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 unit 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. Northrop Grumman, for example, earlier this year announced it was getting out of the business of building Navy ships, and a putting its yards up for sale.
Then factor in the still-fragile prospects for the marine 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.
--Contact R.G. Edmonson at email@example.com.