Comment on the Maritime News

October-December 2003

   ANOTHER DISMAL YEAR.   Is that too harsh?  What can you say about a year in which the U.S. maritime industry so clearly continued on a downward slope?

In 2003, the U.S. shipbuilding industry saw the Quincy shipyard sold to a used-car dealer and Sparrows Point to an internet entrepreneur.  Kvaerner Philadelphia delivered its first ship, but at such huge cost that a cloud of uncertainty still hangs over its future.  MARAD made a complete bollox of the ship scrapping program.  The "Big Two" secured contract prices for submarines, destroyers and amphibs that were so far out of line with past prices as to be incomprehensible, but nobody in Washington seems to care and the Navy continues to talk nonsense about what a good deal it is for the taxpayer not to have any competition.  In the absence of any help from the federal government, the States of Louisiana, Mississippi and Florida threw hundreds of millions of dollars worth of aid to their shipyards: so much for the importance of a "level playing field".  Tank barge construction finally picked up, in the face of the 1-Jan-05 cliff-edge, but the number of new commercial vessels of other types ordered from U.S. yards was close to zilch - not a single OSV, for example, despite that sector's advanced age.

Meanwhile, the U.S. shipping industry saw a Malaysian company buy "Project America" and breach the Passenger Vessel Services Act in a way that has to be irreversible.  The Carlyle Group bought CSX Lines.  A Canadian company bought Great Lakes Transportation.   A Singaporean company bought American Automar.  The  U.S. flag doesn't seem to mean anything any more except possibly as an employment program for King's Pointers.  And more US-built, US-owned ships were scrapped or flagged-out without being replaced, while more foreign-built, foreign-owned ships were given nice patriotic names and brought under the U.S. flag in order to qualify for U.S. government hand-outs.

If there's a bright spot anywhere, it's got to be the continuing improvements in the smaller shipyards.  Although not helped by the reluctance of the offshore industry to get on with the long overdue renewal of its fleet, all the second-tier yards are doing good things and have lots of work in their collective future.  Oh and here's something to be thankful for: this was the year that FastShip finally went away.  Tim Colton, December 31, 2003.

   MORE LIES ABOUT SEARIVER MARITIME.   It's really disgraceful that ignorant, uninformed and possibly malicious folks are spreading all these outrageous rumors about SeaRiver Maritime and its increasingly forlorn efforts to build some ships.  It is absolutely untrue, for example, that NASSCO's price for the planned replacement ships is in excess of $200mm and their first delivery is in late 2007.  It is also completely untrue that SeaRiver is looking at buying or chartering BP's three Sun-built "Ecology"-class tankers, which are double-hulled but 30 years old.  It is untrue too that SeaRiver is talking to AMFELS about building ships in Brownsville.  And, finally, it would be positively disgraceful to suggest that there could possibly be any basis to reports that ExxonMobil, which recently sold its Benicia, California, refinery to Valero Energy and now sells its Alaskan oil to other refiners, will eliminate the whole issue by electing to export the oil to Asia, which would not, of course, require Jones Act ships.  Then they could, in theory, close SeaRiver Maritime down, but I'm sure they wouldn't do that.  No, no, of course not.  Tim Colton, December 20, 2003.

   LPDs GETTING PRETTY EXPENSIVE.   The fifth of the "San Antonio" class of LPDs, the contract for which was announced today, will cost over 70% more than the fourth in the series.  I know that the nation needs these ships and, goodness knows it would be nice if we could keep Avondale in business as well, but this is a tad excessive, even for Northrop Grumman.  Tim Colton, November 25, 2003.

   SALE OF SPARROWS POINT SMELLS LIKE ANOTHER FIASCO IN THE MAKING.   The company that apparently bought the assets of BMI at its liquidation auction on November 5, Barletta Willis LLC, is described in the Baltimore Sun as a Boston investment group.  It's hard to say how big an investment group it is, because it can't be found either on the internet or in the Boston phone book.  Mr. Willis is quoted as saying that they plan to hire a shipyard operator or form a joint venture with one.  Oh dear, apparently he doesn't know anything about running a shipyard and he bought a shipyard without having anyone to run it for him: there's a familiar recipe for disaster.  Mr. Willis is also quoted as saying that his company plans to pump about $20 million into the site initially to make it operational but envisions a long-term investment of about $200 million over five years.  Oh dear again, there's nothing like having a well-thought-out business plan, is there?  Mr. Willis is also quoted as saying that he has an option to buy another, unnamed, shipyard and is negotiating the purchase of two more shipyards.  Oh dear, yet again.  Pardon my skepticism, but horsefeathers.  This is a very small industry and it has a very tight information mill.  If there was somebody out there buying up shipyards, it would be well known by now. 

Now to be fair, Mr. Willis is actually quoted as saying one thing that make sense.  According to the Sun, he said that "his team could make a go of a failed shipyard by 'packing a couple more lines of business into the yard, trying to bring some additional users into more space than we're likely to consume' ".  Well, he's right.  The Sparrows Point yard is much, much bigger than is needed for a ship repair operation and assets need to work, not to lie idle: that was one of BMI's mistakes.  Putting the under-utilized assets to work, however, is easier said than done, especially in the run-down dump that Sparrows Point has regrettably become.

So, anyway, let's give Mr. Willis the benefit of the doubt and see what he can do.  None of us want to see Sparrows Point die.  I'm not optimistic but it would be nice to be pleasantly surprised.  Tim Colton, November 8, 2003.

   REFLAGGING OF "FREEDOM" EMPHASIZES MARAD'S LACK OF FOCUS.   The Japanese-built car carrier "Takamine" has been renamed "Freedom" and registered in the U.S. by its owners, American Roll-On/Roll-Off Carrier LLC, (ARC), which despite its nice name, is jointly owned by Norway's Wilhelmsen Lines and Sweden's Wallenius Lines.  ARC now has five US-flag car carriers: the other four - Faust, Fidelio, Tellus and Tanabata - were recently renamed Liberty, Patriot, Independence and Resolve, respectively, presumably to make them sound more American.  Why is the reflagging of "Freedom" good news?  Beats me.  Oh yes, I remember now, it creates jobs for US-citizen mariners.  To be precise, 18 jobs.  And it provides a US-flag car carrier in case we need one in an emergency, although car carriers are, of course, readily available in emergencies anyway, through the long-established practice of chartering, with which Military Sealift Command is thoroughly familiar.  So now the owners of "Freedom" will get about $2.5 million a year in U.S. taxpayers' money from the Maritime Security Program (MSP) to employ 18 US-citizen mariners.  Tim Colton, October 31, 2003.

   CANADIAN NATIONAL DEAL RAISES NEW JONES ACT CONCERNS.  Canadian National's planned acquisition of Great Lakes Transportation, including its 8-ship fleet of lakers (see the table below),  raises a new Jones Act issue that is potentially of just as much significance as all those other current hot buttons.  Let's see, now: we have British control of a major tanker operator, French control of a major offshore operator, Australian control of a major tug operator, Malaysian control of our only deep-draft passenger vessel operator, and now Canadian control of a major dry bulk carrier operator.  What will be next?  Will a South American company buy ACL out of its current Chapter 11 situation?  Tim Colton, October 20, 2003.

For comment on maritime news reported in earlier quarters, click on one of the following links:

Third Quarter of 2003

Second Quarter of 2003

First Quarter of 2003

Fourth Quarter of 2002

Third Quarter of 2002

Second Quarter of 2002

First Quarter of 2002

Fourth Quarter of  2001

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