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U. S . MARITIME INDUSTRIES: STATUS ~ TRENDS, AND NEEDS
STATUS
The U.S. maritime industries (i.e., shipbuilding, ship operating,
marine terminals, and coastal and inland waterways shipping and
shipbuilding) are in the midst of rapid change as the result of an
eroding U.S. competitive position in world shipping and trade,
deregulation of the freight transportation industries, and increasing
competition for scarce government funds. One consequence of these
changes is the oversupply and overcapacity of capital assets,
including ships and barges, shipbuilding capacity, and in some cases
underutilized marine terminals. Some of the oversupply/overcapac~ty
is nominal--too many or too much. In other instances the
oversupply/overcapacity is structural--the surplus facilities are too
old or poorly sited for modern conditions. The problem of
oversupply/overcapacity adversely affects the business climate in the
maritime industries.
The business climate for U. S.-flag shipping is both depressed and
intensely competitive, with excess capacity high on the list of
causes. Any time any segment shows signs of profitability, as did the
U.S. cruise business several years ago, foreign shipbuilders and the
governments that support them produce additional tonnage for virtually
any owner. The result once again is oversupply. Given the long list
of failures that such a shipbuilding policy has generated, many of the
developed countries are reassessing the wisdom of continued support of
shipbuilders, with the result that closings are taking place at an
accelerated rate.
The mounting losses incurred by the shipowners has hit the
international lending institutions particularly hard. Recent
difficulties of several major shipowners have sent shock waves through
the banking industry. It will be increasingly difficult for even the
soundest shipping companies to obtain financing in the future. This
will lead to further diversification out of the industry.
As a defensive move, many European ship operators are "flagging
out" existing tonnage or selling off their fleets and chartering in
cheaper third-flag vessels. This indicates that time has run out on
their efforts at cost reduction for their national flag ships. Given
the existing overtonnaging, freight rates have plummeted to a point
where any tax or regulatory burden or crew cost differential cannot be
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absorbed. Hany owners have concluded that neither the available
systems nor the technologies exist that can produce sufficient
increases in productivity in the short run to offset the cost
differential enjoyed by the third-flag carriers.
A new generation of 4,000 twenty-foot equivalent unit (TEU)
container ships is now servicing the United States. This additional
low-unit-cost transportation capacity virtually guarantees that 1986
will be another year of depressed freight rates. The demise of
well-established shipping companies is likely to continue.
Although the dollar has begun to weaken against the major
currencies, the lag time built into foreign trade transactions
precludes any substantial change in U.S. trading patterns in the
short-to-mid term. For example, there is no recognized forecast
indicating any major improvement in the U.S. grain and coal export
picture that is essential for a substantial increase in traffic on the
rivers. Existing overcapacity also will continue to depress freight
rates in this area as will the reduction in the world price of
petroleum. The drop in oil prices has also dampened activity in the
oil service and supply sectors, and the shipbuilders and repairers
that serve that industry. No improvement is in sight.
TRENDS
The U.S. maritime industries are faced with a continuation of
trends already well begun. The most competitive shipbuilding and ship
operating companies will certainly survive. The surviving ship
operators, in particular, will become part of a highly competitive
international industry, but much of their expansionary efforts will be
in the intermodal land transportation systems so that the ship itself
will continue to be Reemphasized.
The domestic fleet will continue to shrink and some changes may
take place in the cabotage laws, particularly as they pertain to the
requirement that all vessels be U.S. built. Because of increasingly
competitive land transport alternatives, the higher cost of some Jones
Act services can no longer be passed along to the consumer. At
present, the cheaper tug-barge systems are taking over' but some
provision for foreign building is inevitable in the future.
Many state governments appear to be willing to continue to
stimulate port improvement and expansion through the use of
state-backed industrial bonds, tax incentives, and subsidies. This
will sustain a competitive environment that puts pressure on port
costs and at the same time will result in excess port capacity
nationwide.
There is a growing concentration of cargoes at a smaller number of
ports. This concentration is caused by the necessity of improving the
utilization of capital-intensive ships, double-stack trains, and
modern marine terminals. To increase the number of vessel voyages and
unit train round-trips, carriers must limit the number of port and
terminal stops. Load centers have developed around high capacity,
high service-frequency ports that offer throughput efficiencies. The
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growing.number of container double-stacked unit-trains has benefited
the U.S. carriers that introduced them by substantially reducing
inland costs.
The concentration of ship operating activities is hardly good news
for some shipbuilders. The largest shipbuilders are sustained with
Navy work; the smaller shipbuilders must develop new markets or go out
of business.
