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Sunday, October 25, 2020

Maritime Logistics Professional

Old Salts Need to Broaden Their Vision

Posted to Martin Rushmere (by on May 20, 2010

Finances will inevitably change policies

This month 150 Old Salts plus advisors berthed for the first time at the Capitol to tell Congress their thoughts on the future of US merchant marine policy and ways to keep maritime commerce healthy.  Dubbed the "Maritime Congressional Sail-In", the delegation yakked with congressional leaders and took dead aim on two points, the Harbor Maintenance Tax (HMT) and, indirectly, the Jones Act. (A less publicized reason for the visit was to voice disquiet about the Executive Order on piracy ransoms.)
On the Harbor Tax, there are very few dissenters that it should be substantially changed, replaced by a fairer measure or just dropped altogether. Short-sea shipping is going nowhere until there is some action.
On the merchant marine, there is considerable debate. Sure, the nation needs such an institution, but the way the Jones Act is being viewed is causing more problems as the years go by. What's more, the Washington jamboree was not exactly neutral as it was under the auspices of the International Organization of Masters, Mates and Pilots, an affiliate of the AFL-CIO.
Trade unions are naturally and automatically gung-ho about practices such as the Jones Act, because they restrict the free flow of labor and capital, raising the barriers to entry and inevitably leading to costs (wages) going up.
During their ear bashing of Congress, it is unlikely that the Old Salts brought up the financial performance of the Jones Act flag carriers, Matson and Horizon.  And perhaps they are not even aware of it, which is a shame.
Matson's parent, Alexander and Baldwin, notched up a sixfold increase in net profit for the first quarter—due largely to the shipping line's improvement in business from China (containers up 30 percent and overall shipping up 14 percent). Horizon whacked in a $13 million loss, up from a $10 million loss in the same quarter in 2009. Its boss, Chuck Raymond, doesn't expect to see much improvement for the whole year over 2009.
 Matson is keeping afloat partly due to its parent making a bundle of money from other operations – real estate and the cash cow of Hawaiian interests. Capital is available to modernize the fleet and its equipment. Horizon is suffering because it is dependant on maritime operations only, and when these sink, there is no lifeboat. (A comparison of the age of the fleets is not easily available).
A recent analysis of the top 10 shipping lines listed on the NYSE and NASDAQ showed that the most efficient in terms of revenue per employee is Dryships at $3.2 million and Matson (via Alexander and Baldwin) ninth at $700,000. Horizon does not figure on the list.
Lobbying can be a two-way street. Someone needs to tell the Old Salts that the policies on the merchant marine need to be shaken up.

Tags: ports northern Horizon Matson railroads Buffett Burlington Warren