This year finds the nation and its armed forces alerted, activated, and at war with Iraq and against the ideologies and systems of terrorism. By the end of April 2003, U.S. and coalition forces had taken control of Iraq and dusted the Hussein regime.
In the course of preparing for this war, a complex maritime logistical plan to supply Operation Iraqi Freedom was put in place by the U.S. Transportation Command. This plan included activation of more than 35 Ready Reserve ships, the commercial chartering of other vessels, and the offer of escorts and protection to tankers and other ships in the Persian Gulf by U.S. naval and Coast Guard personnel to protect against mines and terrorist attacks.
While troops primarily are airlifted, cargo is moved primarily by sea. During the past decade, the armed services have designed, constructed, or converted an armada of vessels that they directly operate and control to support the position and movement of ammunition, supplies, and equipment all over the globe.
One of the critical policy changes within the maritime industry was the increased emphasis on port and national security. This resulted in creation of the Department of Homeland Security and the transfer of the U.S. Coast Guard to it on 1 March 2003.
The same problems experienced by the maritime industry in 2002 also affected the shore-side transportation and manufacturing industry, the stock markets, and international business. Though it might be hard to remember after this year, we had a mild winter in 2002. Oil shipments, particularly heating oil, declined. The economy continued in mild recession. This translated into a surplus of tanker capacity and lower freight rates for tanker operators throughout much of the year. Oil prices and rates improved somewhat late in 2002 and early into 2003 as a result of the war in Iraq and concerns about supply both from Iraq and from Venezuela and Nigeria. However, these worries seem to have been discounted, at least for now. Oil prices have declined about $10 per barrel from their highs of earlier this year because oil production has resumed in Venezuela, and most of the oil fields and production facilities in Iraq now are under coalition control.
The sinking of the oil tanker Prestige, and the oil pollution event that followed off the coast of Spain, triggered a number of actions that will be debated in the maritime community for a long time. This is particularly true of the official government conduct and political scapegoating that resulted in the 85-day imprisonment without bail of the captain of the Prestige in a Spanish high-security prison for what may turn out to be carrying out the orders of the Spanish government under protest and against his best judgment.
Tanker owners, operators, insurers, and classification and inspection societies are defending their operations and quality standards in the wake of this casualty. European nations and the European Union are blaming tanker operators for negligence, and are planning major legislation that would bar all single-hull tankers from the European coasts and provide for other strict new regulations. There is plenty of blame to go around. Ship owners and insurers suggest that no nation or maritime authority ever should have ordered the Prestige, which reported herself to be in distress, to be towed offshore directly into a storm, which was sure to increase damage to the ship and further degrade her already compromised seaworthiness. Operators claim that a ship facing such circumstances should have been offered prompt sanctuary in a safe harbor of refuge, where the cargo could have been removed and the ship could have received emergency repairs to reduce the risk of an oil spill and allow a safe salvage operation. Everything imaginable cascaded wrongly in the ultimate sinking of the Prestige, creating yet another serious pollution event along Europe's coast.
The bulk shipping sector did not set any records in 2002. Mississippi River levels were low throughout the year because of drought conditions. Many barges were tied up for lack of business, and some large barge lines merged or went into bankruptcy. Many traditional customers of U.S. grain exports have become self-sufficient growers, explaining at least in part a decline in exports of certain grains and wheat. The steel and coal business also was affected by low demand and general business recession, as well as by foreign competition.
Containership operators experienced flat rates and declines in cargo volumes compared to the prior year. Container line service alliance partners were unable to generate significant increases in sales or rates. In some cases, the lines agreed to reduce carrying capacity to cut costs. As usual, some small and niche market or specialty operators achieved better comparative net operating results than did the major carriers. Operators of specialty ships such as heavy-lift vessels and roll on/roll off operators did better than others.
