A False Sense of Security
Avoidance of the so-called “Fiscal Cliff,” the delay of the Port Strike (Part Deux) and a little more water in the Mississippi River at yearend are all welcome developments. These are temporary band aids, however.
The perfect storm, conveniently scheduled for the end of 2012 didn’t happen. An 11th hour compromise in Washington seemingly has headed the mandatory spending cuts off at the proverbial pass. The USACE released (a little) water into the Mississippi River, staving off at least for now the effective closure of the Mississippi River. And, a 30-day extension on the longshore labor contract which involves ports stretching from Maine to Texas gives shippers, vessel operators the port authorities some welcome breathing room. I’m not resting easier on any of this news. Neither should you.
Budget Battle: not over yet …
Notwithstanding yesterday’s nice little bump for the broader markets, the bigger budget battle looms just ahead. Everything will be on the table and that means shared pain by all. Will it impact defense and homeland security spending and recapitalization? Probably. And, when it comes to those two line items, there are few more expensive than ships and anything connected with the water. Bottom line? Spending will continue in the shipyards; the level to which previous commitments will be met is very much an unanswered question. And that means U.S. boatbuilders – especially those heavily leveraged in government work – will have to continue to hedge their bets, trying to sustain their boom period with foreign sales and/or increased commercial work.
All Stop on the Mississippi River?
On the Mississippi River, the crisis still looms large. And, while AWO and the Waterways Council, Inc. have jointly done an excellent job of sounding the alarm and pushing the Administration to release more water to stave off an almost certain closure of the river to navigation, action from inside the Beltway has been slow, ineffective and, at the end of the day, simply stupid. Just yesterday, the AWO and WCI were forecasting the effective closure of the Mississippi River to navigation to occur – if nothing else was done – between January 5th and the 15th. A national TV news broadcast even had the crisis on their evening telecast yesterday; albeit about seven items into the edition. Maybe when the river shuts down, it will be the lead item.
Port Strike Averted? Not so fast …
Separately, and like the U.S. Congress itself, all the ILA and the US Maritime Alliance did last week was kick the can down the road just a little further. When they agreed Friday to extend the current Master Contract for an additional 30 days, it postponed the strike that was to occur on December 30th. But, not before the US Maritime alliance, representing employers of the East and Gulf Coast longshore industry, predictably made concessions. And, in order to prevent the strike from occurring at the end of the month, they’ll likely have to make a lot more. And that means the member companies consisting of 24 container carriers and every major marine terminal operator and port association on the East and Gulf Coasts will once again get hit hard in the pocketbook at a time when they can least afford it. A relatively short work stoppage on the West Coast in 2012 did much damage to the supply chain.
By the end of January, we will know the ultimate, cumulative effect of all three of these variables on the greater maritime industry. With any luck, we can weather the storm and see a continued rebound, especially in the brown water side of the equation in the United States. In the meantime, the end of January – like the end of December – will bring some interesting developments. Stay tuned. – MarPro
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Joseph Keefe is the lead commentator of MaritimeProfessional.com. Additionally, he is Editor of both Maritime Professional and MarineNews print magazines. He can be reached at firstname.lastname@example.org or at Keefe@marinelink.com. MaritimeProfessional.com is the largest business networking site devoted to the marine industry. Each day thousands of industry professionals around the world log on to network, connect, and communicate.