62 Million in Grants go to Port Improvement

From IFW-Logistics
20 December 2011


The US Department of Transportation (DoT) has announced $62 million in port-related grants as part of the third round of funding in its TIGER (Transportation Investment Generating Economic Recovery) programme.

Four of the 46 awards go directly to US port-related infrastructure, comprising around 12% of the total $511 million available for capital grants.

South Jersey Port received $18.5 million to repair the DelAir Bridge (pictured), which links the rail networks of Pennsylvania and New Jersey and enhances freight movement throughout the north-east.

Port of Long Beach got $17 million to improve tracks to two rail yards and relieve a rail chokepoint, improving efficiency, reducing the environmental impact of freight movements and enabling the port to move 35% of goods by on-dock rail by 2035.

Port of Jacksonville received $10 million for the Dames Point Intermodal Container Facility that will be used by CSX railroad.

In addition, Port of New Orleans received US$16 million, as previously reported in IFW.

A number of TIGER-funded projects also address key congestion points along main rail lines, inland port facilities and highway trade corridors, making a positive impact on freight mobility and the movement of goods to and from US seaports.

TIGER grants are awarded to transport projects that contribute to the long-term economic competitiveness of the US, improve existing transport facilities and systems, increase energy efficiency and reduce greenhouse gas emissions and improve safety.

In the first round of TIGER grant awards, port-related infrastructure projects received 8% of the original $1.5 billion. In the second round of grants, port-related infrastructure received 17%.

Political Shenanigans

My posts are generally related specifically to the Marine Industry, so this is a modest one-time departure from that theme. Today, the congress passed a two month extension of the payroll tax cut, in addition to funding the government for the remainder of the governments fiscal year. There is an incredible amount of political grandstanding happening at the expense of the American people. 

I am currently unemployed, trying to survive on the income generated by this blog (which isn't easy.) I have been denied unemployment; I am a Veteran; and I have been dedicating 40 to 50 hours per week looking for a new career. No less than 9 times, I have been told by prospective employers that they were waiting to see what the tax implications are before taking on any new employees. 

So, to the American Congress, I would like to give a big (and yes, very sarcastic) "Thank You!" 

Perhaps the most stomach turning rhetoric I'm hearing is the push to create more jobs for the Veterans coming home from Iraq. Meanwhile, the Keystone Pipeline remains on hold; the payroll tax cut is temporarily extended for two moths; major shipping ports are in need of significant improvements; Inland waterways are in need of improvement; Schools are still a mess; and there is still no dramatic economic rebound from the  800 billion dollars in "shovel-ready" projects that were supposed to save us all. 

Businesses like stability, and our Congress is not providing that. Two months? Again, my sarcastic thank you. Thank you for giving business 2/3 of one fiscal quarter in stability and predictability.

So, what will I do? Well, I will continue looking for work. Hopefully, the new year will  yield more positive results.

Record Breaking Volumes for Port of Los Angeles

Fron IFW Freight and Logistics News Service
16 December 2011


The US port of Los Angeles has reported a record year for exports, buoyed by an all-time monthly high for goods shipped overseas in November, the second consecutive month of record export volumes.

LA exported 1.9 million containers in the first nine months of 2011, breaking the previous record of 1.8 million in full-year 2010.

And imports were 6.2% higher in November than in 2010.

The largest US container port said it was on course to export more than 2 million teu this year.

Exports reached the highest monthly volume in the port’s history last month, handling 195,877teu, 15% up on the previous November. And in October, the port handled 193,547teu, up 28% on October 2010.

Goods exported include raw materials, cotton and grains, as well as high-value goods, including computers, medical equipment and aerospace components.

The rise in export volumes from LA has been buoyed by the weak US dollar boosting demand for US goods, particularly in Asia. The stagnant domestic economy also has forced the country to find new income in foreign markets.

Last year, President Obama outlined a National Export Initiative, aiming to double exports through the nation’s seaports by the end of 2014 to boost the ailing domestic jobs market.

The US will focus on India, China, Brazil and other emerging markets with strong potential for growth.

No Gas for Nome, Alaska

Article from the Alaska Dispatch
28 November 2011

Unleaded gasoline sells for $5.43 a gallon at the pump in Nome, but that price could skyrocket by this spring because a fuel barge with more than 1 million gallons didn't arrive as expected this fall in the remote Northwest Alaska community.
For Nome residents, the cancelled shipment, which petroleum distributor Delta Western blames on stormy weather and sea ice, brings back memories of a similar situation in another rural Alaska community.
In the spring of 2010, after a fuel barge couldn't reach the Interior town of McGrath, the distributor was forced to fly fuel in. Those costly flights pushed prices at the pump from $5.97 to $8.50 a gallon. Nome Mayor Denise Michels said her community of 3,600 isn't facing an emergency yet. But if Nome fuel stocks drop too low this spring, supplies would have to be flown in, which would raise prices at the pump.
Hopefully, Delta Western and Bonanza Fuel, the company that ordered the 1.6 million gallons of gasoline, diesel fuel and heating fuel, can reach an agreement that avoids passing costs onto Nome residents, said Michels. The companies are discussing the problem now, she said.
"They need to figure it out," Michels said.

The barge carrying the big fuel load couldn’t reach Nome, in part because of stormy weather, including the recent tempest in the Bering and Chukchi seas, said Kirk Payne, Delta Western vice president. Sea ice that has since enveloped the community, delivering the final blow. The barge won't reach Nome this winter, Payne said.
It's possible that costs related to the canceled barge shipment could be rolled into a state disaster declaration, said Scott Ruby, director of the state Division of Community and Regional Affairs.
Gov. Sean Parnell's Disaster Policy Cabinet meets on Wednesday to consider whether damage from the mid-November storm across a wide swath of western Alaska warrants a disaster declaration from the state. The cabinet will advise the governor, who makes the final call, Ruby said.
Nome has asked the state's emergency services division to determine whether a disaster declaration would cover the cost of higher fuel prices, said Michels. It might, but the city hopes Bonanza and Delta Western resolve the issue themselves.
One question is whether the weather was truly the problem, said Michels.
It was, said Payne. But Jason Evans, board chair of Bonanza parent company, Sitnasuak Native Corp., said Bonanza ordered the fuel in May, and the company has been awaiting its order for three months. "There's not been 90 days of extreme weather," Evans said, and other barges have reached Nome before ice surrounded it.

Contact Alex DeMarban at alex(at)alaskadispatch.com

Interferry says meeting low-sulfur deadline is "mission impossible"

I find this interesting in contrast with the study done by the Glosten Associates on the conversion of Washington State Ferries to LNG Propulsion. (Refer to our  21 November Blog Post.) I guess that the contrast comes from the economic hardships facing Europe versus our own here in the United States. I think this deadline hits them economically where we were three or four years ago. It will be interesting to see how they emerge from it.