In the passenger ship market, a number of small operators with older ships went out of business as a result of competition and poor market conditions. In the post-11 September era and during the recession in 2002, and because of the war in Iraq, travelers have become more cautious, staying closer to home. Merger activity is continuing. In the United States, some carriers are basing ships in port cities closer to population centers and main markets. They also are offering shorter cruises closer to home and discounted prices to lure travelers. The shipbuilding spree that brought more than 20,000 new passenger cabins on fantastic new luxury cruise ships to the market during the past few years has peaked, and will start to slow over the next few years.
The financial, operating, and structural condition of the maritime industry invites close inspection. Because the industry is becoming more international in nature and is not very well understood by the public, and because of its generally poor investment track record and lack of good news (we only hear about the catastrophes), many investment houses do not budget much time or resources for analyzing shipping companies. Closely held shipping companies tend to value their privacy, and do not share information willingly. Increasingly, major investment and commercial banks are not very interested in either financing new ships or underwriting new stock offerings. Some companies have resorted to issuing high-yield (junk) bonds to finance their ship and equipment purchases, but that sector experienced defaults in 2002. As a result, the maritime industry is becoming increasingly dominated by larger conglomerate players on the one hand, and smaller companies that have the expertise to succeed as either niche or specialist operators on the other.
With a few exceptions, the maritime industry finished 2002 without much change or real improvement in either market conditions or profitability compared with 2001. The U.S.-flag registered merchant fleet ranks 12th in the world. However, U.S.-domiciled investors (some of which are traded on the New York Stock Exchange) beneficially own or control what amounts to the fourth largest fleet in the world. The forecast for 2003 is mixed, and the industry is very cautious about future prospects. This will not, however, prevent them from ordering more ships, because everyone agrees that world trade is expected to grow significantly over the next decade. Shipyard prices are very competitive, and interest rates are at rock bottom. The consolidation of major market participants should continue, because the results of many companies still are not strong enough to attract the significant new investment that is required to build and profitably operate the new and technologically advanced ships that will be required to replace maturing vessels about to be forced to the scrapyards because of their age or their perceived danger to the environment.
Status of the U.S.-Flag Industry
The U.S.-flag registered fleet includes about 497 vessels of more than 1,000 gross tons, including vessels owned by the government and dedicated or used for military sealift or national defense commitments, in the following categories:
- Oceangoing cargo—257
- Great Lakes—70 (some vessels are laid up/not trading)
- Government owned—170 (including National Defense Reserve and Ready Reserve Fleets)
(Total Jones Act Qualified—146)
U.S. Maritime Administration
Under the command of Captain William Schubert, Maritime Administrator, the U.S. Maritime Administration (MarAd) allocates approximately half ($100 million) of its budget to operations and training of merchant marine officers through support of federal and state maritime academies and their training vessels. The next-largest piece is budgeted for maritime security, where MarAd manages the Ready Reserve and National Defense Reserve Fleets for the Navy while the ships are in inactive status. The balance of the budget is allocated for ship disposal and scrapping (130 World War II-era and other surplus ships in layup have been designated eligible for disposal), and for the troubled Title XI loan guarantee program, which the Bush administration does not actively support. MarAd estimates there are enough Standards of Training, Certification, and Watchkeeping (STCW) qualified mariners in the U.S. system to crew approximately 500 ships.
Military Sealift Command
The U.S. Navy's Military Sealift Command (MSC), a component of the U.S. Transportation Command under the command of Vice Admiral David L. Brewer, operates a fleet of about 123 ships in its worldwide service to support the logistical requirements of its various military and government agency clients. Ninety-two Ready Reserve Force ships are held in reduced operating status, ready to sail on short notice. A significant portion of these have been activated and assigned to support Operation Iraqi Freedom. MSC continues to expand its fleet of fast combat support ships for the Naval Fleet Auxiliary Force, dry cargo/ammunition ships, and other vessels to meet its mission requirements. MSC-owned or -controlled vessels are manned by a combination of service personnel, civilian mariners employed by MSC, and third-party contract operators. The MSC-controlled fleet has been assigned many complex logistical and support missions, and is regarded as one of the largest quasi-commercial shipping operations in the country with a very good training safety record.
