• ITVI.USA
    15,217.650
    537.460
    3.7%
  • OTRI.USA
    26.980
    -0.590
    -2.1%
  • OTVI.USA
    15,176.720
    538.120
    3.7%
  • TLT.USA
    2.550
    -0.040
    -1.5%
  • TSTOPVRPM.ATLPHL
    2.850
    0.220
    8.4%
  • TSTOPVRPM.CHIATL
    3.310
    0.440
    15.3%
  • TSTOPVRPM.DALLAX
    1.400
    0.050
    3.7%
  • TSTOPVRPM.LAXDAL
    2.670
    0.660
    32.8%
  • TSTOPVRPM.PHLCHI
    2.120
    0.240
    12.8%
  • TSTOPVRPM.LAXSEA
    3.070
    0.300
    10.8%
  • WAIT.USA
    125.000
    -2.000
    -1.6%
  • ITVI.USA
    15,217.650
    537.460
    3.7%
  • OTRI.USA
    26.980
    -0.590
    -2.1%
  • OTVI.USA
    15,176.720
    538.120
    3.7%
  • TLT.USA
    2.550
    -0.040
    -1.5%
  • TSTOPVRPM.ATLPHL
    2.850
    0.220
    8.4%
  • TSTOPVRPM.CHIATL
    3.310
    0.440
    15.3%
  • TSTOPVRPM.DALLAX
    1.400
    0.050
    3.7%
  • TSTOPVRPM.LAXDAL
    2.670
    0.660
    32.8%
  • TSTOPVRPM.PHLCHI
    2.120
    0.240
    12.8%
  • TSTOPVRPM.LAXSEA
    3.070
    0.300
    10.8%
  • WAIT.USA
    125.000
    -2.000
    -1.6%
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FreightWaves Classics: America’s commercial shipbuilding industry is nearly gone

The history of the American shipbuilding industry goes back to before the Revolutionary War. The United States is blessed with three extensive coastlines, as well as numerous ports and harbors that have been the sites of shipbuilding companies for more than 250 years. 

Although it is no longer true, at one time in the not too distant past the U.S. commercial shipbuilding industry led the world in quality and output. 

This article will focus on the U.S. merchant shipbuilding industry in the 20th century.

Between the wars

Following the end of World War I and the mid-1930s, the U.S. merchant fleet, including its cargo and passenger ships, was in danger of becoming obsolete and declined in absolute numbers. 

A merchant ship’s crew loading cargo. (Photo: Wikipedia)

However, Congress passed the Merchant Marine Act of 1936, which led to a national shipbuilding program to upgrade and increase the size of the fleet. It was the start of World War II in Europe that intensified those efforts and eventually led to a shipbuilding program that produced 5,500 vessels in just a few years. Among them were 2,710 mass-produced ships known as Liberty ships. 

President Franklin D. Roosevelt served as Assistant Secretary of the Navy during World War I, loved naval vessels and had an eye for ship design. While reviewing blueprints of the Liberty ships at the White House, the president said to Maritime Commission administrator Admiral Emory S. Land, “I think this ship will do us very well. She’ll carry a good load. She isn’t much to look at, though, is she? A real ugly duckling.” The president’s comment led to the Liberty ships’ second nickname, “the ugly ducklings.”

A Liberty ship. (Photo: National Park Service)

When the Japanese bombed Pearl Harbor on December 7, 1941 and plunged the United States into World War II, the shipbuilding program of the previous five years had put the country on a path to a modern merchant fleet. 

But Germany’s lethal submarines (U-boats), preyed on American merchant ships, sinking thousands of tons of shipping and often sinking ships within sight of the American coastline. Unfortunately, the Liberty ships were too slow and too small to carry the vast tonnage of supplies needed to win the war. Convoys protected by U.S. Navy ships were organized to get war materiel to the United Kingdom, the Union of Soviet Socialist Republics and other war-time allies. While merchant and naval vessels were still sunk by the U-boats, the numbers were lower thanks to the convoy strategy.