From MarineLog News Article.
28 November 2011

The international trade association for the ferry industry, Interferry, claims that ferry operators in northern Europe face a "near-impossible" choice in trying to meet the 2015 deadline for ultra-low sulfur emissions from bunker fuel. It also says that the low-sulfur legislation will " percentprompt an environmentally damaging modal shift from short-sea to overland transport and pose severe financial implications for the overall European economy.

Under pending IMO and soon to be agreed European Union (EU) environmental requirements, vessels operating in the Baltic, North Sea and Channel Emission Control Areas (ECAs) will have to comply with a 0.1 percent limit on fuel sulfur content.

Interferry says that meeting the 2015 deadline is "mission impossible" because of "unsustainable cost increases."

The association argues that, despite the ferry industry's efforts to develop alternative technologies and feasible alternative fuels, abatement technologies and financial support will not be available or sufficient enough to avoid a modal shift from sea to road.

A "toolbox" of technical and financial solutions proposed by the European Commission (EC) suggests the use of clean LNG fuel or, for vessels that continue to run on heavy fuel oil, the use of scrubbers - exhaust gas cleaning systems. It also points operators towards EU funding initiatives and state aid.

Interferry says that these are not realistic options because:

• It is widely recognised in Europe that LNG is only an option for new vessels due to the prohibitive cost of converting existing vessels, and in any case the LNG fuel supply infrastructure is inadequate
• Scrubber technology is not a "miracle cure." Ferry operators have contributed financially and operationally to developing the technology and Interferry says it is a solution that seems to be able to remove sulfur particles from the exhaust gases on some ships. However, a new Interferry feasibility study covering 108 vessels from six leading operators reveals that scrubbers would not be technically or financially viable for 60 percent of the existing fleet. Furthermore, trial installations among association members have shown that it will not be possible to have scrubbers in operation in time for 2015 for the other 40 percent
• EU funding is virtually non-applicable as it applies largely to newbuilds and new routes – a low priority among operators who have invested heavily in new tonnage in recent years, and who now face a desperate economic climate that also reduces the likelihood of state aid

"There is no financial support for existing ferries, while LNG and scrubbers are not feasible," says Johan Roos, the association's executive director of EU and IMO affairs. "In effect, the toolbox is completely empty.

"Our only option is to use marine gas oil – technically straightforward but very costly and potentially counter-productive in environmental terms. Operators have warned that they will not be able to pass on the 70 percent or more fuel cost increase to customers with a choice of transport modes, which will inevitably push up to 50 percent of cargo off short-sea ships and back on to the road network."

Mr. Roos added that, apart from cost, availability is also an issue with MGO, stressing: "At the very least, the IMO must bring forward its availability review from 2018, as mandated in MARPOL Annex VI, to 2012 or 2013. It's also clear that the ongoing revision of the EU Directive must put provisions in place as to what should happen if low-sulfur fuel is simply not available to operators in 2015."

Interferry conducted the scrubber feasibility study among six Interferry members operating in the north European ECAs - Brittany Ferries, DFDS, Grimaldi Group, P&O Ferries, Stena Line and TT-Line.

The conclusion that more than half their existing ships could not be fitted with scrubbers was based on five critical parameters:
Vessel age and the consequent commercial viability of making a massive technical investment

• Stability reserves taking into account the weight of scrubber units and how high up the stack they would be fitted
• Deadweight reserves and the resulting impact on cargo capacity
• Casing – because many ferries have very limited void in the ideal stack casing location and would therefore need special scrubber casing that reduces cargo capacity
• Whether or not Selective Catalytic Reduction (SCR) technology was already fitted to reduce NOx emissions – if so, retrofitting wet exhaust scrubbers would be more challenging as these cool gases to below 100 degrees C compared with temperatures above 400 degrees C required by SCR

The detailed results are being offered to the European Maritime Safety Agency for independent audit and will also be made available to relevant authorities.

The EC toolbox was discussed in Helsinki on November 18 when senior personnel from Interferry members joined Mr. Roos at a special seminar organized by the Finnish Ministry of Transport & Communications and the Finnish Transport Safety Agency. Invited delegates also came from national authorities, shipowners' associations and equipment manufacturers.

Mr. Roos reports that at the meeting, where an EC representative and various national administrators also participated, it became obvious that current funding support programs are only allowed for new ships or new routes and are not available to address the "real problem"of safeguarding existing fleets and the routes they already service – offloading millions of trucks from the European road network every year.

November 28, 2011

How Consumers and Communities Can Benefit From 'Buying Local'

From US News and World Report:

Comparison shopping between independent stores and chains is about overall value, not just price

By Rachel Koning Beals

October 28, 2011


Certainly, there are other retail realities. The existence of any business, chain or not, is often preferred over an abandoned storefront, and will better serve communities void of key supplies for everyday existence. While I happily patronize my local toy store, the reality is that big-box retailers that include a grocery section may just be the saviors for the vast "food deserts" across other parts of my home city, Chicago. There, zero grocery options, especially fresh food, exist for blocks on end.
Still, the risk of losing more independent businesses or even slowing their growth is only reenergizing the small-business community. Local and national campaigns that join efforts to raise awareness can boost results for indies.
A 2011 Independent Business Survey was conducted by the Institute for Local Self-Reliance and dozens of national and local business organizations. Respondents who participated in "Buy Local" campaigns reported an average gain in revenue of 5.6 percent, compared with a 2.1 percent revenue increase for those not involved in these campaigns. The survey gathered data from 2,768 independent, locally owned businesses during an eight-day period in January. It covered all 50 states and included a range of business types.
National campaigns are also gaining some traction. Nov. 26, 2011, the Saturday immediately after Thanksgiving and Black Friday, is designated as the second-annual Small Business Saturday holiday shopping promotion. An effort called Independent We Stand joined with American Express to create the national program in 2010 in response to small business owners' most pressing need: more demand for their products and services. Last year's inaugural program drove millions of dollars to Main Street merchants, the campaign says.
"Locally owned businesses reinvest in the local economy at a 60 percent higher rate than chains and Internet retailers, so Small Business Saturday shoppers will be revitalizing their economies while finding great deals at their favorite local merchants," says Bill Brunelle, project manager of Independent We Stand, in a news release.
For Milchen and other advocates, the fight is as much about preserving quality human interaction and a sense of community as it is about the bottom line.
For more on the Independent We Stand holiday promotion and other resources for the indie shopping movement, see below:

Independent We Stand: independentwestand.org
U.S. Chamber of Commerce Small Business Nation: uschambersmallbusinessnation.com
Civic Economics' Indie City Index 2011, a ranking of American Metropolitan Areas by the proportion of retail activity captured by independents: civiceconomics.com
American Independent Business Alliance: amiba.net
Institute for Local Self-Reliance: ilsr.org
Business Alliance for Local Living Economies: livingeconomies.org

LNG use on Washington State Ferries Could Save Millions over Time.