MSC ships are organized in seven operating groups:
- Naval Fleet Auxiliary Force
- Special mission ships
- Prepositioning ships
- Sealift ships
- Ready Reserve Force
- Introduction ships
- Charter ships (time or voyage) to meet short-term market or mission requirements
The Ready Reserve Force fleet is under Department of Transportation/MarAd ownership and maintenance when inactive, but is controlled by MSC when activated and operational.
Maritime Security Program
The Maritime Security Program (MSP) provides for a maximum of 47 U.S.-flag, militarily useful ships to receive ten-year subsidy payments amounting to $2.1 million per ship until 30 September 2005, subject to annual appropriations by Congress. The owner-operators of the ships currently in the MSP fleet are:
- American Ship Management/APL, 9 containerships
- American RO/RO Carriers, 3 roll on/roll off ships
- Maersk Line, 4 containerships
- OSG Car Carriers, 1 roll on/roll off ship
- International Shipholding/Central Gulf/Waterman, 7 ships
- First American Bulk Carrier, 2 containerships
- First Ocean Bulk Carrier, 3 containerships
- U.S. Ship Management (formerly Sea-Land), 15 containerships
- E-Ships (formerly Farrell Lines/P & O), 3 containerships
Some 90% of Maritime Security Program subsidies are paid to U.S. operators, on behalf of non-U.S. owner lessees or charterers. For example, A. P. Moller-Maersk Lines, a long-established Danish owner/operator, probably is the largest military contractor operator of ships for the U.S. government, with major operating and maintenance contracts. American President Lines, owned by Singapore's Neptune Orient Lines, and American RO/RO Carriers, owned by Sweden/Norway's Wallenius-Wilhelmsen Group, also are major participants. A new bill, the National Security Sealift Enhancement Act, with tax incentives, is designed to supercede the MSP, but the program does not provide incentives to build new vessels because the amount of money is too small and it is funded only on a year-to-year basis, whereas ship owners must plan on at least a 20-year service life for every vessel.
Voluntary Intermodal Sealift Agreement
When combined with Maritime Security Program vessels, the 69 participants in the Voluntary Intermodal Sealift Agreement (VISA) offer the Department of Defense additional capacity on commercial ships in return for certain cargo preferences during peacetime. These vessels include RO/RO, container, LASH, bulk, and tank vessels. VISA provides an intermodal sealift capacity of about 170,000 containers (TEUs).
Mergers and Acquisitions
Merger and acquisition activity continued in 2002:
- Carnival Cruise Lines acquired P & O Princess Cruises.
- Wallenius-Wilhelmsen Lines effectively acquired Hyundai Merchant Marine Car Carriers.
- CSX Container Line was sold to Horizon Lines, owned by the Carlyle Group.
- American Commercial Barge Line was acquired by Danielson Holding Corp. in May 2002; American Commercial and Jeffboat filed for Chapter 11 bankruptcy on 11 January 2003. The company owns 4,700 barges and 200 tugs and has 975 employees.
The continuous merger and strategic alliance activity among carriers has attracted the attention of both the European Union and U.S. antitrust authorities. Major carriers have consolidated their market shares, and in some cases rationalized aspects of their operations and scheduling and, as a result, have triggered anticompetition investigations.
For example, Stolt-Nielsen, Tokyo Marine, Odfjell Tankers, Jo Tankers, Wallenius-Wilhelmsen, Carnival/Princess, Maersk-Sea-Land, and TACA (Transatlantic Conference Agreement) member lines and other carriers all have faced investigations and/or charges because of their size and their strength in their market sectors in terms of their alleged ability to influence or control rates and capacity. While these allegations circulate in public, many of the corporations and conferences under scrutiny have not demonstrated the kind of bottom-line results that would indicate that exorbitant profits have been amassed or shipping customers exploited or harmed in a way that has damaged markets, shippers, or the public. In fact, many of the carriers complain that freight rates and profits are not sufficient to attract investors or banks to loan money for ship mortgages, and that cutthroat competition is proof that there is no proven ability to control rates or markets even in the case of lines belonging to rate-setting conferences, which are allowed antitrust immunity.
