*

Sanctions seen as warning without immediate impact,

analysts say

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Hanwha affiliates have no business connection with China,

analyst Kang says

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China unlikely to expand sanctions due to business with

Korean

shipbuilders, analysts say

By Joyce Lee

SEOUL, Oct 15 (Reuters) - China's sanctions against five

U.S.-linked affiliates of South Korean shipbuilder Hanwha Ocean

are seen as a warning gesture without immediate

impact, and Beijing is unlikely to gain much by expanding them,

analysts said on Wednesday.

The move, announced on Tuesday when the U.S. and China began

charging additional port fees targeting each other's vessels,

comes ahead of an expected meeting between U.S. President Donald

Trump and Chinese leader Xi Jinping in late October to resolve

the protracted trade war between the world's two largest

economies.

China's commerce ministry banned transactions and

cooperation with Hanwha Ocean's U.S.-linked affiliates, citing

security risks stemming from their involvement in the U.S.

government's "relevant investigative activities." It did not

elaborate on the suspected activities.

Hanwha, one of the world's largest shipbuilders, owns Philly

Shipyard in the U.S. and has won contracts to repair and

overhaul U.S. Navy ships. Its entities also will build a

U.S.-flagged LNG carrier.

The sanctions do not have any direct impact as the Hanwha

affiliates Beijing sanctioned have no business connection with

China, said Korea Investment & Securities analyst Kang

Kyung-tae.

"Stock prices had fallen due to various concerns that the

sanctions will spread to ... Korean parent companies and the

entire Korean shipbuilding industry, but this is only a

possibility," Kang said.

Shares of Hanwha Ocean rebounded 1.8% on Wednesday, while

peer HD Hyundai Heavy shares rose 2.2%, recouping

some of Tuesday's losses.

Hanwha's Philly Shipyard builds ships meant for the U.S.

market such as the 10 medium-range tankers Hanwha Shipping

ordered in August, which are "geared for the Jones Act and are

not using steel plates from China, but from the U.S., Canada and

Mexico," said Daeshin Securities analyst Lee Jini.

Hanwha said on Tuesday it is closely monitoring the

potential impact of the sanctions, and that it will continue to

provide services to its customers, "including through our

investments in the U.S. maritime industry and via Hanwha Philly

Shipyard."

CONCERNS OVER MORE SANCTIONS

Investor sentiment remains jittery, as they fear China may

target more South Korean shipbuilders cooperating with the U.S.

South Korea pledged to inject as much as $150 billion to

help the U.S. revive its troubled shipbuilding industry as part

of its trade talks with Washington, which has said it needs help

from allies Japan and South Korea to revitalise the sector,

especially in turning out warships.

China, however, is unlikely to expand sanctions due to its

reliance on the South Korean shipbuilding industry, the world's

second-largest, for steel exports and engine imports, analysts

said.

"South Korean shipbuilding industry purchases some Chinese

steel plates, about 20-30% of the total ... If sanctions are

expanded, the impact to Chinese steelmakers will be no less than

that on Korean shipbuilders," said Daeshin's Lee.

While the heightened trade war between the U.S. and China

may make shipowners delay commercial vessel orders, it could

spark more global orders for naval ships, analysts said.

"The U.S.-China conflict will become a catalyst for more

naval shipbuilding opportunities in countries around the world,"

said Shinhan Securities analyst Lee Dong-heon.