Shares of Yangzijiang Shipbuilding dived around 16 per cent on Thursday (Feb 27) morning, a day after it posted earnings and in a week when the US proposed to slap fees on Chinese-built vessels entering US ports.
Just past 10 am, the shares of the Singapore-listed maritime vessel maker plummeted to roughly S$2.28, that heavy selling wiped S$1.5 billion off its valuation.
That plunge built from already-heavy losses incurred earlier in the week. Its shares were at S$3.30 a week earlier, representing a weekly loss of nearly 31 per cent. At 10.40 am, the shares pared some losses to trade at S$2.29, or a 14.55 per cent decline. About 71 million shares changed hands.
On Feb 21, the US Trade Representative (USTR) office proposed to hit Chinese-built vessels entering US ports with fees of up to US$1.5 million, as part of investigations into China’s rising dominance in the global shipbuilding, maritime and logistics sectors.
The probe’s findings, published in January, were that China’s global shipbuilding tonnage share rose significantly over 1999 to 2023 from 5 per cent to 50 per cent due to hefty state subsidies and preferential treatment for state-owned businesses that are hurting international competitors, Reuters reported.
It is proposing port entrance fees of up to US$1 million per vessel owned by Chinese maritime transport operators, or alternatively, a charge of US$1,000 per net tonne of a vessel’s cargo capacity.
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On Wednesday, Yangzijiang reported a net profit of 3.6 billion yuan (S$659.3 million) for the second half ended Dec 31, 2024 – 50.5 per cent higher than the 2.4 billion yuan recorded in the corresponding period a year earlier.
For the full year, it reported a net profit of 6.6 billion yuan, a 61.7 per cent increase from 4.1 billion yuan in the 2023 financial year.
DBS in a note on Thursday said that the sell-off on the news on US port charges was overdone.
“USTR proposes to impose port fees for Chinese-built vessels that enter US ports for every port calls last Friday, sending Yangzijiang’s share prices on downward spiral,” it said.
“Subsequent broker downgrades exacerbated the sell-off. We believe the knee-jerk reactions are overblown,” it said.
DBS noted that the US proposal is pending review on Mar 24, and the “materiality” of the new policy is yet to be determined.
It also believes shippers are likely to pass on those additional port fees to consumers via higher surcharges.
DBS also implied demand for Chinese shipyards might not get affected very much.
“Avoid placing orders with Chinese shipyards entirely might not be plausible, especially since the Korean yards are also very full, while US shipbuilding is uncompeitive at two to three times the costs of Asian shipyards,” it wrote.
“Hence, we opine that the news brings about uncertainty and impacts new ordering sentiment.”