Because of the limitations of the Liberty ships, the U.S. began a new shipbuilding program. The new ships were faster, larger and if they survived the war, would be able to carry cargo in peacetime. These ships were named Victory ships.

The Red Oak Victory ship. (Photo: National Park Service)

As foretold by President Roosevelt, the Liberty and Victory ships served the United States and its allies in war and peace. But those ships were built between 76 and 85 years ago. Of the thousands of Liberty and Victory ships built, only a handful remain (and most are floating museums).

1945-1981

After World War II, American commercial shipbuilding was at its peak and led the world in output and tonnage. As noted in a 1985 article, “Thirty years ago, U.S. shipyards built most of the world’s fleets.” In 1975, the U.S. was building more than 70 commercial ships annually. Within a few years, however, the U.S. commercial shipbuilding industry had almost vanished.

More than 90% of global shipbuilding takes place in just three countries – China, South Korea and Japan. In 2019. China completed ships with a combined gross tonnage of approximately 22.3 million tons. China State Shipbuilding Corporation (CSSC) is China’s leading shipyard, and as the name implies, is controlled by the government.

(A Chinese-built container ship. (Photo: Flickr/Kees Torn)

By contrast, only four U.S. shipyards construct large oceangoing commercial ships. The U.S. ranks 19th in commercial shipbuilding, accounting for only about 0.35% of new commercial ship construction. This is despite the fact that the U.S. formerly led the world in this category and the nation boasts the world’s largest economy. What happened?

Government subsidies tilt the playing field

Many issues contributed to the decline of the U.S. commercial shipbuilding industry, including global oversupply, recessions and changing economic fundamentals. However, one government policy decision is the key to the decline. For decades, nations around the world have subsidized their national shipbuilding industries – including the United States. Shipbuilders received construction differential subsidies (CDS); however, these subsidies were halted in 1981. Because foreign shipbuilding companies had the advantage of subsidies from their governments but U.S. shipbuilding companies did not, it was impossible for the American shipbuilding industry to compete. 

A ship’s stern and propeller. (Photo: Pixabay)

Moreover, there was no government action to enforce fair market policies, and so the U.S. commercial shipbuilding industry declined steadily during the 1980s as it tried to compete against subsidized foreign competitors. According to a U.S. Navy report, between 1987 and 1992, the U.S. shipbuilding industry “sold only eight commercial ships over 1,000 gross tons, compared to 77 ships annually in 1975.”

This contrasted with “The Japanese, Korean and European governments made it a standard practice to support their shipbuilding subsidy programs,” according to a maritime analysis. Another analysis by Dun & Bradstreet concluded, “Japanese and South Korean shipbuilding industries received substantial government support during the 1970s and 80s, which helped them to emerge as top players in the world. While the South Korean government significantly bolstered the industry under its Heavy and Chemical Industrialization (HCI) policy, which included capital incentives, trade incentives and tax holidays, the Japanese government provided large subsidies in the form of easy finance and loan deferments.” 

Because of these government subsidies and a lack of U.S government action to resolve the imbalance, the U.S. shipbuilding industry slowed significantly and the orders for new ships were filled in other countries. 

For reasons that are very hard to explain, the Reagan Administration stopped the construction subsidies for U.S. shipyards without seeking reciprocal action from other shipbuilding nations. The result was that the U.S. commercial shipbuilding industry collapsed while subsidized Asian shipbuilding companies captured the market. In less than a dozen years, the U.S. went from the leading commercial shipbuilder in the world to producing virtually no vessels for international trade.

A statue of a shipyard worker. (Photo: Pixabay)

Other U.S. industries met similar fates during the last decades of the 20th century, including the textile and shoe industries for example. And not to make light of those job losses, the U.S. cannot move the materiel for war without a merchant fleet.  

