Maritime News and Comment

June 2008

    NEW LHA TO BE NAMED "AMERICA".  The Navy Times reports that SECNAV announced on Friday that the first ship of the new class of LHAs will be named "America".  Read the report here.  This news has not appeared on either the Navy or the DoD web sites, but the Navy Times is a reliable source.  June 30, 2008.

    BAE SYSTEMS BUYS TENIX.  This is not exactly U.S. news but it should be of interest to U.S. shipbuilders.  The Australian company Tenix  has sold its defense business, including Australia's only large shipbuilder, to BAE Systems.   Read the announcement here.  If we don't watch out, one of these days we are going to wake up and find that BAE owns all the big naval shipbuilders in the western world.  June 28, 2008.

    MATSON AND HORIZON FIXING RATES?  Surely not.  Heaven forefend.  How could anyone possibly think such a thing?  Eight small Hawaiian companies, led by the delightfully named Rhythm of Life Cosmetics, are suing the two companies that maintain a duopoly of the shipping trade between Hawaii and the Continental U.S.   Read the report in the Honolulu Advertiser here.  For as long as anyone can remember, one company has matched the other company's every rate increase.  That's not rate-fixing, surely?  Isn't that just healthy competition?  Although one does wonder why everything in Hawaii costs so much.  Or what would happen if one of the two were actually to offer lower rates than the other.  June 28, 2008.

    GAO RULING ON USAF TANKER.  As everyone knows, the GAO sustained Boeing's protest of the Air Force's award of the big tanker program to Northrop Grumman.  This decision undoubtedly raises questions about the susceptibility to protest of future Navy and Coast Guard contract awards.  Read the GAO press release here and the actual decision here.  June 26, 2008.

    SUPREME COURT OVERTURNS EXXON VALDEZ RULING.  In a stunning development, the culmination of 18 years of effort, the Supreme Court has reduced the punitive damages award against Exxon for the 1989 oil spill in Prince William Sound to only about $500 million.  In a 5-to-3 decision, they ruled that, under U.S. maritime law, punitive damages had to be limited to the value of the actual harm.  The original award of $5 billion had already been cut in half by the Appeals Court, and the Supreme Court decision reduces it to a mere 10% of the original.  Tough break for the fishermen and others who had been counting on this money.  Read the decision here and Reuters' report here.  June 25, 2008.

    WHY ARE NASSCO AND AKER PHILLY CHEATING?  The Common Structural Rules (CSR) for tankers were adopted in December 2005.  Aker Philly signed its original 10-ship contract with Aker American Shipping in April 2005, so it is legitimate, just, that these ships are not being built to the CSR.  An order for three more, plus three options, was announced in February 2007.  Why are these ships not being built to the CSR?  And why is Aker currently marketing a design for a shuttle tanker that does not comply with the CSR?  Well I can see why Aker is doing this: they don't want to change their hull design if they can get away with not changing it.  But why does ABS go along with this?  And why do the oil companies - who created the CSR by their pressure on OCIMF - and the refiners who are chartering these ships go along with this evasion?

If Aker's non-compliance is at least understandable, NASSCO's is completely inexcusable.  Their contract with US Shipping was executed in August 2006.  So why are these ships not being built to the CSR?  Why is ABS going along with this?  And what do the oil companies and refiners and the Navy, who are chartering them, have to say for themselves?

Every significant tanker builder in the world has switched to CSR-compliant designs, including, of course, Hyundai and Daewoo, the two industry leaders who are holding Aker Philly and NASSCO by the hand.  But it's too hard for Aker and NASSCO.  Of course tiny American Heavy Lift can do it, but not GD or Aker.  Why would we want product carriers in the Jones Act fleet that are obsolete on the day of delivery?  Disgraceful.  June 25/28, 2008.

    AKER AMERICAN DROPS THE AKER.  Aker American Shipping, the owners of the ships being built at Aker Philadelphia Shipyard, is now plain American Shipping, although it's hard to see what's all that American about a company that's owned by a bunch of Norwegians.  But then Norwegian Cruise Line is owned by Malaysians.  Read the announcement here.  The company will continue to be traded on the Oslo Stock Exchange under the symbol AMSC.  June 25, 2008.