An LNG-fuelled ferry would have significant environmental and economic benefits, according to a recently feasibility study for Washington State Ferries. Architectural and marine engineering firm, The Glosten Associates, recently completed the feasibility study for Washington State Ferries (WSF) on converting its 144-car ferry design to liquefied natural gas (LNG) propulsion. 

Glosten's study concluded that the conversion is both technically feasible and cost effective, although technical and regulatory challenges remain. The study examined design, economic, regulatory, and environmental issues. 

The operational savings for a single vessel are estimated to be between $900,000 and $1.25 million per year, after an upfront capital cost premium of $8.5 million to $10 million. Switching to natural gas fuel will significantly reduce emissions of nitrous oxides (NOx), sulfur oxides (SOx), particulate matter, and carbon dioxide (CO2). These greenhouse gases have been identified by the U.S. Environmental Protection Agency (EPA) as significant factors in harming human health, including respiratory illnesses, as well as damaging to the environment. 

Glosten’s design was formally reviewed by the United States Coast Guard (USCG). USCG provided extensive feedback as well as a written response, showing their willingness to work with owners early in developing a case-by-case design basis until official rules are developed. The USCG response provides WSF with a regulatory basis from which to advance the project design. This is an important result, as the lack of USCG regulations is often cited as a primary risk to vessel owners interested in reaping the benefits of LNG fuel conversion.

Overall, this looks very promising for the nation's largest ferry system to save on operating costs. The initial investment is pretty sizeable, however saving nearly a million dollars per year in fuel will do a lot to shrink the state budget. We think that this would be a great use of federal funds as opposed to some of the other job creation projects that have been touted - such as the high-speed rail project the current administration is pushing.

Click herefor the full Glosten Associates report.

Nation’s Third Littoral Combat Ship Successfully Completes Builder’s Trials

MARINETTE, Wisc., October 24th, 2011 — A Lockheed Martin [NYSE: LMT]-led industry team completed Builder’s Sea Trials for Fort Worth, the nation’s third littoral combat ship.

The trials – a coordinated effort between the U.S. Navy and the Lockheed Martin team including Marinette Marine Corporation (MMC) – were conducted in the waters of Green Bay and Lake Michigan. They included operational testing of the vessel’s propulsion, communications, navigation and mission systems, as well as all support systems.

“Successful completion of Builder’s Sea Trials means we are on track for the Navy’s Acceptance Trials, putting us a big step closer to getting the Navy the ships it needs,” said Joe North, vice president of littoral ship systems for Lockheed Martin’s Mission Systems and Sensors business. “We support the Navy’s effort to grow their fleet affordably and effectively.”

The rigorous trial period included maneuverability tests; high-speed runs; power and navigation system checks; rescue boat launch and recovery; and tracking exercises, as well as other ship and system evaluations.

Following the successful completion of Builder’s Sea Trials, Fort Worth returned to MMC to prepare for Acceptance Trials. LCS 3 will be delivered to the Navy next year and its home port will be San Diego, Calif.

Fort Worth, the second Freedom variant ship in the LCS program, was christened in December 2010. It is more than 96 percent complete and remains on cost and on schedule. LCS 3 is being constructed with 30 percent fewer production hours as a result of lessons learned from designing and building LCS 1, USS Freedom.

The team began construction on LCS 5, the future USS Milwaukee, in August.

Headquartered in Bethesda, Md., Lockheed Martin is a global security company that employs about 126,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation’s 2010 sales from continuing operations were $45.8 billion.

General Maritime files for Chapter 11

From Marine Log

17 November 2011

 

Tanker operator General Maritime Corporation (NYSE: GMR) says it has filed for relief under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. Substantially all of the company's subsidiaries – with the exception of those in Portugal, Russia and Singapore as well as certain inactive subsidiaries– have also commenced Chapter 11 cases.

The company says the bankruptcy filing is necessary to implement a restructuring agreement reached with its key senior lenders, including its bank group, led by Nordea Bank Finland plc, New York Branch as administrative agent, as well as affiliates of Oaktree Capital Management, L.P.

General Maritime says the restructuring agreement and related equity commitment letter have the support of over two thirds of the company's obligations from its banks and Oaktree. Under terms of the agreements, Oaktree will provide a $175 million new equity investment in General Maritime and convert its prepetition secured debt to equity. Under the terms of the agreement, General Maritime expects to substantially reduce its funded indebtedness and enhance its liquidity profile. It says that operations are expected to continue without interruption.

In conjunction with the filing, General Maritime has received a commitment for up to $100 million in new debtor-in-possession (DIP) financing from a group of lenders led by Nordea as administrative agent. The initial amount of the DIP is $75 million, however, the credit facility contemplates that, if needed, the company will have access to another $25 million of future financing, subject to the applicable lenders' agreement, certain other conditions and further order of the Bankruptcy Court.

November 17, 2011

New amendment passes to boost transparency of Jones Act waivers

Press Release From US Representatives Elijah E Cummings and Jeff Landry
Cummings, Landry say measure will help preserve U.S. mariners' jobs
(11/15/2011)
(WASHINGTON) -- Congressman Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, and senior member of the House Committee on Transportation and Infrastructure, today joined Rep. Jeff Landry (R, LA-03), Vice Chairman of the Coast Guard Subcommittee, in applauding their colleagues in the House of Representatives who approved the Cummings-Landry amendment to the Coast Guard reauthorization bill that passed the House on Tuesday. The amendment will increase government transparency surrounding the issuance of waivers allowing non-Jones Act-qualified vessels to carry cargo between U.S. ports. It is nearly identical to the American Mariners Job Protection Act (H.R. 3202), a bill with bipartisan support that was introduced by Reps. Landry and Cummings earlier this year. “Americans are desperate for jobs,” said Cummings. “In this time of economic turmoil, we owe it to the people we represent to make full use of American maritime capabilities by adhering firmly to the Jones Act. Every single ship that can carry cargo under the Jones Act should be full and every American mariner should be able to work a fair day’s work for a fair paycheck. Congressman Landry has stood resolutely beside me as we protect the jobs of American mariners and I thank him for his support.” Under current law, when the head of the agency responsible for the administration of the Jones Act believes it necessary to waive the Act’s requirements in the interest of national defense, the agency must request the Maritime Administration to assess whether Jones Act-qualified vessels are available to carry the cargo under consideration. “I came to Congress to increase government transparency and get America back to work; today we took another step in that direction,” said Landry, whose district has the most domestic maritime industry jobs in the nation and transports much of the nation’s energy-based resources. Excited by today’s passage, Landry continued: “American mariners are the most qualified and safest workers in the world, and I am grateful my colleagues voted today to put them back to work. I thank Congressman Cummings for his leadership on this issue and thank him for working to ensure that the American mariner is always the first option.” The Cummings-Landry amendment will require the Maritime Administration to include in such assessments information on the actions that could be taken to enable Jones Act-qualified vessels to carry the cargo for which the Jones Act waiver is sought. The Maritime Administration would also be required to publish its determinations on its website. Further, the amendment would require notification to be provided to Congress when a waiver is requested or issued.