Liner Trades
Major container carriers have continued to operate within alliance and freight conference groupings along major transatlantic, north-south American, and transpacific trade routes in an effort to pool ships, containers, and terminals and rationalize carrying capacity and sailing schedules. Most belong to rate-setting conferences. They share shoreside terminals and space on board their vessels but advertise independently and set long-term contract prices and markets separately. Together, the five groupings shown in Table 3 account for a 54% market share of the U.S. import-export container market, a decline of about 10% over the prior year.
Delphic Shipping, owner of five small containerships, has had five of its ships arrested on behalf of Fortis Bank, which has elected to foreclose on its loans.
Passenger Ships
Construction of large new passenger cruise ships has begun to peak. Some companies have delayed the pace of delivery of new vessels to create some breathing room and space between capacity and passenger demand. The post-11 September travel slump, business recession, and the war in Iraq have cooled market demand, but bookings are satisfactory (i.e., above break even) on many popular routes.
Several new cruising concepts made their debut in 2002, including the ResidenSea condominium ownership afloat and the completion of Disney Cruise Line's second ship. Some North American-based companies, including the Carnival companies, Norwegian Cruise Line, and Celebrity Cruises, have positioned ships at key market gateways to better serve regional customer bases. For example, carriers are basing ships in ports such as Boston and New York to offer economical one-week vacation packages to Canada and New England. Similarly, Holland America has based some vessels in San Diego to offer cruises to the west coast of Mexico and Hawaii on alternating weeks before positioning the vessels to Alaska for the summer.
The stress of pricing competition on the operators has been apparent throughout 2002, with newspapers and travel agents offering deep discounts and incentives to lure more passengers on board. Cruise lines also faced outbreaks of the Norfolk virus and respiratory virus infections on certain vessels, which caused some to be temporarily removed from service for inspection and special disinfection treatments. Such problems often cause sensational headlines, but it remains to be seen if the incidence of cases on individual cruise ships carrying 3,000 passengers and crew exceeded, for example, the incidence of similar cases in the general public in other places of public accommodation, such as hotels, offices, or business conferences.
In a major move, Carnival Cruise Lines ($926.2 million net income in 2001), based in Miami, acquired P & O Princess Cruises (based in London) after an intense bidding war against Royal Caribbean, and very close scrutiny by U.S. and European antitrust authorities.
The largest cruise lines, measured by market capitalization in 2002, were:
- Carnival Cruise Line/P & O Princess Cruises and wholly owned subsidiaries
- Royal Caribbean Cruise Line
- Star Cruises
- Norwegian Cruise Line (acquired by Star Cruises in 2000)
Tankers, Bulk, and Specialized Carriers
About 90% of U.S. international maritime trade tonnage is carried by bulk carriers, oil and chemical tankers, barges, and other specialized carriers, a reflection on the country's reliance on oil, as well as trade in wheat, steel, iron ore, and coal. Tanker operators under investigation are Stolt-Nielsen, Tokyo Marine, Jo Tankers, and Odfjell Tankers, for their role in allegedly attempting to control pricing and availability of space and service in the carriage of bulk chemicals.
Tankers. The Oil Pollution Act of 1990 requires that all single-hulled tankers trading in the United States be phased out (or converted to double hull) by the end of 2004. This regulation already has had a major impact on both U.S. tankers and tank barges. The demand for domestic tank carrying capacity is projected to increase through 2010. Congress might be pressured to waive the Jones Act requirement for U.S.-flag tankers in the domestic trades, especially if the war with Iraq siphons capacity.