    DELAWARE RIVER TO BE DEEPENED.  The Philadelphia Regional Port Authority and the U.S. Army Corps of Engineers have agreed on a $379 million project to deepen the main channel of the Delaware River from 40 to 45 feet.  Read the Inquirer's story here.  The Philadelphia folks seem to think that this will attract big containerships to Philadelphia and Camden.  Yeah, right.  Dream on.  June 24, 2008.

    NYC SAYS MORE DRY DOCKS ARE NEEDED.  The New York City Economic Development Commission has released a study that concludes that a lot more dry docks are needed to accommodate all the growth in the marine industry.  Find the main report here and the appendix here.  I haven't read it yet and will reserve comment until I have.  June 24, 2008.

    NAVY SCUPPERS ASNE CONFERENCE.  The American Society of Naval Engineers (ASNE) the professional society for the Navy's engineering community, is holding a two-day conference this week, called "The Road to CG(X)".  The Navy Times reports, however, that COMNAVSEA, VADM Paul Sullivan, opened the conference by telling the assembled delegates that the Navy didn't want to talk about CG(X).  Read the article here.  After all, the CG(X) has only been in development for 20 years now.  We wouldn't want to rush things, would we?  And we wouldn't want to trust our professional community to conduct a constructive discussion, either, apparently.  Maybe it's time for Sullivan to go.  June 24, 2008.

    THE TIMES DISCOVERS THE DRILLING INDUSTRY.  The New York Times, which normally acts as though the only businesses worth reporting on are finance and advertising, has just discovered the offshore drilling industry.  Somebody apparently told them about the shortage of drilling rigs.  They still seem to be a bit confused about the different types and sizes, but it's a start.  Read the article here.  June 19, 2008.

    CBO DUMPS ON NAVAL SHIPBUILDING.  The Congressional Budget Office has just published a report that tears the Navy's estimates of shipbuilding costs to ribbons.  Read it here.  June 18, 2008.

    HMS ONTARIO FOUND.  The Revolutionary War-era brig HMS Ontario has been found sitting upright and almost intact, in over 500 feet of water, on the bottom of its namesake lake, somewhere between Niagara and Rochester.  Read the AP report here.  The 22-gun, 226-ton "Ontario" was built in 1779/80 by Carleton Island Shipyard, for the express purpose of deterring an American attack on Montreal.  She foundered in a hurricane on the night of October 31, 1780, with the loss of all 88 people on board, and has never been found until now.  Carleton Island is in New York State today and is essentially deserted.  See the site of the shipyard from the air on Google here.  It's hard to tell the yard's exact location: it was on the west side of the isthmus, presumably below the walls of the fort, the outline of which is clear.  June 14, 2008.

    C. & G. GETS ANOTHER YP.  The Navy has exercised an option priced at $8.4 million for the fourth of five YPs being built by C. & G. Boat Works, in Mobile.  Read the DefenseLink announcement here.  C. & G.'s backlog now includes eight large crewboats and two mini-tankers, in addition to the four YPs, with deliveries into the second half of 2010.  Pretty good.  June 14, 2008.

    US SHIPPING HEADS ON DOWN.  After dropping from $7.35 to $4.65 yesterday, USS headed on down today, opening at $4.11, reaching $3.17 at noon and closing at $2.68.  Toast.  June 12, 2008.

    TODD HAS BETTER YEAR.  Todd Shipyards released its 10-K yesterday.  It's not on their web site yet but you can read a summary here.  They had a slightly better year than last year but it doesn't exactly get your heart racing.  See a summary of Todd's performance over the past 24 years, here.  June 12, 2008.

    US SHIPPING COLLAPSES.  US Shipping's stock price plunged by 37% today, from $7.35 to $4.65, way down from last year's plateau of about $20.  Today's trading volume was almost six times the average.  The reason is a press release called an "update", that makes it pretty clear that the only way USS can get out of its present mess is by selling the company.  Read it here.

So this is intriguing.  Who might be interested in buying USS?  I don't think that just getting some new investors will cut it: I think USS needs new owners who are more diversified, as OSG (which just increased its dividend by 40%) and Seacor are, especially as USS probably needs new management too, because who would trust these guys ever again?

Note also that two of USS' ships - Charleston and Chemical Pioneer - are due for special surveys this year but I'm told that no bid packages have been sent to the shipyards.  We can assume that maintenance expenses are being minimized, but deferring a special survey is hard.  June 11, 2008.

