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Maritime
Memos -
February 2012 |
|
 And
Another DDG for Bath
The Navy has exercised an option on its contract
with BIW for DDG 116. Read the DefenseLink announcement
here. The
price is $663 million and completion is in August 2018.
February 28, 2012. |
|
 Third
MLP Awarded
The Navy has exercised an option on its contract
with NASSCO for the third MLP. Read the DefenseLink announcement
here. The
price is $360 million and completion is in January 2015. They already have
$60 million for LLTM, so the net price is $420 million, compared to $426 million
for each of the first two. But this price won't last: this is the MLP that
they are talking about converting into an AFSB.
February 28, 2012. |
|
 No
Jones Act Waivers!
The American Maritime Partnership - the voice of
the U.S. domestic maritime industry - is attempting to pre-empt any talk of
Jones Act waivers for tankers lifting cargoes from the Strategic Petroleum
Reserve this year. Read their statement
here.
February 27, 2012. |
|
 S/R
Long Beach Gone
The sister ship of the notorious Exxon Valdez,
built by NASSCO in 1987, has been sold for recycling in China. The word is
that the Delaware Trader is gone too but the last time I wrote that I got
corrected pretty swiftly.
February 27, 2012.
P.S.: The latest word is that the
Delaware Trader was sold today "as is, where is" in Orange TX, presumably to
a ship recycler. February 27, 2012. |
|
 Two More
JHSVs
The Navy has exercised options on its contract
with Austal USA for the construction of JHSVs 8 and 9. Read the
DefenseLink announcement
here. The
price is $322 million - about 3% more than the price for the previous pair.
The completion date is given as April 2016, but I think Austal's construction
schedule is way ahead of that.
February 25, 2012. |
|
 Why
Not a NATO Navy?
Here's a thought that nobody will like. All
the developed nations find naval shipbuilding to be horrendously expensive,
because (a) each nation buys small quantities of ships, (b) the designs vary
from nation to nation, and (c) each nation's shipbuilding industry has shrunk to
the point that it cannot build ships efficiently. At the same time, almost
every developed nation is a member of some form of regional alliance - NATO,
SEATO and so on. So, why not adopt regional standard designs and
concentrate their construction. In this approach, Country A in each
alliance would build the nuclear-powered ships, Country B would build the DDGs,
Country C would build the large amphibs, and so on. Countries with smaller
yards could team up, or build the smaller ship types, or build hull blocks, or
manufacture equipment. Standardization would
also make the ships operationally interchangeable, making it easier to hold
multinational exercises and even to have crews of mixed nationalities.
Yeah, I knew you wouldn't like it. But how much longer can we go on
building ever smaller numbers of ever more expensive ships? Remember
Augustine's Laws. (If you don't know Augustine's Laws, you shouldn't be in
naval shipbuilding.) And remember what President Coolidge is alleged to
have said when told what the new fighter was going to cost: "Why can't we just
buy one aeroplane and let the aviators take turns flying it?" Oh and, by the
way, why do we need a NATO and a SEATO? Why not just an ATO and a PTO?
Let's get the African and South American nations involved.
February 23, 2012. |
|
 More
on Oilers
Not long ago the Navy moved the T-AO(X) program
up, because it needed to put work into NASSCO. Now the program has been
moved back and NASSCO is being kept on life support with the loony MLP and AFSB
procurements. And in the Navy's customary extravagant fashion, the first
three T-AO(X)s are budgeted at just over $2 billion - about $667 million per
ship. Meanwhile, the Canadian Navy is planning the construction, in
Canada, of three AORs, for which it has budgeted the astonishing sum of $2.6
billion - about $867 million per ship. Now, today, we learn that the
British Navy has ordered four BMT-designed T-AOs from Daewoo Shipbuilding, for
£452 million.
Read the MOD's announcement
here.
Adding in
£150
million for the cost of UK-supplied equipment, this represents a total of about
£602
million, or about
£150
million per ship, or about $235 million per ship in our money - 35% of the US
Navy's budgeted cost per ship.
Now I know that the three designs are different
and this is not a fair comparison, etc, etc, but, heavens, why do U.S. oilers
have to cost three times what a British oiler costs? It's an oiler, for
crying out loud, not a nuclear submarine. What do our oilers have to do
that British oilers don't have to do? Card tricks?
