Ok. So I went to Professor Google, extracted the info, and made the following table.
Book1.pdf (24.5 KB)
So, Dutch wages are the lowest; US wages second lowest, & Norse wages the highest [Ombugge’s doing the happy dance!!].
So why, according to the Cato institute article, are US ships more expensive??
Thanks for taking the time to put the various figures into something comparable.
However, the working week in Norway is 37.5 hrs. not 40 hrs.
Because of the generous compulsory annual leave (4 weeks) and the many long holidays the actual time worked in 52 weeks are only 27 hrs/week:
Here we have 25 holidays per year and 10 public holidays, a total of 35 day is 5 weeks which have to be deducted from the 52 weeks. We work 40 hours per week, per year 1880 hours.
I told this once to a young Japanese engineer in the Bullet train who was flabbergasted as he had only two holidays per year and an immense number of unpaid overtime. I felt ashamed…
My understanding is that the Asian yards are using what are essentially mass production techniques to build many ships using the same standardized designs.
The U.S. yards on the other hand is building only a ship or two for the Jones Act trade.
From what I understand Norway is off-shoring the most of the shipbuilding work and focusing on high-value specialized work.
When I worked in Korea as site manager building a set of ships it was 7 months from cutting of the steel to delivery. Yes, it was the mass production techniques being utilized as @Kennebec_Captain stated. Just as important if not more so were all the supporting manufacturing industries located there as well.
It was not the cost of labor but how it was utilized that made it worthwhile building ships there.
I though that series of tankers that Aker Philly built were basically parts assembled in the US from Korean blueprints?
Lately I have been thinking that one solution may be for American ship-makers to copy the playbook of American auto-makers.
In the 1980s the Japanese began eating the lunch of American auto-makers. The Japanese turned out arguably better product for lower cost. Which took American jobs. American lawmakers eased the crunch by requiring the foreign auto-makers to build part of their output in America, thus maintaining many American jobs.
Also, to reduce costs, many components of a car are now built in foreign countries but the finished auto is completed in America, hence making it an “American” car.
Why not do the same with ships? Ships nowadays are not built piecemeal so much as built in modular sections. The sections are then welded to make the ship, and the final fitting begins.
So why not allow the modular sections to be made overseas?They would then be towed to the U.S., and welded together. Many of the other parts that go into completing a ship could also be built overseas, and then installed in the U.S. The ship would cost less, hence more ships would be built in the U.S., hence more jobs.
One big problem would be the provision of American steel be used in the hull. But the American steel could be towed to wherever. And if American capital and Asian skills were used to create ship module construction plants in Mexico, much of the material shipping costs would be reduced.
The Jones Act, at its core has always been a shipyard subsidy. Any thought that it, in any significant way was intended to protect US seafarers is at best naïve. It has been the single biggest hindrance to the supply of US seafaring jobs. And the answer is simple economics.
A high quality aframax tanker built in Korea is give or take $60m, the last 2 US built Aframax tankers were about $200M give or take. So one would need to amortize an additional $140M over 20 - 25 years, that is give or take $10M year in added cost for US built , and more importantly – have confidence that the Jones act will not be repealed in that window making the additional cost – worthless. These types of numbers drive folks to do what would otherwise be un-economic. The prime example is to ship clean products from US Gulf refineries to Europe, and import clean products from European refineries into the US Atlantic coast. Which sadly is the norm.
There is no better way to increase the number of US Flag ships, and jobs for US Seafarers than eliminating the US build, allow ships built in foreign yards to re flag at some cost, and require US crews.
The US shipyards are near dead as it is, and the thing, at least IMO that killed them was the Jones Act. If you protect an industry from competition - they lose the ability to adapt and compete. The non competitive price only allows to be built what absolutely has to be.
A law that requires US seafarers is somehow the biggest hindrance to US seafaring jobs… disagree.
And sure, the Jones Act was an indirect subsidy to US shipyards and it is still—regardless of how it started.