Tonnage Numbers Steady at U.S. Ports

 

From Marine link:

Great Lakes-St. Lawrence Seaway

Wednesday, November 16, 2011, 10:44 AM

U.S. ports continued to post positive tonnage numbers in October. The Seaway’s year-to-date total cargo shipments from March 22 to October 31 were 29 million metric tons, up 2 percent from the same period last year.

“With just two months left in the 2011 navigation season, the Seaway is on track to meet its projected seven percent improvement over last year’s tonnage performance,” says Rebecca Spruill, Director of Trade Development for the Saint Lawrence Seaway Development Corporation. “General cargoes like steel slabs and coils and wind turbine components are posting solid increases, while we’re moving nearly a million tons more of petroleum products than last season.”

In early October, 18,000 metric tons of hot-rolled steel coils produced at ArcelorMittal’s Burns Harbor facility in Indiana were delivered to the Republic of Macedonia. “Northwest Indiana is the richest steel-producing region in the world and being able to access world markets through our port is vital for ArcelorMittal and many other companies,” said Peter Laman, port director of the Port of Indiana-Burns Harbor.

He added, “This is the first substantial steel export from the port since 2008. Year-to-date steel shipments through the port are up more than 20 percent over last year, with 2011 on target for having the highest steel shipments since 2007. Whether it’s bringing in raw materials or shipping out finished products, steel companies can substantially reduce their logistics costs by shipping through our port.”

The Toledo Port Authority was another Great Lakes port registering tonnage increases. “Through the month of October, seaport cargo tonnage remained nearly 4 percent ahead of the same period in 2010 with increases in all major cargo categories (petroleum products, general cargo, and iron ore), with the exception of coal and grain. Through October, the port handled 9.2 million short tons and 13 more vessels than at the same point in 2010. The month finished strong as grain began to pick up due to the fall harvest,” explained Joseph Cappel, director of cargo development at the Port.

Diversification has been a critical component to growing port commerce during difficult economic times. “The Port of Green Bay has historically been a leading indicator of regional fiscal conditions in Wisconsin,” said Dean R. Haen, port manager.  “The fact that the port has seen a 26 percent increase in tonnage from 2010 to 2011 is a positive sign for the port and our regional economy.” One port tenant, US Venture, continues to be the main driver in increased tonnage and ship arrivals in 2011. They teamed with Wisconsin’s Department of Transportation and invested in opening an inactive port terminal last year which, amidst tough economic conditions, is now paying dividends. October tonnage increases for coal for power generation were up 15 percent year-to-date, while the construction industry demand for cement rose 11 percent from the same time last year. The 69 percent year-to-date increase in gypsum handled by the port was for industrial use.

St. Lawrence Seaway shipments of petroleum products and salt continued up at 90 percent and 33 percent respectively compared to October 2010. Coal shipments totaled 62,000 metric tons in October, a two percent increase from the same month last year. Year-to-date scrap metal and coke shipments saw double digit increases for October 2011. Other general cargo like wind turbine components, increased 31 percent over last year.

The Great Lakes-St. Lawrence Seaway maritime industry supports 227,000 jobs in the U.S. and Canada, and annually generates $14.1 billion in salary and wages, $33.5 billion in business revenue, and $4.6 billion in federal, state/provincial and local taxes. North American farmers, steel producers, construction firms, food manufacturers, and power generators depend on the 164 million metric tons of essential raw materials and finished products that are moved annually on the system. This vital trade corridor saves companies $3.6 billion per year in transportation costs compared to the next least-costly land-based alternative.

Cracks found in year-old Chetzemoka's propellers

M/V Chetzemoka has problems. Supposedly it is just out of the manufacturer's warranty period.Hopefully Vigor does right by the State of Washington. The ship was actually built by Todd Shipyards which was acquired by Vigor.

 

From KOMO News: 

By Ray Lane Published: Nov 9, 2011 at 5:26 PM PST Last Updated: Nov 9, 2011 at 6:49 PM PST

 

»Play Video

SEATTLE -- Thousands of dollars in repairs are in the works after cracks were found on the propellers of Washington state's newest and most expensive ferry boat.

The ferry Chetzemoka was built by Vigor Industrial, which was formally known as Todd Pacific Shipyards.But the propellers were built by Rolls-Royce Marine.

Both businesses say they're trying to figure out what happened.

The Chetzemoka is running with patched-up propellers. Washington State Ferries says the ferry had been in dry dock in Anacortes for scheduled repairs for more than three weeks, during which time inspectors found hairline cracks on one of the 8,000-pound propellers.

Additional tests showed that each of the five blades on both propellers had cracked near the hub. The ferry system says it appears that improperly cast stainless steel is to blame for the problems. Officials believe a high-carbon content made the metal too porous and too brittle.

"These are big ships plowing the waters of Puget Sound in salt water. Stuff happens," said David Moseley of WSF. "That's why we are diligent about the maintenance of these boats, and that's why we're diligent every time we take them out of the water."

Vigor Industrial says two other new ferries of the same class - the Salish and Kennewick - have different, variable-pitch bronze propellers, and therefore should not have the same problems.

One year ago, when the $77 million Chetzemoka made its inaugural run from Whidbey Island to Port Townsend, it was heralded as a new lifeline that could handle the rough waters of Puget Sound.

Transportation officials defended the cost, and the companies that constructed it.

"We have tremendous builders in Washington state and they will help us maintain and preserve these boats for the 60-plus years they're in life," said Transportation Secretary Paula Hammond.

Replacement propellers are now being made for the Chetzemoka, but they won't be ready until April.

The state says it'll file a warranty claim against Vigor Industrial to pay for the new props, which cost $70,000 per piece.

Bad News for the US Shipping Industry.

Source: IFW

Pete Goldin | Wed, 2 Nov 2011

Average US vessel operating costs last year were almost three times higher than their international counterparts, according to a report from MARAD, the US maritime administration body.