Of course it's a sign of the decline of British
industry that they had to go to Daewoo for these ships. But then again,
it's an oiler, not a nuclear submarine. Daewoo is one of the best
shipbuilders in the world. And it's Daewoo that has been working with
NASSCO for several years now, achieving remarkable improvements in that yard's
performance. So here's an idea. Contract with BMT for the design and
contract with NASSCO to build 14 of them - two a year for seven years - with
Daewoo providing production support - engineering, procurement and production
planning.
February 23, 2012. |
|
 Seacor
Buys Superior's Liftboat Fleet
Seacor Holdings' OSV subsidiary, Seacor Marine,
has bought Superior Energy Services' entire fleet of liftboats, all 18 of them.
The price is said to be $134 million. Read the
report in Marine Log
here.
Smart move, good deal.
February 23, 2012. |
|
 Eastern
Expands
Eastern Shipbuilding Group has done a deal with
the St. Joe Co. for the development of 20 acres of deep-water property in Port
St. Joe as a vessel completion yard. The idea is that hulls will still be
built at the company's two Panama City yards but will be moved to the new yard
after launching, for in-water completion, testing and trials. In general,
I am opposed to the construction of new facilities when there are so many yards
underutilized and so many market sectors headed downhill, but this is not
actually a bad idea, given the limitations of Eastern's two existing yards and
their current workload. In addition, Eastern is, in my opinion, much
better-placed for future projects than most small shipbuilders. Read the
report in Marine Log
here.
Read the report on WJHG
here.
February 22, 2012. |
|
 NSC Program Down to Six
Ships?
The DoHS budget request published yesterday
reduces the National Security Cutter (NSC) program - designed to replace the 12
Hamilton-class cutters - from eight boats to six. Defense Daily
quotes Secretary Napolitano as saying that "We will look at [NSCs] seven and
eight in light of what the Navy is doing" which is not very encouraging
news, suggesting that the Navy may be planning to stick the Coast Guard with
some LCSs. Read the Defense Daily report
here.
Pancake Day, 2012. |
|
Ship Naming
Back on Track?
On Tuesday, the Navy responded to the torrent of
criticism of its recent record of assigning ship names and promised to do better
in future. Read the story in the Washington Times
here. Then
yesterday, with startling speed, it announced five new names that are clearly
consistent with past practice. Read that announcement
here. The
next three DDGs will be named for heroic U.S. servicemen - John Finn, Ralph
Johnson and Rafael Peralta - and the next two LCSs will be named for small
cities - Sioux City and Omaha. So the criticism worked.
February 16, 2012. |
|
 Martinac
to Build a Big Longliner
Martinac Shipbuilding, of Tacoma WA, has executed
a contract with Alaskan Leader Fisheries LLC for the construction of a 184-foot
longliner, to be named the Northern Leader. Like the 136-foot
longliner being built by Alaska Ship & Drydock, the boat is being designed by
Jensen Maritime. Read Jensen's announcement
here.
February 15, 2012. |
|
 Send
an LCS? No, Send Three OPVs!
There's an interesting item in Defense News
today concerning our new Pacific-centric defense strategy, and how constrained
it is by our strange preference for a Navy made up of a small number of very
expensive ships. It's written by James Holmes, of the Naval War College.
Read it
here.
It's a shame that the LCSs are so ridiculously
over-specced and expensive, because we could really use a whole lot of simple,
versatile, inexpensive OPVs, as could some of our allies in the region. We
should be transferring new OPVs to the Philippines, for example, not 40-year-old
Coast Guard cutters. And we should be encouraging the wealthier countries
in the region to develop their fleets and to learn to operate in multi-national
groups.
February 14, 2012. |
|
 Matson's
2011 Earnings Off 38%
Alexander & Baldwin published its results for
2011 yesterday and it wasn't good for the soon-to-be-spun-off Ocean
Transportation division. Although revenues were up 6%, from $1,016 to
$1,078 million, despite almost no change (as usual) in the number of containers
carried, operating income was down 38%, from $119 to $74 million. Read the
announcement
here. Oh
well, they are not quite as incompetent as Horizon and they can always jack up
their rates again.
