcapacity has been argued to be a key factor explaining the high share of ‘zombie firms’ and hence an increased risk of non-performing loans and solvency problems; severe cost cutting by the shipyards to sustain profitability levels; lower budgets for research and development (R&D); and growing trade tensions with third countries,” reads its policy paper.
Higher trucking fee due to heavy congestion at port, delays in clearing and disruption in manufacturing and supply chain, and prolonged voyage durations have reduced Chinese shipping industry’s comparative advantage. The Chinese shipping industry that was marred with operational and financial issues is now rocked by the US tariff. Implications are getting visible. Shipping companies have started discreetly deregistering their vessels from Hong Kong and moving operations elsewhere.
