The Ebb and Flow

Someone should come up with a way to bring shipbuilding ups and downs to the attention of unwary Americans. The reporting journal might look something like this:

1. Korea Herald (Nov. 28, 2010) – “China to overtake Korea as world’s No. 1 shipbuilder”- South Korea shipbuilders are likely to be outpaced this year by Chinese competitors with surging freight demand, government subsidies and cheap labor. It will be the first time that Korea, home to seven of the world’s top 10 shipyards, will have lost the No. 1 slot since 2003, when it finished behind Japan.

[Government subsidies could also boost the U.S. shipbuilding industry, nullify the effect of foreign “cheap labor”, and create millions of shipbuilding jobs. We’re not allowed to subsidize industries, though. We’re only allowed to subsidize Wall Street and the Big Banks.]

2. The Daily Mail (Nov. 29, 2010) – “British shipbuilders axed because Poles are 30% cheaper: 300 workers on the Royal Navy’s new carriers laid off” – Hundreds of Britons who were building two aircraft carriers for the Royal Navy have lost their jobs because they were not as cheap as Polish workers, it was claimed last night.

[Two outmoded aircraft carriers? What a waste of shipbuilding talent.]

3. MarineLog (Nov. 29, 2010) – “Vinashin woes have triple effect” – Developing shipbuilding countries hoping to be “the next Korea”, or “the next China”, might consider the woes of troubled Vietnamese shipbuilder Vinashin – and the impact on the rest of the Vietnamese economy. On November 19 Vinashin announced that it may delay the first $ 60 million principal repayment on a $ 600 million unsecured loan arranged by Credit Suisse in 2007.

[Who needs loans? Government subsidies – paid for by under-the-table U.S. taxpayer-funded foreign aid packages – is the only way to go. It works great for South Korea. Remember the objections to that farce lodged by shipbuilders in the European Union?]

4. MarineLog (Dec. 6, 2010) – “American Shipbuilding Association to be dissolved” – The Board of Directors of the American Shipbuilders Association (ASA) said today that the organization will be dissolved effective December 31, 2010. The decision comes after a review of the organization’s charter and changes in the industry landscape convinced the Board that another approach was needed to address the industry’s issues in Washington … ASA represented the largest U.S. Navy shipbuilders and had six shipyard members plus over 100 supplier members.

[Dissolution? It’s about time. We offered to assist the members of this elite shipbuilding grouping a few years ago and got nary a response. This insignificant association won’t be missed.]

5. MarineLog (Dec. 9, 2010) – “House approves Navy LCS acquisition strategy” – The Navy is on track to get approval of its plan to order 10 LCS’s apiece from each of the competing teams. A massive, catch-all year end spending bill passed by the House yesterday “provides authority for the Navy to acquire 20 Littoral Combat Ships (LCS) to allow implementation of the Navy’s preferred acquisition strategy for the class,” according to a bill summary released by the House Appropriations Committee.

[More taxpayer-funded weaponry – and not a dime’s worth of ROI.]

6. Business Times (10 Dec 2010) – “Vale’s mega ships to stall maritime recovery for years” – (Singapore) The rollout of the world’s largest dry bulk carriers by Brazilian mining giant Vale in 2011 will slash the cost of shipping commodities and choke off a recovery in the freight market for years … The arrival of these so-called Chinamax carriers will not only cut costs for Vale but will also lower freight rates for the entire industry, as the new vessels swell an already oversupplied market.

[Bigger is better? No. Bigger is cheaper – but only in the beginning. In the long run the concept is costly because it creates an oversupplied market, and we all end up as losers.]

7. Japan Daily Business (Dec. 10, 2010) – “Shipbuilders strive to stay afloat / Japanese companies cut costs, boost technical capabilities to battle foreign rivals” – Once No. 1 in the world, this nation’s shipbuilding industry is struggling to survive as Japanese companies are overwhelmed by Chinese and South Korean firms that are more cost-competitive. Nevertheless, Japanese companies are making great efforts to endure and rehabilitate themselves … Companies are also focusing on improving their technical capabilities. South Korea’s shipbuilders are rapidly catching up with Japan in terms of technology.

[It’s tough to compete with South Korea because of that country’s subsidy scheme.]

8. Business Times (11 Dec 2010) – “China’s small shipyards may run aground in 2011” – (Singapore) China’s shipbuilding industry will see dozens of small shipyards go under or get taken over next year, as a choppy wave of consolidation rocks an oversupplied market. “There are too many shipyards. For the next couple of years, a number of them won’t be able to survive on their own,” said Robert Lorenz-Meyer, the president of Bimco, the world’s largest shipowners’ grouping. “There will be consolidation, but hopefully some yards will re-focus on scrapping.”

[Correct, Mr. Lorenz-Meyer. Some yards – the unsubsidized ones – won’t be able to survive on their own. Building LCS’s and half-sized aircraft carriers, though, well that’s different. Those yards will survive because taxpayers always subsidize war-making efforts.

Correct on the scrapping issue, too. How else could an unsubsidized shipyard survive in an oversupplied market? “Slow-steaming” won’t save those expensive leviathans from the scrap heap. The obsession with “economies-of-scale” – the corporate fanning of feathers – the shortsightedness of shipowners – one way or another, we’ll all pay dearly for those egotistical whims.]