Very, VERY Astute!

On Friday, the Journal of Commerce had this to say about U.S. Marine Highways (aka, “Short Sea Shipping”):

“Will Marine Highways Save US Shipbuilding?

“The Department of Transportation’s announcement last week to advance their marine highways initiative was arguably the biggest single boost the fledgling industry has had since everyone started talking about the concept eight or nine years ago.

“You could assume that a boost in U.S. coastal shipping would be a boon for U.S. shipbuilders since the Jones Act requires that vessels operating in American waters be American built. Some yards will benefit from new orders, but there’s no guarantee that the marine highways save the industry.

“American Feeder Lines, one of the DOT’s designated projects, signed letters of intent with Aker Philadelphia Shipyard and Bay Shipbuilding for 10-1,300 TEU container ships to shuttle containers along the Atlantic coast. Price: $ 70 million apiece, and a badly needed shot in the arm for Aker.

“‘Ten vessels would be a substantial contribution, at least to one or two yards,’ said Eugene P. Miller, an attorney with K&L Gates in Washington. But is $ 70 million the real cost? Traditionally, series construction lowers the cost of vessels, but new U.S. construction recently has been plagued by cost overruns.

“Miller noted Aker’s order book goes empty once it completes the last two of a string of product tankers for the U.S. trade. Several mid-size yards have gone bankrupt in the past couple years, the result of a bad economy. Big builders that focus on navy construction may be facing substantial cuts in government spending. Northrup Grumman, for example, earlier this year announced it was getting out of the business of building Navy ships, and putting its yards up for sale.

“Then factor in the still-fragile prospects for the maritime highways. For the eight projects, DOT’s endorsement could give them credibility they didn’t have among prospective investors, but Miller said he’s unconvinced about the amount of cargo marine highways operators will be able to attract from highways and railways.

“‘There’s a lot of interest in the marine highways, and it clearly has objectives that are worthwhile from a lot of perspectives,’ Miller said. Advocates argue that the marine highways can reduce air pollution, save energy and untangle congested highways.

“‘I may be the Cassandra around here, but I’ve still got to be convinced. I’m still not sure how big the market is. And $ 70 million is still an expensive vessel.,’ Miller said.” –

Very astute. Very astute.

But consider this. The same JoC writer – R.G. Edmonson, by the way – hit the nail right on the head in a column he wrote back in April of 2004. Short-sea shipping would succeed, he pointed out, if smaller vessels could be accommodated and cargo handling could be expedited.

Former DOT Secretary Norman Mineta had earlier advised the use of smaller ports closer to end users, adding substance to what a truck fleet operator had said when he warned that, “If your product is not on the shelf, you’ve lost that customer forever”.

Time and profit are the fundamental issues that will determine whether or not U.S. Marine Highway and shipbuilding will be successful.

Mr. Miller suspects that those 1,300 TEU – $ 70 million vessels will not likely cut the mustard, and the chances are he’s right. At 575 TEUs, National Shipping of America’s MV National Glory is a considerably smaller vessel and was purchased from Marad for a lot less than $ 70 million. And although its shallower draught allows it to access smaller ports, it barely cuts the mustard.

Even more important is the fact that in both cases, time and profit are adversely affected by conventional means of container storage and retrieval, and it’s the time spent in repeated loading and offloading operations in efforts to disgorge targeted containers that eat into profits and raise costs at every link along the chain.

On the other hand, our newly-designed container ship guarantees the following benefits:

– At 695 TEUs its draught will be about six feet less than that of National Glory and will permit access to even more of the nation’s smallest ports.

– Our patented push-button method of storage and retrieval is a radical departure from primitive and time-consuming container handling methods. While this rapid delivery system greatly increases profits for the shipping line, the line’s operating costs as well as costs to the end user are dramatically reduced.

– The reduced amount of operating time allows for a greater number of deliveries per trip and a greater number of annual trips as well.

– Guaranteed profits will attract more investors and more shipping lines.

– The demand for more of our patented vessels will prop up failing shipyards and create hundreds of thousands new jobs.

– More jobs mean more weekly paychecks. More paychecks restore lost buying power. Restored buying power equates to more demand, and more demand, of course, requires responses by manufacturers both here and abroad.

This happy progression of events might even come to the attention of our leaders in Washington who might then see that, “Whoever builds ships, builds worlds”.