28814 members and growing – the largest networking group in the maritime industry!


Saturday, November 28, 2020

Maritime Logistics Professional

The Light at the End of the Tunnel

Posted to Global Maritime Analysis with Joseph Keefe (by on September 19, 2016

Depending on which sector that your maritime business resides on the global waterfront and within the world’s supply chain, the past 18 months may not have been your best ever. This week, the confluence of three separate, but related events may just form the basis for a way forward to better times. In other words: the light at the end of the tunnel.

They Come in Threes

The old wives tale holds that ‘bad things come in threes.’ And it is true. Take the global waterfront, for example. The collapse of shipping giant Hanjin dominates today’s news cycle, especially where it impacts the supply chain, but seemingly endlessly low bulk freight rates (overcapacity) and the low price of oil are also taking their toll on the bulk trades and offshore industries. Here in United States, the ‘war on coal’ exacerbates that impact on the bulk trades, albeit this time, on the inland and Mississippi Rivers. All of that negatively impacts the shipbuilding industries; here and abroad.

Fortunately, it turns out that good things also come in threes. And if the summer optimistically enough kicked off with the long-awaited release of the U.S. Coast Guard’s Subchapter M towboat rule, then it is also going to end in a decidedly more robust fashion. This week’s contract award by the U.S. Coast Guard for its future Offshore Patrol (OPC) to Eastern Shipbuilding Group is of course good news for Eastern, but the deal should resonate through the supply chain, as well. The first OPC is expected to be delivered in fiscal year 2021; the service plans to build 25 OPCs.

Notwithstanding the understandable disappointment of the also-ran yards, the total award is reportedly valued at $110.29 million, something that ought to ripple through the waterfront nicely. If all goes according to plan, the service plans to build 25 OPCs, putting the contract’s potential value at $2.38 billion. Those ships aren’t going build themselves, so the manpower required will present not only opportunities for the yard and its personnel, it’ll also tighten a flagging shipbuilding employment sector that desperately needs a kick in the pants.

Separately, the IMO’s ratification of the Ballast Water Management Convention, and its entry into force on the 8 of September 2017, presents a robust opportunity for shipyards everywhere. It also represents a significant challenge to industry, especially where that ruling involves scheduling drydock space for the world’s 60,000 hulls that might be impacted, the OEM’s who need to ramp up their manufacturing base, and yes, the Coast Guard, who hasn’t yet approved any devices for vessels traveling in U.S. waters. While it isn’t altogether clear as to how all of that will come together, the downstream impact that equipment installations that can cost as much as $1 million at a pop should not be underestimated. And, not a moment too soon.

The Macro View

There’s something for everyone: blue water, brown water and everything in between. Those three events, all by themselves, don’t of course provide the complete panacea that we’re looking for, but as a combined punch, it is certainly better than a sharp stick in the eye. On the other hand, a closer look at the subchapter M towboat rules provides a glimpse at a rule – some stakeholders in the inland waterways industry had positively quailed over what was coming in the many months before its announcement – that simply isn’t nearly as strong as it could have been, provides many ‘outs’ in the form of delayed entry into force and grandfathering of certain issues. Still, there will be work to be done, and that’s good news for the boatbuilding and repair sector, as well as the many OEM providers that service them.

The IMO ballast water convention ratification also holds some uncertainty, especially in the face of the excruciatingly slow approval process on this side of the pond. But, with 95% of all freight entering the United States doing so on a boat and all but a handful of those vessels registered to a flag of convenience, most of the Ballast Water Treatment solutions will probably be installed somewhere else, when they do happen. Still, savvy shipowners are reluctant to install something which hasn’t yet been U.S. Coast Guard approved, even with the deadline date looming large in the proverbial porthole. It will be a mess when it happens, but the rule will eventually help put some repair yards back on their feet.

Elsewhere, Reuters was reporting that U.S. drillers last week added oil rigs for an 11th week in the past 12, despite the fact that crude oil prices remain below “the key $50 a barrel level that spurs a return to the well pad.” Well, maybe they (the drillers) know something I don’t.

Bad things can come in ‘threes.’ We’ve certainly seen enough of that over the course of the past two years. Good things can and do follow a similar pattern. In fact, I think it was John F. Kennedy who said, “When the tide comes in, all the boats float.” Has the tide started to come in? I don’t know. And, you are free to make of current events what you will. From where I sit, however, I’d call the cumulative impact of this summer’s events and announcements, ‘The Light at the End of the Tunnel.’ Let’s go with that, for now. – MarPro

* * *

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 jkeefe@maritimeprofessional.com 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.