By Kimberley Kao

Yangzijiang Shipbuilding Holdings shares dropped Thursday morning after the company warned that proposed U.S. fees on Chinese ships could affect new orders in the near term.

Shares of the Singapore-listed shipbuilder were recently 14% lower at 2.30 Singapore dollars, equivalent to US$1.72, after sliding by as much as 17% earlier Thursday. The shares are on track for their biggest one-day loss since August 2019.

"Combined with a growing backlog of newbuild orders and extended delivery lead times, these downside risks may impact shipowners' willingness to place new orders in the near term," Yangzijiang Shipbuilding said late Wednesday while reporting second-half earnings.

The share-price drop overshadowed the shipbuiler's earnings results.

Yangzijiang reported a 50% jump in second-half net profit compared with a year earlier, and attributed the profit gain to increased newbuild prices, favorable foreign-exchange rates and lower raw material costs.

"As we move into 2025, the group will stay resilient and agile, focusing on timely contract fulfillment while actively securing high-quality newbuild orders to further enhance our revenue visibility," Chief Executive Ren Letian said in a statement.

DBS Group Research analysts said in a note that the "knee-jerk" selloff due to the U.S. Trade Representative's proposed port charges is "overdone," adding that subsequent brokerage downgrades have driven the downward spiral further.

"Chinese shipyards account for nearly half of global shipbuilding capacity; [avoiding] placing orders with Chinese shipyards entirely might not be plausible," DBS said. South Korean "yards are also very full while U.S. shipbuilding is uncompetitive at 2-3 times the costs of Asian shipyards," it added.

Given the scope of order backlog for ships, DBS said any new orders placed now would only be delivered from 2028 onwards, which would be near the end of President Trump's term in the White House. The proposal for port fees is also pending a review next month and how material the policy will be hasn't yet been confirmed, DBS added.

The market may be awaiting more clarity on the business outlook from the company despite high revenue visibility and margins, Citi Research analyst Luis Hilado said in a note.

Taking into account order deliveries that are expected to continue until 2030, and potential U.S. levies, the company guided for order wins this year at $6 billion, compared with $14.6 billion recorded for 2024, Hilado said. He noted that the company has a track record for providing conservative guidance.

"We believe that the current state of capacity for major non-Chinese yards posts a challenge for clients to seek builds elsewhere and that shipping lines may deploy their existing non-Chinese built vessels to the U.S. as an option" to work around the additional fees, Hilado said.

Write to Kimberley Kao at kimberley.kao@wsj.com

(END) Dow Jones Newswires

February 26, 2025 22:26 ET (03:26 GMT)

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