    STRAIGHT SHOOTING ON OIL.  The new CEO of BP appears to be a distinct improvement on his weird predecessor.  In today's Financial Times, he has some very sensible things to say.  Read his opinion here and pass it on to your congressidiot.  June 11, 2008.

    HOW TOMORROW MOVES.  CSX has a very effective series of TV ads running that promotes the efficiency of U.S. railroads.  You've probably seen them.  If not, you can find them on CSX's web site, here.  But, is shipping not significantly more cost-effective, more fuel-efficient, cleaner and safer than rail?  Of course.  Are the data available?  Of course, and all the inland carriers use them in their annual reports and analyst road shows.  So why does none of this ever reach the general public?  Because, unlike road and rail, the maritime industry has a dozen different industry associations, no two of which can agree on anything.  It's pathetic.  When, if ever, are we going to get our act together?  What hope is there for our ever developing a coastal highway system?  MARAD is at least trying and full marks to the Administrator (and his predecessor) for their efforts.  They have even developed a promotional video, which is not bad, although 16 minutes may be a bit long.  You can find it on MARAD's web site, here.  June 10/11, 2008.

    ONLY ONE ENGINEER!  The Science section of the New York Times reports today that there are only "about 30" scientists in the U.S. Congress, and that's defining a scientist pretty loosely.  Read the article here.  Note that included in the count is a single engineer.  One.  No wonder this country is so messed up.  Here's a challenge for the engineering profession: let's set about increasing the number of engineers in the Congress.  What's a reasonable goal?  Two more in every two-year election cycle?  June 10, 2008.

    DETYENS TO COMPLETE OSG'S SHUTTLE TANKERS.  The first two US-flag shuttle tankers, now under construction by Aker Philadelphia will only become crude oil shuttle tankers after conversion by Detyens Shipyard, in Charleston SC.  The ships will be delivered to OSG as the product carriers "Overseas Cascade" - Hull 15 - and "Overseas Chinook" - Hull 16 - in 4Q-09 and 4Q-10 and will go into service in the Gulf of Mexico for PetroBras in 1Q-10 and 1Q-11.  June 10, 2008.

    HORNBECK MAY SELL ITS BARGE BUSINESS.  Hornbeck Offshore Services has hired JP Morgan Securities to advise it on the best thing to do with its tank barge business.  They seem to think that it might be a good idea to cash out and concentrate on the offshore services sector.  Don't see it myself, but what do I know?  Read the press release here.  June 6, 2008.

    AKER BAILING OUT OF AKER AMERICAN.  Aker American Shipping, the owner of all those product carriers being built in Philadelphia, is losing its Aker.  Aker ASA announced today that it has sold 9.2 million of its 14.7 million shares, reducing its holding to about 20% of the outstanding shares.  Read Aker American Shipping's announcement here.  June 6, 2008.

    DOD GOING BANKRUPT?  There is a really excellent article in this month's U.S. Naval Institute "Proceedings" by John Christie, the former Director of Acquisition Policy at DoD.  Picking up from Norm Augustine's classic work "Augustine's Laws", Christie demonstrates that growth rates for unit costs of major DoD systems are greater than those for total defense procurement, total defense spending and the gross domestic product.  As a result, "U.S. defense forces will continue to shrink and age, and we will rapidly cease being a dominant military force in the world".  You can read the article here but the on-line version doesn't include any figures, so you need to find a hard copy to get the full picture.  And if you've never read "Augustine's Laws", there's no better time than now: find it on amazon here.  June 6, 2008.

    K-SEA BUYS ROEHRIG'S TUGS.  K-Sea Transportation says that it is beefing up its fleet by paying $42 million for Roehrig Maritime's fleet of eight elderly tugs.  Read K-Sea's announcement here.  See below to see what they're buying.  Wow!  $5 million per tug for eight tugs with an average age of 29, two of which are only 1,800 hp!  They could have bought five new 6,000-hp tugs for the same money.  June 5, 2008.

    SO THEY CAN FIRE PEOPLE AFTER ALL!  Well gosh, SecDef just fired the Secretary and the Chief of Staff of the Air Force.  So it is possible for senior members of this Administration to be held responsible for their screw-ups, after all.  So let's see some of the folks responsible for naval shipbuilding heading for the exits.  June 5, 2008.