The highest profile event in the tanker industry was the loss of the fully loaded (with 77,000 tons of fuel oil) single-hulled tanker Prestige, which encountered heavy weather off the coast of Spain and subsequently foundered. Since the ship sank, about 12,000 tons of the oil has escaped through cracks in the hull. Claims costs already are estimated to exceed $200,000,000. Debate will continue for years over whether Spanish authorities should have granted the vessel a harbor of refuge for repairs and transfer of her cargo versus ordering the ship away from the coast to face the full force of the storm, which already had damaged the vessel.
Demand for new tankers is expected to grow slightly in 2003, and this has caused owners to get ready to place new ship orders. The threat of a ban on single-hull tankers in Europe is growing, and yards are offering competitive prices that, teamed with low interest rates, make the terms attractive at this time.
Bulk Carriers. The United States lost market share in the export of grains, including corn, in 2002. A combination of drought, self-sufficiency among former grain-importing countries, and foreign competition caused the market weakness. There also is concern that genetically engineered grains are not as widely accepted in the markets as their designers and producers anticipated. All of these cargoes, except for modest tonnages of Public Law 480 and aid cargoes carried on U.S.-flag vessels, are carried by internationally flagged ships, including a few tankers that have been converted to haul grain.
Worldwide Bulk Coal Trade. The United States is the world's leading producer of coal. Worldwide production is estimated at 3,500,000,000 metric tons, with the United States producing about 900,000,000 tons. Coal shipments declined in 2002 as a result of international competition and business recession.
Roll-on/Roll-off Ships (RO/ROs). The RO/RO ship fraternity—those operators of car carriers and pure truck and car carriers, whose business often is arranged through long-term contracts for the transport of finished automobiles and automobile components and parts—has evolved into a complex logistical support operation for about a dozen major automobile manufacturing giants and their subsidiaries and affiliates, as well as for shippers of heavy earth-moving equipment, road-building equipment, etc. As the group of operators has grown and consolidated, antitrust authorities have started to look more closely at their operations, market share, and ability to control pricing. Wallenius-Wilhelmsen, NYK, Mitsui OSK, K Line, and other conference members are under investigation.
Shipbuilding and Ship Repair
South Korean, Japanese, Chinese, and Taiwanese shipbuilding yards continue to dominate the market for orders for tankers, bulk carriers, and containerships. Kvaerner-Masa (Finland), Fincantieri (Italy), and Alstom (France) have top market share in building passenger ships. Howaldswerke and Blohm + Voss Shipyards (Germany) also are among the leading ship construction, modernization, and conversion yards. In 2002, 2,780 orders were placed with international shipyards for new vessels totaling 114,386,904 deadweight tons. In the United States, nine commercial ships (two RO/ROs, two containerships, and five Polar tankers) are under construction.
The major industrial shipbuilding and repair yards in the United States are:
- Newport News/General Dynamics
- Northrop Grumman/Litton/Ingalls
- General Dynamics/Electric Boat
- Bath Iron Works/General Dynamics
- Avondale/Northrop Grumman
- National Steel
- Kvaerner (formerly Philadelphia Naval Shipyard)
- McDermott Shipbuilding
- Atlantic Marine Shipyards
- Norfolk Shipbuilding & Drydock
- Halter Marine Group
- Baltimore Marine Industries (formerly Bethlehem Steel Shipbuilding, Sparrows Point Yard)
Most of the large U.S. yards specialize in construction of military vessels, as well as maintenance, repair, and upgrading of military vessels. A few have obtained commercial orders for passenger, tanker, oil well drilling/supply, and RO/RO ships. Eight ships were completed by U.S. yards for the Navy by Northrop Grumman, National Steel, and Bath Iron Works in 2002.
Many smaller shipyards around the coast and in the Great Lakes service the Jones Act trade, the repair and conversion markets, and specialty areas, including tugs, large yachts, and offshore supply vessels. Many, including companies such as Derecktor Shipyard, Trinity Shipyards, Washburn and Doughty, and Blount, also have developed advanced production techniques and offer high quality and competitive pricing. The larger U.S. yards are not perceived as being cost competitive compared to European and Far Eastern yards because of labor costs and a lower level of productivity. In spite of this, U.S. yards have a reputation for building high-quality, durable vessels.
