Ebeling: Government support keeps U.S.-flag international lines afloat
A long-time ocean shipping executive warned that without ongoing and enhanced federal government support the U.S.-flag international carrier industry would likely disappear.
“Simply put, U.S.-flag shipping requires for its survival that the U.S. government maintain a long-term maritime policy and committed support programs,” said Raymond P. Ebeling, chairman and chief executive officer of American Roll-on Roll-off Carrier (ARC), to attendees at the D.C. Propeller Club luncheon on Wednesday.
Ebeling said that government support is needed for U.S.-flag international carriers to remain competitive in today’s global market, which is highly competitive and low-cost oriented.
“Competent, well-trained foreign crews can today be obtained for one-fifth the cost of a U.S. crew,” he said. “This is basically the same reality that you come face to face with when buying goods at Wal-Mart or similar stores.”
ARC started operations in 1990 with two ro/ro vessels, eventually increasing in size to eight ships with the passage of the 2005 Maritime Security Act, which includes the Maritime Security Program legislation. MSP provides the government immediate access to 60 modern container, ro/ro, and heavy-lift vessels in times of war and national emergency. ARC is the third-largest U.S.-flag vessel operator in the MSP program.
The government maintains an “organic” fleet of cargo ships. However, it’s not enough to support sustained supply operations, such as the case with military activities in Iraq and Afghanistan.
“Particularly when viewed against the requirements of operating an integrated global network of ships, marine terminals, intermodal services, information systems and logistics services, the U.S. does not possess that organic capacity and capability,” said Ebeling, who also serves as chairman of the National Defense Transportation Association. “The most recent estimate by the U.S. government for it to obtain capability comparable to that offered by the MSP-based U.S.-flag international carriers was $65 billion.”
According to the NDTA, the cost for the U.S. government to own, maintain and operate a fleet comparable to MSP would be 12-times greater annually.
“By the way, the government spends over $200 million annually just to maintain — not to operate — 45 old ships in the RRF (Ready Reserve Fleet),” Ebeling said. “The MSP fleet, on the other hand, requires no government investment, and provides 60 modern, active, fully crewed ships and related terminal, intermodal and logistics networks at a cost of $50 million less per year than the RRF.”
Even with MSP, U.S.-flag carriers are facing hard times. There’s a looming oversupply of ships with demand in the United States and other markets in decline, a potential slowdown in Defense Department business in the coming years, ongoing fallout from the declining dollar value, doubling of new vessel construction costs, and escalating fuel prices.
“By my estimates, in just the last year, the U.S. international carriers’ fuel bill has increased by more than the total amount of money carriers receive annually from the MSP program,” Ebeling said. “That is looking only at the increase. In effect, in the last year, we have lost our MSP contracts.
“Although there is some offset from fuel surcharges, this is potentially a game-changing event, and there is no obvious solution,” he said.
Ebeling presented five suggestions on how the U.S. government might improve the MSP-based fleet:
' Due to the difficulty for carriers to finance the purchase of a $100 million ship, a 30-year asset, MSP should be made stable over the long term by eliminating the 2015 expiration.
' MSP’s vessel age limit for participation should be raised from 25 years to 30 years.
' The amount of annual stipend under the MSP program must be periodically reviewed and adjusted for competitive parity with foreign-flag vessels and crews.
' Remove barriers to non-U.S. investment, such as the Section 2 citizen requirement.
' Eliminate the 10 oldest, most useless ships in the RRF, and use the savings to cover the cost of adding to the MSP program 10 more ships, all under 15 years of age, and 20 active crews.
Ebeling believes that industry groups, such as the Propeller Clubs and NDTA, most do a better job at educating the public about the importance of the U.S.-flag international carriers to U.S. national security.
“Very few people know about it, and even fewer understand its strategic significance,” he said. “We have to do a better job of telling our story.” ' Chris Gillis