But A&B's stock price dropped 7% today for some
reason.
February 14, 2012. |
|
 First
FRC Delivered
On Friday, the U.S. Coast Guard took delivery from Bollinger
Shipyards of the first of the new Sentinel class of Fast Response
Cutters, the USCGC Bernard C. Webber (WPC 1101). Read the
announcement
here and check
out the video on the Coast Guard Compass of her arriving in Miami
here.
February 14, 2012. |
|
 Marinette
Gets 40 More RB-Ms
The U.S. Coast Guard has exercised an option on
its contract with Marinette Marine for 40 additional Response Boats, Medium.
Read the announcement
here.
The value of the option is $89 million.
This brings the total number ordered so far to 166, of which 81 have been
delivered. See whether there's one near you,
here.
February 14, 2012. |
|
 $811
Million Over-Run on CVN 78
Business Week reports that the future USS
Gerald R. Ford (CVN 78) is already 16% over budget. Read the story
here. Not
good news. February 13, 2012.
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|
 Corrected
and Updated Recycling News
Apparently my report last week that the New River and the
Crescent City were headed to
Brownsville for recycling was only half right and wholly incomplete. New River
has, in fact, already been recycled, along with her sisters, Captain H. A.
Downing and The Monseigneur. In addition, Crescent City
is not alone: Mispillion (AO 105) and Pigeon (ASR 21) are also on
their way to Brownsville and Pyro (AE 24) is headed for recycling in New
Orleans. Among the ships currently under the torch are Isherwood
(T-AO 191), Eckford (T-AO 192), Sperry (AS 12), Thomaston
(LSD 28), Point Defiance (LSD 31), Tulare (LKA 112), S/R
Wilmington and TS Patriot State. Finally, Saratoga (CV
60) has now been assigned to a recycler in Brownsville. February 13, 2012.
|
|
 Lay
Off the US-Build Requirement!
Michael Hansen, of the Hawai'i
Shippers Council, wrote an article recently in the Hawai'i Free Press entitled
"US-Build Requirement for Ships Imposes Dilemma on Non-Contiguous
Jurisdictions". His problem is with the "prohibitively high cost" of US-built
ships and the impact of those costs on freight rates. The high costs of other
aspects of a US-flag operation, such as the cost of an over-manned US-citizen
crew with all its fringe benefits, get no mention.
There is no doubt that
US-built ships cost more than foreign-built ships. US shipyards are not
internationally competitive. This is not new. They have not been
internationally competitive since the days of wooden hulls, when we were clearly
the world leaders. That is why the Merchant Marine Act of 1920 - the "Jones
Act" - was passed in the first place, as well as the Shipping Act of 1916, the
Merchant Marine Act of 1936 and various others. Unlike the US-flag shipping
industry and unlike the US port industry, our lack of competitiveness is not a
function of labor contracts: once you get past the "big six" naval shipbuilders,
there are hardly any unionized shipyards. Likewise, it is not a function of our
capital investments: U.S. yards do not compare with the big Korean yards,
certainly, but they are fully comparable with European yards and much more
advanced than most Chinese yards. And it is not a function of our lack of
specialization either. Building a variety of types and sizes is certainly less
efficient than building a long series of identical ships but it is a rational
strategy for survival in an industry with a pronounced long-term business
cycle. For the same reason, the big Koreans and Japanese yards don't specialize
either, although they do get to build a lot more ships of a particular design.
The Chinese yards specialize and you will get to see many of them folding over
the next ten years.
So what is the cost of the
US-Build requirement? Let's say, for the purposes of discussion, that a new
containership costs $120 million in the US and $40 million in Asia, a
differential of $80 million. Finance that differential over 20 years at 5% and
you get an additional annual cost of about $6.4 million. (If you don't like my
choice of numbers, use your own.) Matson had gross revenues last year of about
$1.05 billion, or an average of about $80 million per ship, so the incremental
cost of US-Build today is about 8% of revenues. Put another way, for a 3000-TEU
ship making 24 round trips a year that's about $90 per TEU on a one-way basis.
Is that a lot? In November, Matson announced an increase in its Hawai'i
westbound rate for 2012 of $175 per TEU. Over the past eight years, Matson's
annual increases in its Hawai'i westbound rate have totaled $880 per TEU. I did
not hear the Hawai'i Shippers Council screaming about that.
