Hamilton, who has more wins in Shanghai than anyone else with five, was more than a half-second off Vettel's pace, and admitted he couldn't explain why.
Hill believes Lewis Hamilton needs to pay attention to this potential swing in momentum before signing a new long-term deal with Mercedes.
It's still early, but it looks like Ferrari is back.
"We've been underperforming since... yesterday and today have been a distaster on my side".
"It's not going to be easy to beat Kimi and Sebastian tomorrow, they're the quickest on the straights too, so overtaking will be tough".
Only when Mercedes turned up their engines for the finale of Q2 to guarantee Hamilton and Bottas progressed on the slower more durable soft tyres - which all of the top four will start the race on - did the W09 appear a match for the Ferrari.More news: Qatari Emir to skip Arab summit in Saudi Arabia
Vettel, who clinched pole with his final lap, said: 'I was happy with the whole lap, not just the last sector.
Red Bull's Australian driver Daniel Ricciardo celebrates winning the Formula One Chinese Grand Prix in Shanghai on April 15, 2018.
Despite his current difficulties though, Hamilton only finds himself nine points behind Vettel in the championship, after the Ferrari driver could only finish eighth following his clash with Verstappen.
The forecast is for a warmer race today and that should be better suited to Hamilton's Mercedes auto, but the Briton, who will have the Red Bull duo of Max Verstappen and Daniel Ricciardo occupying his mirrors, fears he will be looking over his shoulder rather than hunting down Vettel.
"I don't think I necessarily need to change a lot of things", he said.
The duo were spotted talking not long after the race and Vettel has revealed the contents of that discussion.More news: GlaxoSmithKline (LON:GSK) Receives Buy Rating from Liberum Capital
Several other drivers spun or went off the track as they tested the limits, with the cool and blustery conditions catching them out.
"What they have achieved today is miraculous, getting the engine turned around, dressed and onto the auto", team boss Christian Horner told Sky F1. I don't think so.
Star of the session: Raikkonen has really been the star of the weekend so far and can consider himself quite unlucky to not be on pole position. They came into the year with high expectations but are already 45 points shy of Ferrari in the World Constructors' Championship standings after a miserable trip to Bahrain saw both Max Verstappen and Daniel Ricciardo retire within the first couple of laps.
"I don't seem to win boring races", said Ricciardo after claiming his first victory since last June's Azerbaijan Grand Prix.
Team-mate Lance Stroll, meanwhile, survived a spin.More news: Guardiola charged with improper conduct after Liverpool defeat