The report, Comparison of US and Foreign-Flag Operating Costs, says: “US flag-carriers are at a distinct disadvantage in their ability to compete in international transport markets.”

The comparison used aggregate average total operating costs.

MARAD also found that average operating costs for US-flagged containerships and ro-ro vessels in particular were generally three times higher than foreign-registered ships.

Difference in crew costs were even more noticeable – roughly 5.3 times higher for US-flagged vessels in 2010, even though their average crew size is slightly smaller. Crewing costs on US bulk carriers were 5.7 times higher.

The report attributes the higher operating costs to regulatory requirements on vessel labour, insurance and liability, maintenance and repairs, taxes and expenses associated with environmental compliance, higher wage rates and social benefits.

The report also notes that approximately 110 ships fly the US flag, while more than 540 US-owned vessels are registered in 31 other countries, presumably to reduce costs.

The report also suggests several options MARAD may pursue to encourage participation in the US fleet.

These include promotions and missions to secure additional streams of commercial cargo for US-flagged vessels, encouraging US companies to support domestic industry by using US vessels and providing information on annual cargo preference volumes to assist carriers with business planning.

DryShips and OceanFreight Complete Merger

Friday, November 04, 2011

 

DryShips Inc. (NASDAQ: DRYS) and OceanFreight Inc. (NASDAQ: OCNF) announced today that following approval by OceanFreight's shareholders at a special meeting, the companies have completed the merger and OceanFreight has become a wholly-owned subsidiary of DryShips. Under the terms of the merger agreement, OceanFreight shareholders will be entitled to receive $11.25 in cash and 0.52326 of a share of common stock of Ocean Rig UDW Inc., a global provider of offshore ultra deepwater drilling services, for each share of OceanFreight common stock owned by them.

As a result of the merger, OceanFreight's common shares will cease trading on the NASDAQ Global Market today, and OceanFreight expects to deregister and suspend its reporting obligations under the Securities and Exchange Act of 1934, as amended.

American Stock Transfer & Trust Company has been appointed to serve as the agent for payment of the merger consideration to OceanFreight shareholders, and will promptly mail to shareholders instructions on how to surrender their stock certificates and receive payment for their shares. Banks, brokerage firms or other nominees will provide those shareholders who hold their shares in "street name" with their proceeds from the transaction. For more information, shareholders who hold their shares in "street name" should contact their bank, broker or other holder of record, and shareholders of record may contact American Stock Transfer & Trust Company at (877) 248-6417 (toll free). Shareholders of record should wait to receive the letter of transmittal before surrendering their shares.

Good News, Bad News For The Shipping Industry.

A report on Ship Operating Costs from MooreStephens International:

OpCost 2011

29 September 2011

Ship operating costs increase again but insurance costs plummet

International accountant and shipping consultant Moore Stephens says total annual operating costs in the shipping industry increased by an average 2.2 per cent in 2010. This compares with the 2.0 per cent average fall in costs recorded for the previous year, which was the first time since 2002 that operating costs had fallen. All cost categories showed an overall increase this time, with the exception of stores and insurance – with the latter falling by 4.7 per cent overall.

The findings are set out in OpCost 2011, Moore Stephens’ unique ship operating costs benchmarking tool, which reveals that all individual categories of vessel covered by the research, with the exception of handysize product tankers, experienced an increase in total operating costs in 2010, the financial year covered by the survey. Costs for the three main sectors covered – bulkers, tankers and container ships – were all up. The bulker index increased by 5 index points (or 2.9 per cent) on a year-on-year basis, while the tanker index witnessed a two-index-point (1.1 per cent) rise. Meanwhile, the container ship index (with a 2002 base year, as opposed to 2000 for the other two vessel classes) was up three index points, or 1.9 per cent. The corresponding figures in last year’s OpCost report showed falls in the bulker, tanker and container ship indexes of 1, 5 and 13 points respectively.

There was a 3.2 per cent overall increase in 2010 crew costs compared to the 2009 figure, which itself represented the most moderate increase for a number of years. In 2008, the report revealed a 21 per cent increase in this category. Tankers overall experienced increases in crew costs of 2.7 per cent on average, compared to 2.5 per cent in 2009. For bulkers, meanwhile, the overall increase in crew costs was 4.0 per cent, while for container ships it was 2.9 per cent.

For repairs and maintenance, there was an overall increase in costs of 4.5 per cent, compared to the 11.3 per cent decrease recorded for 2009. The biggest increase here was the 8.0 per cent recorded in the container ship category. For bulkers the increase was 7.6 per cent, and for tankers just 0.8 per cent. There were variations in the cost movements experienced within vessel categories. Whereas operators of handysize bulkers spent an average of 12.0 per cent more on repairs and maintenance in 2010, those running capsizes recorded an average increase of just 3.7 per cent. And whereas the average increase in repair and maintenance costs for panamax tankers was 8.4 per cent, operators of aframaxes actually spent 1.3 per cent less than in 2009. In the container vessel sector, meanwhile, increased repair and maintenance spend was fairly consistent across all box ship tonnage sizes covered by the report.

For the second successive year, OpCost reveals a fall in the level of spending on stores – down by 1.0 per cent. Overall, expenditure in this regard was actually up in the bulker sector, by 1.1 per cent, but down in the tanker trades (by 3.4 per cent) and in the container ship market (also by 3.4 per cent).

The insurance category showed the biggest movement in terms of costs – down overall by an average of 4.7 per cent across all vessel types in 2010. For tankers, the insurance spend was down by 7.9 per cent, for container ships by 3.8 per cent, and for bulkers by 2.9 per cent. Panamax bulkers were the only individual class of ship to spend more on insurance in 2010, while the likes of small chemical tankers (10.4 per cent), VLCCs (9.8 per cent) and aframax tankers (9.0 per cent) spent considerably less.

Moore Stephens partner Richard Greiner says: “The movement in operating costs during 2010 is fairly consistent with what we might have expected, bearing in mind the big fall in costs in 2009 and the continuing economic downturn. The average overall increase in crew costs of 3.2 per cent, up one per cent on the figure for 2009, is clearly a matter of continuing concern for owners and operators. But it is modest in comparison to some of the very significant increases recorded in this category in earlier years. The industry must continue to invest in personnel, and it is encouraging to see that it is not only doing so, but also doing so without suffering the huge surge in outgoings that was giving such a lopsided look to operating costs a couple of years ago.

“The 4.5 per cent average increase in expenditure on repairs and maintenance compares with a decrease of more than 11 per cent in 2009, but is significantly down on the 13 per cent-plus increases recorded in both 2007 and 2008. It is also an indicator not only of increases in the costs of labour and raw materials, but of a continuing willingness on the part of the industry to pay for the upkeep of its ships which, with increasingly stringent national and international regulations coming into force covering the likes of corporate and environmental responsibility, is a prerequisite for the continuing ability to trade.