Yes, US-Build adds to the cost
of shipping goods to the non-contiguous states and territories. It has done for
over a century. But it is not the only factor, or the most significant factor.
The Jones Act operators would not last a week in competition with the big
international container lines, as we saw recently, when both Horizon and Matson
tried it, so why would you expect US shipbuilders to be internationally
competitive? And our port facilities are small, antiquated and inefficient
compared to the major ports of Asia.
The Jones Act tanker operators
have renewed their fleets and passed on the cost to the consumer. I don't hear
any screaming. Matson has built four new ships in recent years, TOTE two and
Pasha one, with another on the way. Both Matson, with eight old ships, and
TOTE, with three, still have more to do, but the real problem is Horizon Lines,
with 15 dreadful old clunkers and not enough financial capability to build a new
outhouse. The Hawai'i Shippers Council might be better employed looking for
someone with money and brains to take over Horizon than throwing brickbats at
the shipyards.
There's another problem that
Mr. Hansen doesn't mention. Suppose that the US-Build requirement were to
magically go away tomorrow. A new operator could then enter the trade with
Chinese-built ships and it would have a huge commercial advantage over the
existing operators. Would that be fair on Matson, TOTE and Pasha? Perhaps the
Hawai'i Shippers Council would be willing to compensate Matson, TOTE and Pasha
for their investments in US-built ships. No?
If I lived
in Hawai'i, I would be outraged by what things cost, but I think that there are
two parts to the problem. First, if we don't need the Jones Act any more, we
should do away with the whole thing: it would be grossly unfair to single out
one sector of our maritime industry for punishment. Second, if we did elect to
do away with it, we would need to have a very carefully thought out plan for the
transition. February 11, 2012.
|
|
 Are
There No Canadian Engineers?
Irving Shipbuilding, which has been selected by
the all-wise Government of Canada to build all the Canadian Navy's combatant
ships for the next umpty-ump decades, is recruiting engineering personnel in
Scotland. See the announcement
here. Can
it be that unemployed Scots are likely to be cheap labor? February 11,
2012.
|
|
 Trouble
at US Shipping, Continued
US Shipping's CEO, Mike Ryan, obviously gets his
scripts written for him by Dilbert. After last week's smart strategic
move, reported lower down on this page, he must have had to field a bunch of
questions, because here he goes again, in a memo to "US Shipping Corp
Customers":
First, thank you for your business. I am writing to advise you we have initiated
a select few organizational changes to continue to improve our safety
performance and fleet maintenance activity. While we operate well within the
acceptable standards of our industry today, our new goals at US Shipping Corp
exceed those standards. We have as objectives zero safety incidents and 100%
compliance in all of our operating standards. The new senior team at US Shipping
Corp has a zero tolerance level for not adhering to such performance levels. Our
previous organizational structure did not provide us with a path to these
desired results.
Our new structure consolidates many of the very
important former duties of port captains under existing personnel in Edison and
in the field. Our marine superintendents will be spending a much greater
percentage of their time in the field with our ships, assuming more of the
vessel maintenance roles previously handled by the port captains. We will also
establish a new position of Manager of Health, Safety, Environmental and Quality
(HSEQ) in Houston, closer to our customers’ major gulf locations. This new field
based manager of HSEQ will advance an aggressive new program of safety and
statistical analysis.
Setting unachievable goals while simultaneously cutting staff. What a
dodo!
February 9, 2012.
|
|
 Two
More PSVs for Trinity Offshoot
Harvey Gulf International has ordered two more
302-foot dual-fuel PSVs from Trinity Yachts' offshoot, Trinity Offshore (Trinity
Offshoot?) No prices or deliveries have been released but they are
probably close to $60 million each, with deliveries in the second half of 2014.
This order is further indication (a) that the offshore industry is back and (b)
that the shipbuilding industry is in the diversify-to-survive mode that goes
with the downward slope of its business cycle. February 9, 2012. |
|
 MHI Comes
Up with a Winner
Mitsubishi Heavy Industries, (MHI), the only
Asian shipyard to have built a Panamax cruise ship, has developed a system to
ensure that a large ship remains upright even after sustaining significant
flooding damage on one side. Read about it
here.
