YZJ Shipbldg SGD plunged approximately 16% on the morning of Thursday, February 27, following the company's earnings release and amid a U.S. proposal to impose fees on Chinese-made vessels entering American ports.

Shortly after 10 a.m., the Singapore-listed shipbuilder's shares plummeted to around S$2.28, with heavy selling erasing S$1.5 billion from its market valuation.

This decline exacerbated earlier losses earlier in the week. Compared to its price of S$3.30 a week prior, the stock had fallen nearly 31% over the span of seven days. By 10:40 a.m., the stock partially recovered to S$2.29, marking a 14.55% drop, with about 71 million shares traded.

On February 21, the U.S. Trade Representative (USTR) proposed imposing fees of up to $1.5 million on Chinese-made vessels entering U.S. ports as part of an investigation into China's growing dominance in global shipbuilding, shipping, and logistics.

According to Reuters, the investigation, announced in January, revealed that China's share of the global shipbuilding tonnage market surged from 5% in 1999 to 50% in 2023, driven by substantial government subsidies and preferential treatment for state-owned enterprises, which have harmed international competitors.

The proposal suggests charging up to $1 million per vessel owned by Chinese shipping operators or $1,000 per net ton of cargo capacity.

On Wednesday, Yangzijiang Shipbuilding reported a net profit of RMB 3.6 billion (S$659.3 million) for the second half of the year ending December 31, 2024, a 50.5% increase from RMB 2.4 billion in the same period last year.

The company's full-year net profit reached RMB 6.6 billion, up 61.7% from RMB 4.1 billion in fiscal 2023.

In a report on Thursday, DBS Bank stated that the sell-off triggered by the U.S. port fee news was excessive.

"The U.S. Trade Representative's proposal last Friday to impose port fees on Chinese-made vessels docking at U.S. ports led to a decline in Yangzijiang Shipbuilding's stock price," the report noted.

"Subsequent downgrades by brokerages exacerbated the selling. We believe this knee-jerk reaction was somewhat exaggerated," it added.

DBS highlighted that the U.S. proposal will undergo review on March 24, and the "substantiality" of the new policy remains uncertain.

It also suggested that shipping operators might pass these additional port fees to consumers through increased surcharges.

DBS further indicated that demand for Chinese shipyards might not be significantly affected.

"Completely avoiding orders from Chinese shipyards may not be feasible, especially given the strong order books of South Korean shipyards and the lack of competitiveness of U.S. shipbuilding, which is two to three times more costly than Asian shipyards," the report stated.

"Therefore, we believe the news introduces uncertainty and impacts new order sentiment," it concluded.

YZJ Shipbldg SGD plunges 30% in 5 days.