“Spending on stores was down in 2010. This is perhaps something of a surprise, since the category includes lube oils, the price of which continued to rise throughout 2010, along with the cost of the additives which go into its manufacture. But the more widespread fitting of Alpha-type lubricating systems, the fall-off in some areas of trade, and the resort by some to slow steaming, appear to have made their effect felt in this regard.

“Insurance costs were the big mover in this year’s report, with spending down by almost 5 per cent. Conditions in the insurance market were more benign in 2010 than for a number of years. The general increases announced by the P&I clubs for 2011 are in most cases at their lowest levels for more than ten years, reflecting improved figures for 2010 and more optimistic forecasts for 2011 and 2012. The results of OpCost also point to a level of informed discernment in the commercial underwriting sector, with the likes of chemical tankers – notoriously ‘safe’ ships – paying over ten per cent less for their insurance in 2010 than in the previous year. Tighter regulation and stricter port state control should result in fewer accidents and, in an ideal world, will feed through to more favourable insurance rates.

“The global economic outlook remains both bleak and uncertain. Like other industries, shipping will both play a part in its recovery and suffer from its consequences. But the indications from OpCost 2011 are that operating costs are under a measure of control, which could prove crucial over the next couple of years.”

Mercury Marine's Report/Testimony on Ethanol to Congress

There was a House Committee hearing on the unintended consequences of increasing Ethanol in fuel  from 10 to 15 percent. I would be willing to bet no one in the news covered this at all. The following is a summary from a report from the National Renewable Energy Laboratory (DOE). Mercury Marine was contracted to conduct these tests, and demonstrates some disturbing effects of E15 fuel. Thes tests were exclusively performed on marine engines, and I hope that similar tests are performed on other outdoor power equipment.

The abridged version of the results are that two of three E15 test engines did not finish the test. All three of the non-ethanol control engines finished with no problems.The two-stroke E15 test engine was damaged so badly that Mercury Marine could not determine the cause of failure.

I feel that this information wasn't given enough attention in the hearing. The two stroke engine that was damaged beyond repair retails for approximately $15,000. Nobody mentioned this at the hearing. More attention was given to the testimonies of the EPA and the various individuals representing the Oil, Gas and Ethanol industries.

Click here to view the complete report. The Summary follows:

Objective:

The objective of this work was to understand the effects of running a 15% ethanol blend on outboard marine engines during 300 hours of wide-open throttle (WOT) endurance – a typical outboard marine engine durability test. For the three engine families evaluated, one test engine each was endurance tested on E15 fuel with emissions tests conducted on both E0 and E15 fuel, while a second control engine was emissions and endurance tested on E0 fuel for each engine family.

Summary of Results:

Results are based on a sample population of one engine per test fuel. As such, these results are not considered statistically significant, but may serve as an indicator of potential issues. More testing would be required to better understand the potential effects of E15.

9.9HP Carbureted Four-Stroke:

• The E15 engine exhibited variability of HC emissions at idle during end-of-endurance emissions tests, which was likely caused by lean misfire.

o Both the E0 control engine and E15 test engine ran leaner at idle and low speed operation at the end of endurance testing compared with operation at the start of the test.

o The trend of running lean at idle coupled with the additional enleanment from the E15 fuel caused the E15 engine to have poor run quality (intermittent misfire or partial combustion events) when operated on E15 fuel after 300 hours of endurance.

o CO emissions were reduced when using E15 fuel due to the leaner operation, as expected for this open-loop controlled engine.

• The E15 engine exhibited reduced hardness on piston surfaces based on post-test teardown analysis.

o The exhaust gas temperature increased 17°C at wide open throttle as a result of the leaner operation when using E15 fuel. Higher combustion temperatures may have caused observed piston hardness reductions. Lack of pre-test hardness measurements prevented a conclusive assessment.

• Several elastomeric components on the E15 engine showed signs of deterioration compared with the E0 engine.

o Affected components were exposed to E15 fuel for approximately 2 months; signs of deterioration were evident.

300HP Four-Stroke Supercharged Verado:

• The E15 engine failed 3 exhaust valves close to the end of the endurance test.

o Metallurgical analysis showed that the valves developed high cycle fatigue cracks due excessive metal temperatures.

• The pistons on the E15 engine showed indications of higher operating temperatures compared to the E0 engine’s pistons as evidenced by the visual difference in carbon deposits.

• The E15 engine generated HC+NOx values in excess of the Family Emissions Limit (FEL) when operated on E15 fuel, but did not exceed that limit when operated on E0 emissions certification fuel.

o The primary contributor to this increase in exhaust emissions was NOx due to enleanment caused by the oxygenated fuel.

o CO emissions were reduced when using E15 fuel due to leaner operation, as expected for this open-loop controlled engine.

200HP EFI 2.5L Two-Stroke:

• The 200 EFI two-stroke engine showed no signs of exhaust emissions deterioration differences due to the fuel.

o The E15 fuel caused the engine to run lean resulting in reduced HC and CO emissions. NOx was of little concern on this type of engine since NOx accounted for less than 2% of the total regulated HC+NOx emissions.

• The E15 engine failed a rod bearing at 256 hours of endurance, which prevented completion of the 300 hour durability test.

o Root cause of the bearing failure was not determined due to progressive damage.

o More testing would be necessary to understand the effect of ethanol on oil dispersion and lubrication in two-stroke engines where the fuel and oil move through the crankcase together.

4.3L V6 EFI Four-Stroke Catalyzed Sterndrive:

• Since E15 fuel was readily available in the test facility and an engine equipped with exhaust catalysts was on the dynamometer, emissions tests were conducted on a 4.3L V6 sterndrive engine to better understand the immediate impacts of ethanol on this engine family.

o At rated speed and load (open-loop fuel control) E15 caused exhaust gas temperatures to increase by 20°C on average and the catalyst temperatures to increase by about 30°C.

o More rapid aging of the catalyst system occur due to the elevated catalyst temperature when considering the high load duty cycle typically experienced by marine engine applications.

Conclusions and Recommendations:

Several issues were discovered in this study from an exhaust emissions and an engine durability standpoint as a result of running E15 fuel in outboard marine engines. Run quality concerns were also identified as a result of the lean operation on the carbureted engine.

