Respected maritime authority calls Jones Act an “expensive luxury”

by Michael Hansen, Hawaii Shippers Council

The respected authority Drewry Shipping Consultants Ltd. in their Container Insight Weekly (WK-46) published November 17, 2013, called the Jones Act “an increasingly expensive luxury” and validated Hawaii Shippers’ Council (HSC)’s estimates that U.S. shipbuilding costs are 4 to 5 times that for building a comparable ship in South Korea or Japan which was published on November 7, 2012.

The Drewry comments were prompted by the recent order placed by Matson Inc. with Aker Philadelphia Shipyard Inc. for a pair of 3600 twenty-foot equivalent unit (TEU) capacity containerships for delivery in 2018 for the astounding price of U.S. $ 209 million apiece.  Drewry says, “comparable sized vessels could be built in Asia today for less than a fifth of that price.”

The two corporate press releases announcing the containership order are dated November 6, 2013:  Matson – Aker Philadelphia Shipyard

Drewry believes, “US consumers will, no doubt, be concerned at the increasingly high price of protecting US domestic or coastal traffic for US flag ships only.”

The Hawaii Shippers Council has been alerting the residents of the noncontiguous jurisdictions to this same message for several years.  The noncontiguous jurisdictions – Alaska, Guam, Hawaii and Puerto Rico – are most affected by the federal cabotage laws because they are completely dependent on ocean shipping for interstate surface transportation and do not have access to other modes of surface transportation such as railroad, road trucking and pipeline.

In their editorial statement under the heading “our view” following the news article, Drewry states, “As the political need for the US’ Jones Act is much diminished, and most of its foreign trade is already carried in non-US flag vessels, there are strong commercial and environmental arguments in favour of its repeal.”

The Hawaii Shippers Council has advocated for its noncontiguous trades Jones Act reform proposal that would exempt the noncontiguous trades from the U.S. build requirement of the Jones Act, which Drewry aptly explained is no longer tenable as the Jones Act shipbuilding industry is so uncompetitive.

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Phila Inquirer: Do Philly-made Aker ships cost > 5X Asia ships? Industry responds

US cabotage protection gets more expensive

Drewry: The recent news that Matson has ordered two 3,600 teu vessels from Aker Philadelphia Shipyard in the US for approximately $209 million each underlines the possibility that US flag protectionism is an increasingly expensive luxury. Ignoring differences in ship specification, comparable sized vessels could be built in Asia today for less than a fifth of that price (see Figure 1). As Matson’s last order for 4 x 2,890 teu vessels, delivered between 2003 and 2006, cost around $125 million each, which was around four times higher than the market price in Asia at the time, the differential appears to be getting bigger....

read ... The continuing reservation of US cabotage cargo to US flagged vessels only is getting increasingly costly for US consumers.