NEEDS "AND OPPORTUNITIES
Even in this depressed climate, there are a number of opportunities
for improvement that could add to the overall profitability of
segments of the U.S. maritime industries.
Shipbuilding
Given the lack of any significant commercial market, the principal
beneficiary of increased efficiency or improved shipbuilding and ship
repair techniques is the U.S. Navy. A number of worthwhile projects
are being undertaken to accomplish this. These projects constitute a
collaborative effort within the industry, with government
sponsorship. Despite such efforts in process technology (where
benefits accrue to the government in the form of reduced costs for
building and overhauling naval vessels), U.S. shipbuilders have just
begun to scratch the surface of opportunities that could be created
through market research, development of new products, and entry into
new markets. An example of this is the industrial plant and floating
plant market, which is already creating employment for some U.S.
shipyards. Private collaborative opportunities to exploit the foreign
market for these units are available through the use of export trading
companies and foreign trade zones.
Without government support it will be difficult for the U.S.
shipbuilders to be internationally competitive within the foreseeable
future. U.S. government assistance in international marketing and in
low interest financing of foreign sales is appropriate and necessary.
The absence of any international demand for American-built ships,
together with high U.S. labor costs, greatly restricts the available
market and guarantees an insurmountable price differential.
Ship Operating
Improved utilization of the seagoing work force leading to more
effective manning and possibly crew reduction offers a real
opportunity for future savings and is being undertaken with the
cooperation of some of the U.S. labor unions and the U.S. Coast
Guard. A number of the European maritime nations and Japan are well
ahead in this effort. Several major U.S. shipping companies are
transferring the effective manning technology of Europeans and others
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into their operations. A MarAd-sponsored R&D program with industry
and labor has facilitated advances in this area. The technical basis
still needs to be developed for revising maritime education and
training curricula and for making manning and licensing changes in the
context of U.S. maritime safety regulations.
Long-term efforts relating to energy efficiency are being
successfully undertaken by European diesel engine manufacturers and
their Asian licensees. Given the limited U.S. market, there is little
incentive to undertake independent research in this country; however,
U.S. ship operators (and shipbuilders) are monitoring overseas
developments and should consider participating in future developments.
Marine Terminals
No significant technological limitations impede marine terminal
operations. Most modern container terminal operators are aware of and
use the latest technologies when their use is cost-effective. The two
most promising areas for productivity improvement in the next five
years are advances in automation of information flow within marine
terminals, and improvements directed to the performance of the human
element, including management and labor.
As in other sectors of the maritime industries, technology
development and application in marine terminals is healthiest in
certain Asian and European countries. Any shortcomings in performance
in U.S. terminal operations compared to foreign operations of similar
capability is due more to the performance of the human
element--management, dockside labor, organization, and work
practices--than it is to a need for new technological development.
Generally speaking, labor has not impeded the technical development
and application of most competitive technology in U.S. marine
terminals. However, in East and Gulf Coast ports, long standing
labor/management agreements have denied much of the cost-saving
benefits of new technologies to the terminal operator; this has
impeded full utilization. Manning levels of longshore gangs in these
areas are two to three times the size of those in most areas of the
world' and crane productivity in U.S. terminals is less than that of
the most productive terminals in the world. Tn spite of this
disadvantage, terminal operators have continued to innovate, albeit
with a resultant squeeze on profitability.
In contrast to other economic sectors of the maritime industries,
there is healthy competition in the marine terminals industry between
ports, between terminals, and between labor unions. As a result of
relocation of ports and creation of new marine terminals, the
traditional labor union alignments are being challenged by newcomers
to the longshore industry. High labor costs are creating an
opportunity for new approaches and organizations and its growth is
bound to continue.
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Inland Waterways
Since all basic waterway improvements are government sponsored, the
lack of funds and time-consuming procedures for approval of waterway
projects are major barriers to improvements in operating conditions
and business opportunities. Nevertheless, incremental operational
improvements that modestly reduce cost and increase service can
reasonably be expected, based on past performance. Opportunities for
improving the productivity of vessel operations are to be found in
advances in the engine room, hull design and materials, improved
maneuvering, personnel safety and health, training of personnel,
better communications, and eliminating burdensome regulations.
OTHER CONSIDERATIONS
Given the depressed earnings in the maritime industries, any real
interest in technology development and application on the part of the
industry will only be to identify short-term opportunities for cost
saving or market segment enhancement. Additionally, with continued
government emphasis on the eventual elimination of all direct
subsidies for the maritime industry and reduced federal investment in
ports, only projects that further these short-term goals can be
expected to have federal support unless they can be presented as
essential to national security.
Representative terms from entire chapter:
maritime industries