This article also provides a cautionary tale. Industries and jobs that are lost do not come back – or come back only with a great deal of money and effort. The shipbuilding portion of the U.S. industrial base has been gone for nearly 40 years, devastating companies, communities and significantly impacting our national defense. The loss of this vital industry to subsidized foreign companies significantly damaged a key American industry.

Scott Mall, Managing Editor of FreightWaves Classics

Scott Mall serves as Managing Editor of FreightWaves Classics. He writes articles for the website, edits the SONAR Daily Watch series, marketing material for FreightWaves and a variety of FreightWaves special projects. Mall’s career spans 45 years in public relations, marketing and communications for Fortune 500 corporations, international non-profits, public relations agencies and government agencies.

3 Comments

  1. “In 1975, the U.S. was building more than 70 commercial ships annually.”

    Statistics drawn from MARAD show only 19 ships over 1,000 gross tons delivered in 1975, with delivery hovering around 20 ships per year for most of that decade: http://shipbuildinghistory.com/statistics/deliver2.htm

    The reality is that U.S. shipbuilding has not been competitive since the mid-1800s, and aside from temporary spikes resulting from wartime exigencies has not been a major player in the commercial realm. Much of this lack of competitiveness is a result of Jones Act protectionism that has shielded U.S. shipbuilders from international competition and disincentivized their creation of a competitive niche.

    For all the talk of foreign subsidies, such aid covers only a small fraction of the vast gulf in prices between what U.S. shipbuilders charge and their foreign counterparts. Any attempt at revitalizing U.S. shipbuilding needs to first be inwardly focused on our own counterproductive, protectionist practices.

  2. Clearly Mr Grabow didn’t even read the article, brushing aside the entire issue of gov’t subsidy. To this day, industry subsidies to the tune of billions of dollars for many successive years in China and South Korea are the norm. Meanwhile, in the US, our industry operates under punitive tax and regulatory schemes not ‘enjoyed’ by foreign shipyards and sailing fleets.
    Even while many yards in Asian countries were collapsing all around, their respective gov’ts still pumped cash into these failed yards to keep them afloat and thousands of workers employed. That’s the only reason. Korea has embarked upon building a series of new mega box ships that the market neither asked for or wants. But hey, it’ll keep the worker bees busy and employed and maybe, happy.
    American shipyards should be so lucky, eh?
    Then again, under a Biden Presidency, we have started the March towards socialism so maybe it’ll work out after all?!?

    1. Although I did mention foreign subsidies in my comment, and I am happy to elaborate. In the early 1990s, the USITC examined the effects of a proposed OECD agreement to pare back shipbuilding subsidies. It found that, if adopted, this dramatic reduction in subsidies would cause foreign ship prices to rise a mere 4.3%. Using alternative data from the Shipbuilders Council of America that number increased to 23.5%. (source: https://www.usitc.gov/publications/332/pub2495.pdf) A 2006 Harvard study, meanwhile, calculated that China’s shipbuilding subsidies give that country a 13-20% advantage in shipbuilding costs. (https://microeconomicinsights.org/chinas-hidden-shipbuilding-subsidies-impact-industrial-dominance/)

      For context, U.S.-built ships are commonly estimated to cost 300-400% more than those built abroad. What’s readily apparent is that the complete elimination of foreign shipbuilding subsidies would not be a game-changer for U.S. shipbuilding owing to its long-standing lack of competitiveness that far predates the advent of subsidized shipyards in China, South Korea, and Japan.

      It’s further worth noting that the U.S. shipbuilding industry is hardly pure as the wind-driven snow with regard to subsidies. The Jones Act’s domestic-built requirement — one that perhaps only five other countries in the world have — functions as a huge subsidy to the industry. Beyond that, it also enjoys Title XI loan financing, small shipyards grants, and state and local subsidies (Philly Shipyard alone has received hundreds of millions of dollars in subsidies and leases its land from the local government for a mere $1 per year).