But the idea that if the cost of ship is cheaper it somehow would increase mariner jobs is speculative, and super wishful thinking as has been discussed multiple times.
If that is the norm, then absolutely nothing is stopping someone from running US ships that are foreign built in the trade. But they don’t so what does that say about US shipping in what would be a level playing field building cost wise? The cost of labor is a bigger issue than the cost of building or rather financing the building.
Issues like repealing a part or all of the Jones Act have to be considered in light of the effects of the decision today, not whether you’d implement it a new, or even if it makes purist economic capitalist sense. Removing either the build or
manning provisions is bad, unless a direct connection to a massive, unquestionably positive result that benefits more people than it does now would be a compelling argument. But the only arguments people make are half assed economic theory. You think cheaper build will spur builders to do it cheaper, you mind testing that with allowing ratings and officers to be foreigners? Even just a higher percent of makeup to see if the US mariners get more efficient (aka cheaper)?
Removing the build provisions would take a policy that, flawed as it may be, spreads wealth and replace it with one that would concentrate it more than now.
Aker Philly partnered with Hyundai Mipo for their series of tankers. It was a Mipo design and they supplied all the equipment in addition to the building plans.
Here where International Product tanker rates from mid-January -
Long range 2 (LR2) tankers are earning roughly $26,000/d, long range 1 (LR1) tankers are earning roughly $19,000/d, and medium range (MR) tankers are earning roughly $16,000/d.
US labor costs for a 20 man crew with typical Union contract benefits all in (and with liability insurance to cover US employees) would run between $25 - $35,000 per day. Before any ship mortgage.
To help have vessels available for sealift, MARAD’s Maritime Security Program provides a $5 million dollar a year subsidy to 45 US Flag mostly foreign built ships. Over 365 days, that equals approx $13,700 per day to level the playing field. That would get you into the ballpark for those day rates listed in my earlier comment.
It’s 60 ships actually.
And nothing prevents anyone from getting that 61st and subsequent ships into the flag and enjoying the privilege of cargo preference and no US shipyard build. But somehow the world is not running wild with US flag ships… undercuts any argument the build provisions are the problem.
And a large proportion of those ships are owned and operated by US subsidiaries of large foreign shipping companies, moving older tonnage into the US register,. (??)
How come this is interesting to foreign owners, but less so to the many US companies that own ships under foreign flags (FOC and others)?
Many of the US yards that is able to build large commercial and naval vessels are subsidiaries of foreign shipbuilders. They are using US workers and mid-level managers, but appears to be able to make good profit.
Is this due to the subsidies paid by US taxpayers and the captive market available?
Here is a detailed study by NASSCO with an assessment of the possibilities for an American Marine Highway, US short sea shipping and for US shipbuilding:
See page 32.
This is not new, but I don’t think much have changed since 2009. (??)
Here is a comment about labour cost (not only hourly wages) in US vs. foreign yards:
That is how ships are built both in Asia and Europe and has been for years.
BTW; There are any number of HLVs that can transport large modules, or even bare hull across the world for assembly and outfitting at shipyards in high cost country:
however, you are not factoring the time . The USG/UKC and UKC/USAC being done now is 25 total days laden. Direct USG/USAC is 6 days laden. So the crew cost comp is 6 X 30 = 180 k, vs 25 X 15= 375k - it is not the delta in crew cost that drives this un-economic trade.
except those re-flagged vessels are not eligible for Jones Act trade. The number of ships that reflag for cargo preference - is remarkably close to those needed for cargo preference - done by most of the same folks - go figure
what drives up the cost for US shipyards is not labor - i agree. It is lack of competition. There are very few cases where government interference to artificially support a business have ever had long term positive results - for anyone.
I know, you were describing a specific trade scenario as a result of Jones Act where oil products left the country and would come back, and I pointed out there was nothing preventing a US company from reflagging (or building foreign) and doing the exact same thing, under the exact same conditions, so it’s not about build costs, there are other barriers that appear at least or more meaningful.