Casualties and Losses
Significant casualties in 2002 include:
- Prestige. Fully loaded oil tanker sank off the coast of Spain after being ordered offshore by Spanish authorities against the advice of the master. No loss of life. The ship developed a 30-50 foot crack in its shell plating.
- Hanjin Pennsylvania. 4,400-TEU Hanjin Line containership caught fire and burned for four days off Sri Lanka. Declared a total constructive loss.
- P & O and Maersk. Three vessels encountered severe storms at sea, and each lost at least 100 containers overboard when lashing/securing systems failed.
- Hual Europe. Caught in a typhoon and grounded near Tokyo bay, catching fire. Total loss.
- Le Joola. Passenger ferry capsized off the coast of West Africa with 1,034 passengers and crew believed lost. Because of alleged overloading, the actual number lost may be as high as 1,600, because many passengers and children did not hold tickets and were not manifested. If correct, this is the largest number of persons ever lost at sea in a marine accident.
- Limburg. The 299,000 French-flagged tanker was heavily damaged by explosives in a terrorist attack conducted from a small boat while under way in the Arabian Sea. The terrorists and one crew member were killed.
- Tricolor. Large RO/RO vessel was struck by the containership Kariba and sank in the English Channel. All the Tricolor crew escaped without injury.
- Windsong. Passenger vessel experienced a serious electrical fire in the Pacific. No injuries or fatalities, but the vessel was a total constructive loss.
In the fourth quarter of 2002, catastrophic shipping losses were estimated at more than $1 billion.
Ship Finance and Investment
The number of large commercial banks offering ship mortgage loans has declined, as has the number of investment banks that underwrite stock offerings for shipping companies. With the possible exception of market leaders such as Carnival and a few other publicly owned companies, the market to service shipping debt is growing thinner, including underwriters of high-yield bonds.
U.S. Title XI Loan Guarantee Program
Two large passenger vessels ordered by American Classic Cruises for service in the Hawaiian Islands cruising trade fell into default when the company declared bankruptcy, leaving MarAd with a $178-million loan guarantee obligation. The ships subsequently sold at auction for $2 million, and were towed to Germany intended for completion as passenger vessels to be operated by Norwegian Cruise Line in the Hawaiian Islands.
Jones Act, Passenger Vessel Act, and Towing Vessel Act
Jones Act (Title 46 USC App. 883 and Sec. 289) and related shipping business, or coastwise cabotage trade, is conducted in 42 coastal and inland river states and tributary rivers, bays, and sounds. Enacted in 1789, the acts essentially reserve domestic maritime trade to U.S.-flagged, -crewed, and -built ships. The Jones Act affects a large community of cargo shippers as well as marine operators. Fifty-five other maritime nations have cabotage and related laws of similar substance.
A group of U.S. Jones Act trade ship owners who sponsor the Maritime Cabotage Task Force claim the Jones Act provides a level playing field for operators in U.S. domestic commerce and shipbuilding and a measure of military security through its base of maritime employment and infrastructure. Opponents wanted to reform the act and open some U.S. coastal trade to foreign shipping, believing that cargo interests were paying premium freight rates unnecessarily. The General Accounting Office weighed in on the side of the reform proponents; however, a congressional resolution supported continuation of the Jones Act, and there appears to be little sentiment in Congress for any major reforms or amendments.
The Jones Act trade has languished for years in a coma created by high ship construction costs, high taxes, complex government regulation, and lack of new thinking. However, since 2001, a number of new Jones Act businesses have experienced extraordinary growth. Within the greater metropolitan New York/New Jersey area, for example, intercity and regional ferry services have been established and enjoy remarkable customer support. Most of these companies are operating high-speed vessels using advanced design and propulsion concepts. Because some of these vessels operate at speeds in excess of 30 knots, they cannot rely on traditional propellers for propulsion, because of cavitation problems and exposure to damage from driftwood and ice. Instead, they use water pump/water jet propulsion systems powered by diesel engines, with space-saving gas turbines a possibility for the future.