The new system will be installed on a 550-foot, 23-knot ro-ro being built in
MHI's Shimonoseki yard for Nippon Express.
February 9, 2012.
P.S.: Several knowledgeable birds have
e-mailed to say that there is nothing new here. Looks new to me but I
don't pretend to be an expert on this stuff. In any case, it's interesting
and a positive move.
|
|
 Allied
Shipbuilders Sold
It's hard to think of Allied Shipbuilders, in
North Vancouver BC, without thinking of T. A. McLaren. But, after 64
years, the McLaren family has sold it. Not to a vulture capitalist,
fortunately, but to the yard's VP Operations, Chuck Ko. Well, he should
know what it can do. Read their announcement
here.
February 9, 2012.
|
|
 Non-Contiguans
Speak Up
The President of the Hawai'i Shippers Council
sounded off on the subject of the US-Build requirements of the Jones Act
recently. Read his thoughts in the Hawai'i Free Press
here. He's
wrong, of course, but he does have a legitimate concern. The problem is
not the shipyards, it's Horizon Lines. February 8, 2012.
|
|
 More
Maneuvers at MARAD
Reliable sources report that MARAD's Chief
Counsel, Denise Krepp, has been moved to a new assignment, in the security of
the DoT compound. Rumors abound, of course. February
8, 2012. |
|
 Vigor
Buying ASD
As predicted in this column, Vigor Industrial is
buying Alaska Ship & Drydock. Read the announcement
here. Is
Vigor over-reaching? Can they make ASD work? Will the ridiculous
Lockheed Martin-designed ferry-to-nowhere ever enter service? Stay tuned.
February 7, 2012. |
|
 ConocoPhillips
Developing an Arctic Jack-Up
ConocoPhillips has contracted Keppel Offshore &
Marine to assist in the design of a jack-up that will operate in the Arctic.
Read Keppel's announcement
here. This
is a dramatic development. The new design is going to be significantly
different from existing jack-up designs. It will be interesting to see how
they approach the challenge of withstanding the impact of ice floes. And
if you were wondering what Keppel knows about ice-class structures, remember
that they just built two icebreakers for the Russian company Lukoil.
February 7, 2012. |
|
 Solving
the Icebreaker Problem
It's clear that the U.S. Coast Guard has its
hands full for years to come with the NSC, OPC and FRC programs, not to mention
all those small boats. Meanwhile, the need for a new class of polar
icebreakers gets more and more pressing. So, here's an idea. Let's
do a build-and-charter program,
like we did with the first 18 prepositioning ships.
Get all the energy companies with interests in the U.S. Arctic together in an
icebreaker consortium that would fund the design and construction of however
many polar icebreakers we all think are needed. Then have the Coast Guard
charter them for a term of five years, with four five-year options and the
option to buy any of them at any time, for Fair Market Value. (I'll do the
valuations.) Negotiate an operational strategy that meets the needs of the
energy companies as well as those of the USCG. Also, consider making them
nuclear. There are already more nuclear-powered ships in the Arctic than
in any other ocean. If nuclear makes economic sense, move the next CVN to
the right by five years and let NNS build them. February 7, 2012
(Charles Dickens' 200th Birthday).
|
|
Two
More Old Ships Go for Scrap
Reliable sources report that the product carrier
New River and the troopship Crescent City have headed off to
Brownsville for recycling. The New River is one of the three
American Heavy Lift ships tied up in the Beaumont Reserve Fleet after that
company folded in 2010: built at Sparrows Point in 1960 as the Gulfspray,
she was converted to a poor man's double-hull tanker by Avondale in 1997.
Much more interesting is the USS Crescent City (AP 40, later APA 21),
pictured on the right, which was also built at Sparrows Point, but in 1940.
She was originally intended to be the passenger-cargo ship Del Orleans
but spent the whole war as a troopship. Later she was Cal Maritime's
training ship, Golden Bear II, for 25 years, finally ending up in the
Suisun Bay Reserve Fleet. February 6, 2012.
|
|
Trouble
at US Shipping
US Shipping Corporation has laid off both its
port captains and its manager of quality and training, and will not replace
them. In a memo to the "US Shipping Corp Team", the CEO tries to justify
these moves and fails miserably. Here's a sample:
When you
hear about reductions like this it is natural for you to think the worst for the
company. Let me reassure you that we have good business, good customers and
great prospects for the future. The things which may hold us back from rising
quickly in strength and stature are poor processes, inadequate communication and
unnecessary costs. We will assign the right number of the right people to ensure
the best processes are in use and that waste and inefficiency are driven out of
US Shipping Corp .
