China's travails in U.S. boost Korean shipbuilding, shipping shares

Korea’s shipbuilding and shipping stocks traded strong for a second day in a row on Friday as the sector emerges as the latest battleground between the world’s two largest economies.

Hanwha Ocean's shipyard in Geoje, South Gyeongsang Province [HANWHA OCEAN]

Investors picked up shipbuilding and shipping stocks in the Korean market in anticipation of the local industry benefiting from U.S.-China tensions as the sector emerges as the latest battleground between the world’s two largest economies.

On Tuesday, five labor unions in the United States, including the United Steelworkers, filed a complaint with the U.S. trade authorities, alleging unfair practices by Chinese shipbuilders.

Investors expect the latest tension in the shipbuilding sector to benefit Korean shipbuilders. Coupled with rising crude prices that may lead to additional orders from oil and gas companies, major shipbuilding stocks in Korea have traded strong since.

HD Korea Shipbuilding & Offshore Engineering (HD KSOE) closed at 123,800 won ($96.10) on the main Kospi bourse Friday, up 3.88 percent from the previous trading day. The price reached 127,800 won, up 7.85 percent, in mid-trading in the morning.

HD KSOE gained 4.96 percent on Thursday, following media reports on the petition from the U.S. labor unions.

Kospi-listed Hanwha Ocean rose 11.34 percent on Thursday and closed flat on Friday. The price saw a 5.56 percent increase in mid-trading that day.

Hyundai Mipo Dockyard soared by 6.46 percent on Friday morning before closing at 64,900 won, down 0.15 percent.

Samsung Heavy Industries, which soared 13.19 percent to 9,010 won on Thursday, reached 9,390 won in mid-trading on Friday, up 4.22 percent. However, the price closed at 8,850 won, down 1.78 percent from the previous day. With the latest petition, the U.S. unions are demanding a probe into “unreasonable and discriminatory acts, policies and practices” by Chinese players and the government aimed at dominating the maritime and shipbuilding sectors and a port fee on Chinese-built ships to fight against the country’s dominant presence in the market.

In response to the unions’ complaint, U.S. Trade Representative Katherine Tai said that she “[looks] forward to reviewing this petition in detail” on her social media account.

President Joe Biden also posted on social media, “We’ll always stand against China’s unfair practices—and as long as I am president, I’ll fight for U.S. workers and jobs.”

Meanwhile, China’s Commerce Ministry rejected the latest allegations, arguing they lacked “factual basis” and were an example of U.S. trade protectionism violating the World Trade Organization’s rules.

"The U.S. government is likely to launch a probe in response to the petition with the presidential election looming," said Jeong Yeon-seung, NH Investment & Securities analyst, in a report Friday.

Jeong added that "though it may take some time before the investigation to proceed and reach a conclusion, the issue is likely to continue to come up during the presidential race."

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]