So you support removing cargo preference then?
Could it be that many of the tankers plying the trans Atlantic clean trade, or the USGC to Canada and Canada to USEC are actually owned by US companies??
if so they are indeed operating on a level playing field, but would they still be if they were flying US flag and manned by all US mariners?
The difference in crew costs may be small, but so are the margins in shipping. The market is open and the cargo owners are not likely to pay more than they have to, even if they are patriotic Americans.
The shorter trips USGC to USEC help but are not near enough. The labor costs on a 14 man foreign flag tanker are probably 6 to 7 thousand dollars a day max. How much is health insurance for someone out of Manila? Also don’t underestimate the fear of liability for using US labor.
I still could see a waiver for 3 or 4 LNG tankers though. Crewing costs are much more likely to be closer due to the very specific training requirements and manning levels.
When I checked it was 11 sailing days laden from Amsterdam to NY Harbor.
The difference in crew costs are not small. As the MARAD report comparing costs of running foreign flag and US flag noted, it tends to be five times what foreign crews were paid. Multiple factors.
“…may be able to shop around the world for the cheapest crews available, should they have the necessary skills. Essentially, foreign-flag shipowners have more influence in the determination of their crewing costs than U.S.-flag shipowners. Sixty-seven percent of carriers participating in the PwC survey revealed that the “Citizen Crew Requirement” negatively impacted their decision to register under the U.S. flag. As is true for most industries employing U.S. citizens, carriers suggested that the “Citizen Crew Requirement” results in higher manning requirements, higher wages, and higher benefits compared to foreign registries. Some carriers reported that payroll taxes for U.S. crews also contribute to their operating costs for U.S.-flag vessels. They further noted that in some other countries mariners do not have to pay income tax, which adds to cost differentials for U.S.-flag operators. Essentially, carriers noted that the standard of living in the U.S. and the social benefits provided to mariners contribute to U.S.-flag wages being significantly higher than foreign-flag wages. There are several other components that contribute to overall U.S.-flag crewing costs that may or may not be applicable to foreign- flag vessels, such as mariner education or training and union fees.“
The report didn’t do tankers specifically in their breakdown, but crew costs aspects are certainly going to track. It noted that for container ships, crew costs could be 70% of operating costs for US versus 28% for foreign.
But even if they were small margins, I’ve never seen a corporate board of a US company say, “well, that’s enough cost cutting guys, I think the shareholders will be pleased we didn’t go for it all”. Which is another mark against the idea that if only the companies could buy foreign ships, they’d make it rain for the mariners instead of just buying foreign barges to own Jones Act trader while doing the same as they are doing for non Jones Act.
If it costs $5 per container for foreign crewmen, and $25 per container for US crewmen, I would say that in either case, the crew cost per container is trivial.
This is especially the case where US longshoremen cost $100 per container MOVE (with a typical container being moved several times).
America First. Reserve a reasonable percentage of US foreign trade cargo, both inbound and outbound (and including empty containers) for US flag vessels.
I think you are missing the point i was trying to make. There is absolutely no financial incentive for a us company to re-flag to compete with foreign tonnage on non-protected routes. However, if you removed the immense cost of US built ships, and allowed re-flag ships in the Jones act trade, even with the higher costs of US crews, they could be competitive. The comparison would be the higher crew cost for the much shorter voyage, vs the lower crew costs vs the 2 longer voyages. I hope that makes it a bit clearer.
BP (now OSG) has a modern 250 million US flag tanker in layup that I bet you can bare boat charter for not too much .
Even though a new US built ship may cost 3 or 4 times one built in China, there are a bunch of 10 to 20 year old US built tankers (and ATB’s) out there that are or should be paid for. So it’s like buying a used car i.e. way less than new. Remember too that US tax laws favor depreciation of an asset against operating profits which helps differ that investment.
