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Never mind China, restoring US shipbuilding glory is a pipe dream

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The first involves a related US$20 billion of investment to improve port infrastructure. The second involves efforts to resurrect the moribund US shipbuilding industry. The initiatives smack of tilting at windmills. But they are also driven by alarm over China’s overwhelming dominance in shipping and logistics.

The numbers are stark. The latest UN data shows China as the leading shipbuilder with 47 per cent of the global gross tonnage of new commercial vessels in 2022. Together with South Korea and Japan, the three countries accounted for 93 per cent of the total. Put another way, China built 1,000 ocean-going vessels last year while the US produced 10.
At a time of post-pandemic “de-risking” and perfectly reasonable efforts to ensure resiliency in the world’s supply chains, such a scale of US shipbuilding dependency is a matter of concern. But are its latest responses practical or achievable?
Large liquefied natural gas (LNG) carriers under construction. China State Shipbuilding Corporation recently received an order from Qatar Energy to build 18 LNG carriers that will be among the world’s largest. Photo: VCG

Given that China has for several years accounted for almost half of the world’s newly-built ships, how could the US possibly maintain its global trade if it banned China-made ships? And how many decades would it take for the US to build up enough shipbuilding facilities to provide any semblance of self-reliance?

China’s dominance does not simply rest on its leadership in shipbuilding – born out of a need to carry its imports and exports, including between its many inland ports – but also on its strengths in areas from shipping containers and port cranes to port logistics software.

China, for instance, makes an estimated over 95 per cent of the world’s shipping containers. Is the US thinking about banning China-made containers too?

China also accounts for most of the giant new gantry cranes that lift containers onto and off ships across the world’s ports. Shanghai Zhenhua Heavy Industries, also known as ZPMC, controls around 70 per cent of the global market and supplies most of the roughly 200 cranes in use at US ports.
The Victoria International Container Terminal in Melbourne has bought two ship-to-shore cranes made by Shanghai Zhenhua Heavy Industries. Photo: VICT
Another paranoia-fed nightmare concerns America’s reliance on China’s Logink, a logistics supply chain platform that has become the pre-eminent container and port management platform in most ports worldwide. China provides it, often for free, in many of the 96 ports worldwide in which it has investments.
Given that China accounts for much of the world’s shipping container traffic and has over half of the world’s 10 biggest container ports, its development of the Logink platform seems perfectly natural, and it can deliver speedier and more efficient handling of containers between ports around the world.

But for the US, Logink constitutes a profound threat. “Logink’s installation and utilisation in critical port infrastructure very likely provides the [People’s Republic of China] access to and/or collection of sensitive logistics data,” warns the Department of Transportation Maritime Administration.

The link to a national security threat is simple: the US has an estimated 170,000 troops spread around 750 bases across the world, and most of the military equipment, supplies and fuel are transported by sea in contracted cargo vessels. In theory, much of this movement could be tracked using Logink.

This perhaps explains why the White House statement accompanying Biden’s executive order said: “The security of our critical infrastructure remains a national imperative in an increasingly complex threat environment.”

Shipping containers seen beyond Chinese flags on fishing boats near the Yangshan deep water port in Shanghai, on December 6. Chinese ports make up at least six of the 10 biggest in the world. Photo: Bloomberg

The likelihood that this suite of Chinese threats to national security will go away is small. China’s shipbuilders have orders in hand of around 140 million deadweight tonnes, according to the Ministry of Industry and Information Technology – about three years of work.

With the world shipping industry promising to “decarbonise” the global fleet by 2050, and over 98 per cent of this fleet running on fossil fuel, demand for new clean vessels is set to soar.

Even though Biden says he aims to rebuild the US shipbuilding sector, most experts see this as a pipe dream. Not only would it take decades to construct shipbuilding capacity, but after decades of neglect, the US lacks marine engineers and architects.

If China’s dominance is to be diluted, the main beneficiaries are likely to be shipbuilding powerhouses such as South Korea and Japan, or even the dark horse Vietnam, which has significant container-building capacity.

Concern over China’s dominance in a large number of areas is a legitimate concern, as is “de-risking” and ensuring economic resilience. But the US’ Sinophobia is more hindrance than help – and since paranoia feeds powerfully on itself, any change may be a long time coming.

David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades

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