    WHY IS ABS GIVING ALL THIS MONEY TO THE GREEKS?  ABS' gift of $250,000 to the Greek Liberty ship museum, reported below, is the third item in recent weeks.  On May 21, ABS gave $2.45 million to the Costas Grammenos International Centre for Shipping, Trade and Finance at the University of London, where young Greeks learn to run their daddies' businesses.  Read ABS' press release here.  And on June 2, ABS committed an unspecified sum to the National Technical University of Athens to fund a three-year research program that will study the impact of environmental protection on marine transportation, including shipbuilding.  Read ABS' press release here.  No wonder that today's press release fawns all over the Greek shipping industry for "the tremendous level of support they have given to ABS".  Read ABS' press release here.  I hadn't realized that the Greek shipping industry was so hard up that it can't find a few bucks to fund its own activities and has to turn to a supposedly non-profit U.S. organization for a hand-out.  And if ABS has all this spare cash left over from its supposedly non-profit activities, why doesn't it just lower its fees?  June 5, 2008.

    ABS CONTRIBUTES TO GREEK LIBERTY SHIP MUSEUM.  ABS has contributed $250,000 to the effort to establish the last Liberty ship in the NDRF as a maritime museum in Greece.  Read ABS ' press release here.  This is very generous of ABS and a nice thing to do.  Of course, the announcement comes at Posidonia, but nobody would suggest that ABS was trying to curry favor with the Greek shipping industry.  Heaven forbid.  It's a pity that the press release contains so many inaccuracies.  (1) "There were more than 2,000 Liberties": 2,718 is a good deal more than "more than".  (2) "The Liberties were the first ships built using production line methods": they were not.  (3) "one ship being constructed from keel laying to delivery in just over 4 days": one ship was erected in 4 days and delivered 3 days later, but that was a PR stunt - the ships immediately preceding and following it in that yard took 46 and 51 days, respectively, and the average construction time was 52 days, (not that that figure is not still amazing in itself).  (4) "the ships were designed and built for a single voyage": how's that?  Why would we have done that?  How would we have done that?  June 5, 2008.

    LAST LIBERTY TO GO TO GREECE?  The last Liberty ship in the NDRF may become a maritime museum in Greece.  MARAD has signed an MOU with the Greek government to that effect.  Read MARAD's announcement here.  The ship is the "Arthur M. Huddell".  She was built by St. John's River Shipbuilding, in Jacksonville FL, (established by Merrill-Stevens, still going strong in the yacht sector), as their Hull #23 and the U.S. Maritime Commission's Hull #MCE 1215.  She was delivered on December 18, 1943, but almost immediately converted to lay the gasoline pipeline for the Normandy landings.   After the war she was laid up until 1956, when AT&T took her over and converted her to a cable ship.  She's been in the NDRF since 1984.  June 4, 2008.

    LCS BS REVEALED.  On April 17, the Navy and Lockheed Martin joined forces to dispute my suggestion that there was no chance of LCS 1 being delivered this summer, or even this year. 

Well, let's see.  The machinery trials are now scheduled for July, builder's trials for August, acceptance trials for September and delivery for October, so that's a slip of three months just since six weeks ago.  At that rate, they are on track for delivery some time next summer.  If they "deliver" this year, you can bet that it will be an incomplete ship.  Has anyone been fired yet?  June 2, 2008.  Late news: Marinette's Superintendent of Tests and Trials left today: he quit.

    "CAPE" SHIPS SOLD.  Tradewinds reports that Denmark's Clipper Group has bought the two small cruise ships, "Cape May Light" and "Cape Cod Light", built by Atlantic Marine back in 2001 and laid up ever since.  The price is $18 million, which is not bad compared to their $90 million cost.  Since they will stay US-flag, it must be assumed that a suitably qualified ownership entity has been created.  Apparently they will be operated by International Shipping Partners, of Miami, which operates Clipper's other ships, plus several more, but not, as far as I can tell, any US-flag ships.  June 1, 2008.  They will not be in domestic trade but will operate between the U.S. and Bermuda.  The new owners have only committed to the U.S. flag for the next three years.  June 4, 2008.

For links to comment on earlier maritime news, please go to News and Comment

If you have comments or questions, suggestions or complaints, please e-mail me.