Another example of innovative Jones Act service is the Ports of New York/New Jersey to Albany container barge shuttle, scheduled to begin service in April 2003. This twice-weekly roundtrip service is designed to siphon containers off congested local and interstate highways, thereby reducing terminal congestion and air pollution at a time when international trade is supposed to increase. Common carrier barge services in the Jones Act trade also are operated from Atlantic coast ports to Puerto Rico and from West Coast ports to Alaska.
American Commercial Barge Lines and Jeffboat declared Chapter 11 bankruptcy in January 2003.
The Great Lakes
On Lakes Superior, Michigan, Huron, Erie, and Ontario via the Saint Lawrence Seaway and River, a fleet of U.S.- and Canadian-flagged vessels known as self-unloading bulkers are trading (in order of tonnage carried) in iron ore, stone, gypsum, low-sulfur coal, cement, limestone, salt, grain, sand, and various liquid bulk cargoes between U.S. and Canadian ports. The amount of cargo carried in 2002 declined slightly from 2001 levels. There are about 70 U.S.-flagged vessels used in the bulk trades. They generally are 600 to 1,000 feet in length, displacing up to about 75,000 tons, according to the Lakes Carriers Association.
Maritime Personnel, Safety, and Human Factors
New International Maritime Organization (IMO) Standards for Training and Certification of Watchkeepers were to take effect in 2002. However, tens of thousands of mariners were never trained or certified by the original February 2002 deadline. IMO and port state regulatory agencies extended the deadline because of the widespread lack of compliance and the inability to train and certify the mariners in time. Significant progress has been made during the past year by all port states.
The National Cargo Bureau (NCB), established with the support of the U.S. Coast Guard and the marine insurance cargo underwriters to assist with the safe loading of merchant ships at U.S. ports, celebrated its 50th anniversary in 2002. NCB operates with its network of marine surveyors at all major U.S. seaports and also internationally. It certifies aspects of ship and cargo safety, including bulk cargo stowage, and verifies other aspects of maritime shipboard cargo safety, such as a ship's stability, hazardous cargo training and stowage, and other topics related to risk avoidance with respect to the transportation of cargo in containers. NCB continued its service to the maritime industry by assisting the Coast Guard in shipboard container inspections and hazardous material classifications and stowage during this time of enhanced port and homeland security.
Ship Management
The following large ship management companies supply crew, technical, or management services and operate large fleets of large commercial ships in international trade:
- Barber International/Barber Ship Management (about 260 ships)
- Columbia Ship Management (about 300 ships)
- Denholm-Anglo Eastern Ship Management (about 130 ships)
- Hanseatic Ship Management (about 130 ships)
- V-Ships/Acomarit (about 600 ships)
- Wallem Ship Management (about 130 ships)
Together, these six companies employ within their personnel systems more than 40,000 international mariners and marine technical and management personnel. In general, these companies have made significant investment in training and development of maritime personnel, with generally excellent safety records when measured in terms of reduced off-hire, accidents, and insurance claims. About 35% of the world fleet is managed by third-party ship management firms.
Ports and Harbors
Port and ship terminal operating contractors and stevedoring companies have been consolidated by mergers and acquisitions, just like other sectors of the marine industry. International terminal operators have expanded into container and passenger ship terminal operations, and a majority (estimated at about 90%) of the large container and passenger terminal operators in the United States are held or controlled by foreign investors. In terms of tonnage and TEU volumes handled, the largest operators are:
- Hutchison Port Holdings, Hutchison Whampoa, Ltd.
- PSA Corp. Singapore
- APM Terminals (Maersk affiliate)
- P & O Ports
- Eurogate, Germany
- Stevedoring Services of America
- CSX World Terminals
These companies are believed to control close to 45% of global container volume, including the 90% of U.S. terminals.