I guess the point that we are trying to make is that US wage and benefit costs cost are so much higher that a US crew is just not competitive on anything but the shortest run (which is why you still see US product tankers running to Florida). A Flag of Convenience ship’s wages are so low, that crude oil traders will have a laden tanker sit for months (crewed) waiting for oil prices to rise $5 a bbl.
For a US operator, wages and benefits are the highest cost item in operations. Fuel is second. Mortgage is 3rd.
I admit that we (here on GCaptain) really don’t know if Companies would change their trading patterns if they could buy foreign built ships. But unless they were protected, I agree that it would devastate barge and tug building in the US while adding just a handful of shipping jobs.
I quoted the points you made to ensure you knew which parts I disagreed with. The number one thing I find mistaken is the idea that removing build provisions of Jones Act would magically create mariner jobs. There is no reason to believe that it would create any significant mariner jobs, and it would most certainly cost tens of thousands of other jobs in shipbuilding and related.
No they wouldn’t be. And even if they were, it wouldn’t be much, and more important that all of it—it would be a bad trade against those other lost jobs that are much more meaningful to US communities.
The most “American Cars” will surprise nearly all. 3 of top 5 are HONDA; 9 of the 15 are Honda/Toyota: https://www.cars.com/articles/cars-coms-2019-american-made-index-whats-the-most-american-car-404547/
Why no US build requirement on airplanes?
Because the US is cost competitive in building airliners (or at least they were until the 737Max). That being said the other countries are catching up. That’s why you see Boeing challenging the A220 in Court and Trump putting tariffs on Airbus. You may see a US build requirement for aircraft someday.
Ever wonder why US car manufactures have quit building cars in the US and just build trucks and SUV’s? It’s because there is a substantial tariff on imports of trucks (I think its 25%). Without that protection, GM, Ford and Chrysler would be toast.
See link I posted above. The most “built in America” cars are honda and toyota.
The scary thing is that China controls the supply chain of parts necessary to build “American” cars.
If that supply chain is disrupted by a virus, currency crisis, civil unrest, natural disaster, military aggression, or policy change in China, it’s no longer possible to produce a domestic car in the US.
Same story for many other essential products.
It’s never good to have all your eggs in one basket.
Especially, when a communist adversary is carrying the basket.
Will our “leaders” ever wake up?
There is a need for self sufficiency, including in ship building.
A scarier fact is the following from US News and World Report -
“China has exclusive manufacturing agreements for drugs for anesthesia, cancer and HIV/AIDS, along with other medicines that “we use every day, not only in hospitals but in our own medicine chests,” Gibson says, adding that China is now the world’s only source of antibiotics, including the main ingredient in vancomycin, a treatment of last resort that is used by patients who are suffering from infections that are resistant to other treatment.”
I think the last US plant making penicillin has shut down.
It is insane to allow this. For what benefit? Saving a few pennies short term. Totally crazy.
No argument over the necessity and the end result. But voters would need to be honestly informed as to the economic trade-offs and hardships involved in large scale adjustments to the national economy.
Keeping inexpensive foreign goods out of the U.S. means banning them or imposing tariffs. Look at what recent agricultural tariffs did. U.S. taxpayers are paying large amounts to farmers to compensate them for loss of income. Farm bankruptcies are up, not down. Maybe that’s a short term problem. Maybe it’s not. But the voters should be told the truth. We were told that trade wars were cheap and easy. Obviously, they’re not.
Here’s another consequence voters should weigh:
The U.S. economy is based on importing cheap foreign goods. If these are replaced by expensive domestic goods, a consequence will be higher inflation. Prices for most things would go up. Meaning wages would need to go up, to buy these more expensive things. Which is the definition of inflation. Which has real impacts on everyone, which are often hard to predict, and are often unpleasant.
Consider what would happen if inflation increased to 5%-10% (still less than the high level endured in the 1980s). 401k profits would be eaten away. What would the voters do then?
So, big changes to the economy need to be thought out, and considered in all their effects.
Circling back to shipbuilding; The arrangement that the U.S car industry made in the the 1980s could be the best blueprint for how shipyards could prosper going forward (post 27 and a great photo on post 36).
