Korean firms fall victim to US-China trade war

Cars line up for loading onto a Hyundai Glovis vehicle carrier at Hyundai Glovis Pyeongtaek International Terminal in Pyeongtaek, Gyeonggi Province, Aug. 26. Yonhap

Korean companies have borne the brunt of the renewed trade conflict between the United States and China.

As the world's top two economies have recently engaged in tit-for-tat economic retaliations — moves widely seen as attempts to bolster bargaining power ahead of a possible summit in Korea later this month — concerns are mounting that Korean chipmakers, electric vehicle (EV) manufacturers and shipping firms could suffer from the escalating tensions.

On Thursday, the Chinese Ministry of Commerce announced tighter export controls on rare earth metals including samarium, dysprosium and terbium, which are essential for manufacturing semiconductor equipment, EV motors and batteries.

Although Korean manufacturers have highlighted their stockpiles of rare earth elements in order to dismiss concerns, they could still face long-term production setbacks if Chinese authorities delay export approvals.

"The government will continue negotiations with China to prevent the latest measures from harming domestic companies," said an official from the Ministry of Trade and Industry.

A worker waters the site of a rare earth metals mine at Nancheng County, Jiangxi Province, Jan. 16, 2011. Reuters-Yonhap

A day after the Chinese announcement, the Office of the U.S. Trade Representative (USTR) said it will begin collecting maritime-related fees Tuesday on foreign-built vehicle carriers and liquefied natural gas vessels. The decision came as Beijing retaliated against separate U.S. port fees — also set to take effect Tuesday — targeting China-built, owned or operated vessels.

According to USTR, operators of foreign-built vehicle carriers will be charged $46 per net ton, significantly more than the $14 per net ton proposed on June 12.

Because the U.S. rejected Korea’s request to exclude non-Chinese ships, industry officials expect possible losses for Hyundai Glovis, which mainly transports vehicles produced by its affiliates, Hyundai Motor and Kia.

Once the new port fees are implemented, a 7,000 car equivalent unit (CEU) ship with 19,322 net tons will pay $888,812 per call. While the fees are capped at five times per vessel per calendar year, each 7,000 CEU ship will pay $4,444,060 annually.

"While we are working to make the loading capacities and operations of our vehicle carriers more efficient, we will discuss countermeasures with other global shipping firms and our clients," a Hyundai Glovis official said.

Meanwhile, investors are increasingly worried about a steep fall in the Korean stock market at Monday’s opening, following Friday's plunge on Wall Street after U.S. President Donald Trump threatened a 100 percent additional tariff on all Chinese goods. The S&P 500 dropped 2.7 percent in its worst day since April 10, while the Nasdaq fell over 3.5 percent and the Dow Jones lost nearly 900 points.

Trump wrote on his social media that "there seems to be no reason" to meet Chinese President Xi Jinping during the Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Meeting scheduled for later this month in Gyeongju, North Gyeongsang Province.

With tensions running high, businesspeople and investors are closely watching to see whether the two leaders will manage to reach a dramatic reconciliation at the APEC summit.