Many shipping lines now are ordering ships in the 6,000-10,000 TEU range, with ship sizes approaching 1,325 feet in length and 171 feet in beam. Maximum drafts are expected to be in the 41-49-foot range. Most ports have plans to seek funding for dredging channels to 45-50 feet, and in some cases, to 52 feet.
The United States continues to be the world's leading maritime and international trading nation. Two billion metric tons of cargo and 150 million passengers are handled through our ports and waterways. The trend is for continued growth over the next decade, with trade volume expected to double during this period.
The nation's leading ports in terms of container and bulk cargo volume handled are:
- New York, Port of NY/NJ
- Los Angeles, California
- Long Beach, California
- New Orleans, Louisiana
- Charleston, South Carolina
- Seattle, Washington
- Norfolk/Hampton Roads, Virginia
- Houston, Texas
- Oakland, California
- Savannah, Georgia
Port and Homeland Security
More than 95% of all waterborne bulk, passenger, and containerized cargoes coming in to or going from U.S. ports are carried by internationally flagged vessels crewed by foreign-citizen mariners. The issue of port and homeland security, with our 95,000 miles of coastline, hundreds of small and large seaports, and vast terminal infrastructure, is a major responsibility. In the Ports of New York/New Jersey alone, for example, ship traffic volume exceeds 12,000 foreign-flag vessel movements each year, entering, leaving, or transiting local waters in the New York metropolitan area.
The huge task of providing port and terminal security and setting up systems to detect and interdict maritime terror plots is spearheaded by the U.S. Coast Guard, Customs, and the Immigration and Naturalization Service. The Maritime Transportation security Act tasks the Coast Guard, together with other agencies, to enhance port and homeland security by: conducting port and terminal vulnerability assessments, preparing vessel and terminal facility security plans (which should coordinate with IMO standards), issuing transportation security cards, enhancing crew member identification cards, and extending U.S. jurisdictional borders out to 12 miles. All of these requirements are scheduled to become effective by 4 April 2004, and preferably sooner.
The Maritime Transportation security Act (Public Law 107-295) was signed into law on 25 November 2002. Its passage was the official beginning of a number of efforts, which will be organized into a comprehensive system to enhance maritime security in U.S. waters and ports. Most agree that these efforts will be successful only with the assistance, input, and cooperation of local governmental agencies, including police, fire, and civil service, as well as the maritime industry. The major task of information fusion is being conducted among all of the parties at interest for port and homeland security to coordinate goals and share information.
Conclusion
The U.S. maritime industry is one of the nation's most valuable yet most underrated resources. The business of training seafarers, operating ships, managing terminals, and designing distribution and logistics systems is essential to success in our expanding worldwide markets. Maritime shipping is a knowledge-based resource. It appreciates the traditions of the seafarer—teamwork, personal responsibility, and respect for the perils of the sea and the forces of nature. Mariners worldwide have improved their professional training, certification, and performance. They continue to seek higher standards, especially at a time when port and national security are paramount.
While the nation is at war in Iraq, there are hopes for quick resolution and prayers for peace and for improved international relations. As economists predict that world population and international trade will grow dramatically over the next decade, a strong maritime industry will be the foundation from which expanding world trade can bring improved quality of life, greater safety and security, and promotion of national goals for peace. Nations that conduct free trade and commerce with others have a greater chance to enjoy mutual growth and peace. May God bless all our U.S. and coalition service personnel and mariners, and ensure their safe return.
Mr. Pouch, a graduate of the Maine Maritime Academy, has devoted his career to the maritime industry. He is executive director of the Board of Commissioners of Pilots of the State of New York and former president of Barber Steamship Lines/Barber Ship Management. He served in the Naval Reserve for ten years. Captain McNamara is a graduate of the State University of New York Maritime College at Fort Schuyler. He is president of the National Cargo Bureau and chairman of the Maritime Industry Museum at Fort Schuyler, New York.