The finished product would be less than a wholly-made American ship, but more than foreign-made ship, and the difference may be enough to allow more of these American ships to be built, and increase the number of American shipyard workers.
It’s about whether we are in control of our economy and means of production, or are we going to let the Chinese be in control.
If we are going to let the Chinese control our ability to produce manufactured goods, what is the point of having a huge expensive military? China can shut us down without firing a shot.
When China moves to retake Taiwan (and we all know they will), or some other global power struggle occurs )(we all know it will), and the US objects, China is now in the position to restrict exports to the US to shutdown our ability to manufacture autos, computers, TVs, some drugs, etc. In short, China already has us by the balls.
Are Chinese goods really cheaper?
I don’t think so.
You can go to Walmart and buy a flimsy plastic toy made in China for $20 that will be broken in a month. Or you can go buy a well made wooden toy from a local producer for $100 that you grandchildren can play with 50 years from now. Which is cheaper, admittedly this required a some long run thinking.
The problem is that Americans have become instant gratification McDonalds and Walmart shoppers trained by TV and internet advertising to buy low quality, low upfront cost items today, instead of saving to buy quality products that are good long term value.
Exports and imports are healthy for our economy, but it’s crazy to let a adversary be in control of our supply chain of both critical and non-critical components.
The problem with US shipbuilding is volume. We simply are not building enough ships to maintain a “shipbuilding industrial base.”
A protected cabotage law - without the US build requirement does not need to compete with foreign shipping, it only has to compete with the next best alternative. In the case of refined products to the USAC, the competition is Colonial Pipeline. Which is operating near capacity. The bbls do not fit today are being supplied as i said above. The short sea container trades would not need to beat other ships, just trains or trucks. Not sure but can imagine same for LPG, LNG as well.
There are no guarantees, but if bottoms were available at market type rates, i can envision that US crew costs would not be the deterrent against these other alternatives.
The next alternative is barges. Since barges will beat manned ships needing the mariner quantities you imagine would boom without build requirements there is only the certainty that US barge construction would die, and all its jobs with it. It would not lead to more manned ships (besides the tugs).
Your point from the start is, us build requirement holds down us mariner jobs. And removal of the build requirement would lead to more jobs. Disagree.
It won’t, cause at best it will just kill the US bargebuilding industry as well as the shipbuilding one.
I’d prefer to keep both instead of the belief that in any fashion transportation will turn to the most labor intensive option (a manned ship) to move product. If they can’t pipe it or truck it, they’ll barge it, and after that, they’d build a pipeline and only then think, well, maybe a ship then. That’s why we have so many barges now and keep building them while the manned 1000 GT oceangoing ship graphic above sinks in its number count. Cutting costs, most notably the people.
Bottom line though—you have to concede that it would destroy the US shipbuilding industry. Barge capital investment is 2014 was 2.2 billion dollars plenty of jobs—that’s just barges. Why should anyone destroy that on speculation for routes that will never exist for jobs that will never replace that figure in investment in the American economy?
When I first started working in the Industry in 1984, I worked with 2 Gulf Oil skippers who lost their ships when the Colonial pipeline came into being. At one time, there were dozens US flag tankers running crude and products from the Gulf to NY Harbor. Then there were none.
The Colonial pipeline may be maxed out now but it won’t be for long. Unless Trump overturns pending mandated Vehicle MPG improvements, oil demand on the USEC will continue to fall. Most Eastern states also want to ban the use of HFO for building heat. If a Democrat gets elected, expect a carbon tax which will accelerate the decline in consumption (which is already happening).
Long story short, you may get a couple of years to use a tanker but sooner rather than later that pipeline will be able to carry all of the Northeasts needs. It will economically crush any water borne transport of petroleum from the Gulf to NY Harbor. Just like it did in the 70’s. And you will have opened pandora’s box and wiped out tug and barge construction in the US to get it.