Market Overview and Fleet Size
The much-anticipated release of the USTR’s, Section 301, “Investigation of China’s Targeting the Maritime, Logistics, and Shipbuilding Sectors for Dominance” arrived late Thursday on the eve of the long Easter weekend. While the initial investigation was initiated by the Biden Administration, the aims remain very much in lockstep with the current administration in Washington. With trade tensions mounting, and a seemingly endless array of tariffs and reciprocal tariffs, it was hard to envision an outcome that wouldn’t be devastating to the specialized tanker segments.
For weeks, industry had been speculating what the outcome would be following public hearings in Washington where industries were invited to present their comments either for or against the proposed actions. Many companies submitted their own testimony on how the proposed tonnage taxes would influence their business (positively and negatively), while others worked through recognized trade organizations like the American Chemistry Council to have their opinions heard. Some 600 comments were submitted, and during the hearings the panel heard testimony from 60 individuals, both for and against the proposed action.
The forty-four pages released by the USTR last Thursday provided a comprehensive overview of the findings and it is quite harsh on shipping interests tied to the People’s Republic of China, Hong Kong, and Macau. The phased in approach will come into effect in (180) days and see a significant cost increase for vessels calling US ports and these costs stand to increase further annually before peaking in 2028.
While harsh on specific shipping interests, the USTR also demonstrated considerable restraint when it came to carving out exemptions. Most notably, exemptions for “specialized or special purpose-built vessels for the transport of chemical substances in bulk liquid forms;”. Other carve outs include ships arriving in ballast to load, which will have a positive impact on the US NGL exports. Another notable change from the initial concept is that the fees will be levied per port rotation and not per port call, which makes the fees easier to quantify.
In general, the chemical and chemical gas industries are breathing a collective sigh of relief following the release of Thursday’s report. Non-Chinese owners that built specialized tankers in China will not be penalized for these decisions. Similarly, the shippers that rely on these vessels and their operators to support complex supply chains now have clear visibility on their own transportation costs.
As Americans, we can be proud of the democratic process and how the USTR listened to American industry and recognized that the US cannot rebuild shipping dominance at the expense of the US’s own industry. On the other hand, as a global company with partners that are directly impacted by these fees, we recognize the challenges these costs create. Ultimately, the markets will find equilibrium and new trade lanes are likely to develop as markets react to these taxes and increased trade tariffs.
Recently, Quincannon Associates issued our 2025 IMO Fleet review which provides a comprehensive overview of the fleet and who is operating the assets. Quincannon also has an interactive fleet dashboard which allows users to access critical information on the fleet including where vessels are constructed. To gain access, please visit our website to request access to the interactive dashboard.
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By Patrick Quincannon
President and CEO
Quincannon Associates