Additional investigation is necessary to more fully understand the observed effects and to extrapolate them to all types of marine engines over broader operating conditions. Effects on operation at part load, transient acceleration/deceleration, cold start, hot restart, and other driveability-related concerns need to be evaluated. This test program was mainly testing for end-of-life durability failures, which would not likely be the first issues experienced by the end users. A customer would likely be affected by run quality/driveability issues or materials compatibility/corrosion issues before durability issues. The wide range of technology used in marine engines due to the wide range of engine output will complicate this issue (Mercury Marine produces engines from 2.5HP-1350HP).

More testing is needed to understand how ethanol blends affect lubrication systems in two-stroke engines that have fuel and oil moving through the crankcase together. Crankcase oil dispersion is the only mechanism by which two-stroke engines of this architecture provide lubrication at critical interfaces such as bearings and cylinder walls. Ethanol may have an effect on the dispersion or lubricity of the oil.

A better understanding of how long term storage affects ethanol blends in marine fuel systems would require more real-world testing. Marine vessels often go through long periods of storage that could affect the fuel systems given the fact that the ethanol portion can absorb water when exposed, especially in humid areas near saltwater.

Occupy Wall Street is Killing Small Business

An article from the New York Post

Protesters force cafe layoffs as biz drops

By KEVIN FASICK, SALLY GOLDENBERG and BOB FREDERICKS

Last Updated: 10:00 AM, November 2, 2011

Posted: 2:55 AM, November 2, 2011

They want to change the economy, and now they have -- by putting people out of work!

Heartbroken Shamil Cepeda was one of 21 employees of a once-thriving cafe and catering business who just got fired because the weeks-long Occupy Wall Street protest chased away too many customers.

“I support their freedom of speech but the whole thing is hypocritical if it makes people lose their jobs,” a tearful Cepeda, 23, told The Post yesterday.

“Isn’t that the whole point of the protest?” fumed Cepeda, 23, who had worked at the Milk Street Cafe at 40 Wall St. since it opened in June.

She said she supported the protesters at first -- but now, she’s furious at them.

“I felt really, really angry,” Cepeda said of learning she was a casualty of the supposedly pro-worker movement. “I really enjoyed the job. I liked the people and my co-workers. Everybody was so enthusiastic to make the company go.”

Cepeda also had some common-sense advice for the mash-up of protesters and squatters who have occupied Zuccotti Park since Sept. 17.

“If they would just go get a real job, helping real people, that would help a lot more than just taking up space and shouting at people and putting others they claim to care for out of work,” she declared.

Her former boss, Milk Street Cafe owner Marc Epstein, said he had no choice but to slash staff after Occupy Wall Street caused his business to plummet 30 percent -- and warned he may have to shut down soon.

“We laid off people Friday. We had a staff of about 100,” fumed Epstein. “It’s sad, it’s just so sad.”

He said the ragtag protesters and metal police barricades in front of his once-booming business forced not only Friday’s employee bloodbath but a drastic cut in the eatery’s hours of operation.

“We had to cut back from [closing at] 9 in the evening to just 3:30 in the afternoon,” he said.

The protests, he said, have turned parts of once-bustling Wall Street into a ghost town.

“Wall Street, which is a beautiful pedestrian mall, has for the last six weeks become totally desolate. People aren’t walking here anymore,” he said.

“The food industry does not have anybody in the 1 percent, workers or owners,” said Epstein, who has no love for the protesters.

But he also pointed a finger at the NYPD and City Hall, which he said had ignored his pleas for help.

“I’m saying to all of them, understand the consequences of your actions. As a result of you guys making these decisions, a small business that just invested in your city is threatened, as well as all of the jobs here,” he said.

Also yesterday, Mayor Bloomberg and one of his predecessors, Ed Koch, sparred over who caused the nation’s financial turmoil.

“It’s not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp,” Bloomberg said during the 40th- anniversary breakfast of the Association for a Better New York.

“They were the ones that pushed the banks to loan to everybody, and now we want to go vilify the banks because ... It’s easy to blame them.”

But Koch said, “I want to see somebody ... punished criminally. There’s something wrong with a kid who steals a bike going to jail and someone who steals millions paying a fine.”

Meanwhile, Assembly Speaker Shelly Silver took some shots at the protesters and Bloomberg.

“I asked the mayor to enforce those codes, to enforce the health code while reinforcing the right of people to express themselves,” Silver said, echoing a letter that he and other lawmakers had sent the mayor. People have rights, Silver added, but they “should not include drumming in the middle of night ... defecating or urinating on sidewalks and in places that cause odors, and [they] should not include [police] barriers ... that are infringing on businesses’ right to exist.’’

Other signers of the letter included Rep. Jerrold Nadler, state Sen. Daniel Squadron and City Councilwoman Margaret Chin, all of whose districts include Zuccotti Park.

In another development, the protesters’ security team spotted a man suspected of sex assault in the encampment and notified cops. They took him into custody for questioning.

Additional reporting by Lisa Riordan Seville in New York and Erik Kriss in Albany

rfredericks@nypost

Port of Oakland Operations Halted by Longshoremen.

This video from KGO-TV in Oakland is pretty amazing, especially considering the Occupy Oakland Movement (A part of the Occupy Wall Street Movement) is planning a "blockade" in the city. I can only imagine the traffic headaches this will create. As Mr Roman mentions, this affects ports up and down the West Coast. So if you're on the West Coast near a major port, this could be coming soon!

By Tomas Roman

OAKLAND, Calif. (KGO) -- Dock workers at the Port of Oakland refused to unload ships that are loaded with what they call explosive contents. At least two terminals at the port were closed Monday night because of the threat. It is an extra challenge for the port already preparing a possible blockade by Occupy Oakland on Wednesday and the backup is extensive.

The longshoreman are refusing to move any containers at certain terminals because they say refrigerated containers that were improperly serviced in Vietnam have already exploded in Vietnam, China, and Brazil. Some of those containers have been found in Oakland and other West Coast ports.
Photos were taken in Vietnam of one of the five refrigerated containers that exploded at a port there last Friday. Three dock workers were killed and 16 were injured. An Oakland longshoreman got hold of the photos, but fears losing his job if he speaks on camera. He learned that some of the same types of containers had arrived here in Oakland Monday morning.

The longshoreman said, "At 8 o'clock this morning we got the word that the containers that were over at SSA were actually some of the containers that were on the list that weren't supposed to get here."