Cutting important functions to save money. Not good. Headed for the
exit, I fear.
February 5, 2012.
|
|
 Shipping
Giant?
I find myself to be hugely irritated by FedEx's
latest ads, in which they describe themselves as a "shipping giant". So
how many ships do you have, FedEx? None? Some shipping giant.
Mind you, I like FedEx, they are a great outfit, and they are definitely big, if
not nearly as big as some shipping companies I could name. But if they are
a giant anything, they are a transportation giant.
February 5, 2012. |
|
 STX
Canada Marine Gets Icebreaker Contract
The Canadian Government has selected STX Canada
Marine to design the new polar icebreaker, a contract worth $9.5 million.
Say, Dave, could you please design it so that it meets the US Coast Guard's
requirements as well? Then maybe Vancouver Shipyards could build four of
them, one for you and three for us? Why is Canada only building one,
anyway, when you obviously need at least three?
February 4, 2012. |
|
 What
Is the Harbor Maintenance Trust Fund For?
Check out HR 7, the American Energy and
Infrastructure Jobs Act of 2012. Down there at the end, almost an
afterthought, is Title X, Waterborne Transportation. Title X has one
section and one section only, further emphasizing the importance that the
Congress and the Administration attach to the maritime industry. This
section addresses the Harbor Maintenance Trust Fund, and is actually pretty good
stuff. Here it is, in full:
SEC. 10001. SENSE OF CONGRESS ON HARBOR MAINTENANCE.
Spending the money in the fund has nothing to do
with reducing the deficit or balancing the budget or closing the gap between
rich and poor. The money is just sitting there and accumulating. It
cannot be spent for anything except harbor maintenance. So let's go!
Start spending!
February 4, 2012. |
|
 Dakota
Creek Gets Second AGOR
The Navy has exercised an option on its contract
with Dakota Creek Industries - MM's Shipyard of the Year for 2011 - for a second
Ocean-class AGOR. The mod is priced at $71 million, with completion by
April 2015. Read the DefenseLink announcement
here.
February 4, 2012. |
|
 Congressional
Conflicts
The Senate is pushing a bill to make it an
offense for members of the United States Congress to make money from their
access to confidential business information. It strikes me as bizarre that
such a bill should be considered necessary. Members of Congress are all
fine, upstanding, educated, responsible, churchgoing people - aren't they? - and
surely they all understand the concept of a conflict of interest. But what
about the conflict between local interests and national interests? Members
are elected to represent the interests of their districts/states. As a
result, they root for their local businesses regardless of right and wrong.
So, what about a change in the committee assignment system, so that, for
example, you can't serve on the Sea Power Subcommittee if you have a naval
shipbuilder, naval ship repairer or major naval vendor in your district?
Don't be silly, Colton, I hear you cry, you don't
understand the system. Unfortunately, having been a lobbyist all through
the Reagan years, I understand it all too well.
February 3, 2012. |
|
 More
Diversification at Signal
The 400-foot hopper dredge Wheeler was
built by Avondale but when the
Corps of Engineers needed to repower it, they
turned to
Signal Ship Repair, in Mobile AL.
Read Signal's announcement
here.
February 2, 2012.
|
|
 T-AO(X)
Program Delayed
The word is that, in addition to the cuts in
naval shipbuilding programs that have already been announced, the T-AO
replacement program has been moved to the right, with three ships dropping out
of the FYDP. This is unfortunate but the existing ships are not all that
old, at least by Navy standards. Maybe they can find some money to SLEP
some of them, the ones that are single-hull, for starters. February 1,
2012.
|
|
 End
of Story
The saga of the Hawaiian not-so-superferries is
finally over. MARAD has transferred them to the Navy. Read their
announcement
here.
February 1, 2012.
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Click
HERE to read earlier editions of
"Maritime Memos",
going back to 2001
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