There was a list of refrigerated containers that had been serviced in Vietnam with an unstable form of freon according to the longshoreman's union. They say that's why they exploded.
"They have apparently taken at least three lives and may have injured many more people," said ILWU spokesperson Craig Merrilees.
They were supposed to be taken out before coming to the U.S. The ILWU says they were not and thousands of them are either in ports or out on the water.
"There are potentially thousands of containers being shipped around the world, some that have ended up on docks here in Oakland, they're potentially lethal," said Merrilees.
There are also reports of refrigerated containers exploding in China and Brazil since Thursday. Hundreds of longshoremen on Monday refused to unload any ships or move any containers until those improperly serviced in Vietnam are removed.
"I think we know that at least two terminals, both the SSA and TraPac terminal have been shut down," said Merrilees.
The longshoreman who wanted to remain anonymous said, "Until we get it resolved were not going to work."
If the longshoremen don't work, neither do the truckers. With the terminals closed dozens of trucks line the roads of the port unable to load or unload.
A trucker ABC7 spoke to also wanted anonymity. He said, "I was supposed to turn in my empty containers in and then take loads out and I couldn't do anything." When asked how long he had been there stuck in line, he said, "All day."
So far the U.S. Coast Guard has isolated at least 13 of these problem containers, but they're looking at the same issue in Tacoma, Washington, Portland, Oregon, and in Long Beach.
The Pacific Maritime Association, the longshoreman's union and the shippers are all trying to get together to work this issue out and get the cargo moving.

(Copyright ©2011 KGO-TV/DT. All Rights Reserved.)

10000 Ships to Use LNG Propulsion by 2020?

This report comes from from MEC Intelligence. The impact of this suggests phenomenal growth (over 9000% growth) in LNG use for maritime propulsion. This growth over the next eight years could very well change the face of marine engineering.

LNG in marine propulsion: A Disruption to the Maritime Industry?

According a new forecast by MEC intelligence nearly 10,000 vessels could be adopting LNG propulsion by 2020 triggering a huge growth in the market. Companies in all aspects of the maritime value chain– oil majors, terminals, ports, bunker suppliers, service companies, component producers, vessel owners and charterers – need to rethink their offerings.”

A ground breaking report published by the maritime cleantech market insight firm MEC Intelligence estimates more than 5% of the world fleet will adopt LNG propulsion by 2020 a huge growth considering less than 100 vessels presently.

Best Option for Newbuilds

Strict environment regulations requiring the reduction of SOx, NOx to 0.1% in ECA zone in 2015 and 0.5% globally in 2020 will stimulate demand for technologies that can eliminate or reduce emissions from vessel exhausts. The key compliance options available are either adoption of new types of fuel – low sulphur MGO or LNG – or using scrubber technology on the existing HFO fuel.

The LNG propulsion technology will potentially gain massive traction in the new build segment owing to significantly lower operation costs leading to a lower total ownership cost over the ship’s lifecycle. The total ownership cost over ship’s lifecycle for a new build LNG propelled vessel (depending on vessel type and geography) is expected to be up to 40% lower as compared to that of a fuel oil and MGO propelled vessel.

The low cost are attributed to the abundant availability and competitive prices of LNG compared to crude. Even though, the price of LNG is expected to increase with the pickup in natural gas demand in power sector it is not likely to be significant considering the new supplies from unconventional gas reserves.

Further, considering the often more than 25 year long life cycle of vessels, LNG adoption makes the ship essentially future proof in terms of further regulatory driven emission reductions in SOx, NOx, and Particulate Matter approaching in the horizon.

Huge Long Term Impact Albeit a Slow Start

Better Economics combined with development of building capacity, recent advancements in engine and fuel gas technologies are leading to a pick-up in the interest in LNG propulsion. Although availability of infrastructure and standards is a limiting factor, yet, this is expected to be only a short term inhibitors. An analysis of the existing LNG supply and terminal infrastructure shows ample availability of the fuel to be able to supply and bunkering infrastructure can be developed rapidly to meet the growing fleet.

With the development of infrastructure and IMO ratifications the fleet is expected to reach up to 1,000 vessels by 2015 but pick up rapidly to grow up to 10 times in the subsequent five years as the technology, infrastructure, and economics stack equivocally in favour of LNG propulsion. However, in case infrastructure and regulation are delayed the penetration is estimated to be significant lower yet still significant.

Unique Opportunity to Differentiate and Shape the Market

The report concludes that the adoption of LNG in vessels will call for changes in all aspects of the value chain – oil majors, terminals, ports, bunker suppliers, service companies, components suppliers, owners and charterers – requiring companies to rethink their offerings and align to a new reality sooner or later. It is one of the unique times when companies can move fast to take advantage of a new technology to differentiate themselves in the largely ‘commodity’ market for equipment and services.

About MEC Intelligence

MEC Intelligence is a leading market insight firm focused on growth in the maritime, energy, and cleantech sectors. The company brings together its unique data assets, deep experience in supporting strategic and market business development, and broad industry knowledge to develop objective perspective on industry developments and identify growth opportunities for the entire maritime, energy, and cleantech ecosystem.

How Significant is One Company?

It is not often that I write about a specific shipping company, however today I feel that this one is worth mentioning. There is more to this article than just one shipping company, there is a more important issue for people to think about. In a time where it is commonplace for companies to be "delisted" by the New York Stock Exchange (NYSE)  or the NASDAQ there is significance to the fact Horizon Lines was delisted from the NYSE.

What is it about Horizon that makes this so significant? The short answer is the Jones Act of 1920. Horizon lines is one of the largest Jones Act cargo carriers in business today. What the Jones Act does is restrict domestic cargo to U.S. manufactured, U.S. owned and U.S. crewed vessels for interstate cargo.

Horizon shares traded (at the time of writing this article) in the .24-.25 range, whereas in January, shares were trading at 52 week highs of 5.95. While I don’t believe this company is in serious trouble, its stock price has put its future in question.

If a foreign company were to come in and purchase this company, it would be one less Jones Act Carrier to become history. (Remember must be U.S. owned) This would mean, assets would be sold or moved and the remaining Jones Act Carriers would pick up the slack. Demand for shipping would go up, because there would be less supply. Prices would go up for shipping, and then eventually tacked on to the products each of us buys.

The government isn't helping either. Refer back to the blog article regarding the implementation of fuel usage fees on October 19, 2011. With the expansion of the definition of U.S. Waterways in the proposed fuel usage fees could in fact change the scope of the Jones Act.

The bottom lie is that if Horizon lines disappears from the list of Jones Act Carriers, it wouldn’t be the end of the shipping industry within the United States. However, there are many overlapping factors that get overlooked. If the operating costs are increased for carriers, companies that are struggling could be forced out of business. Because of the economic crisis, our elected officials are scratching their heads trying to uncover more funding. A fuel usage fee, or expansion of areas covered could give the government more funds to resolve the debt crisis. When a congressman, or senator or even the president says "this will provide millions if not billions" I submit that they have not researched the overarching effect to companies like Horizon who are struggling to come back from the last crisis caused by inappropriate legislation.

I'm thinking about this stuff, are you?

K.Swanson