Container & RoRo Tonnage — Non-Contiguous Liner Trades

The container and RoRo fleets of the established carriers serving Alaska, Hawaii and Puerto Rico are aged. While none of these trades is experiencing rapid growth, the involved vessels are expensive to operate and increasingly expensive to maintain. Replacement plans are well underway by one of the major carriers for Alaska. Totem Ocean Trailer Express (TOTE) will be replacing three Sun Shipbuilding & Dry Dock Company built RoRo vessels with two newly commissioned 600 trailer vessels now being built at NASSCO.

Some years ago, the Matson Navigation Company, the predominant carrier in the Hawaiian trade, adopted a maintenance program designed to prolong the service lives of its vessels and so to postpone new construction.

As the Hawaiian economy appeared to be returning to health in 2000, fleet replacements became a subject matter of discussion, only to be postponed by the damage to the Hawaiian tourism economy following September 11. Now it appears that Matson is prepared to move forward with Kvaerner with a four vessel contract (two firm and two under option) for the Kvaerner 35,000 dwt container vessel design. (See related story, page 38).

The fleet serving Puerto Rico is truly antique. Two of the five Lancer class container vessels used by Navieras de Puerto Rico were commissioned 1968, the others in 1969, 1970 and 1971. The two SUN-built RoRos used by Sea Star Line first entered service in 1974. The numbers for the required new vessel tonnage have appeared substantial. But. overtonnaging in this trade (less than break even rates and the resulting financial problems) have until now caused operators to postpone replacements. The recently announced Sea Star purchase of Navieras should alleviate some of the overtonnaging. However, once TOTE newbuildings for Alaska and MATSON newbuilding for Hawaii are complete, TOTE will have three SUN-built RoRo vessels, and Matson will have two SUN-built RoRo combination vessels, surplus to their needs. These could be substituted for the Lancers and might be a satisfactory fit with the two SUN-built RoRos which Sea Star currently operates.

Perhaps CSX Lines LLC rumored sale situation offers the largest measure of vessel new buildings open to speculation. What if an ambitious, well financed purchaser were to come forward? This would certainly signal CSX fleet replacements in all three of the non-contiguous trades, Alaska, Hawaii and Puerto Rico, and probably force Sea Star to newbuildings for Puerto Rico rather than the substitution of existing SUN-built RoRos.

Coastwise Liner Trades Recent highway gridlock on major sections of the U. S. interstate highway system, coupled with projections for the growth of U.S. container commerce over the next decade and beyond has focused attention on the need to augment existing and projected highway and rail facilities with a waterborne alternative. The problem has been a subject for increased study and discussion in the last three to four years. The Interstate 95 and Interstate 5, East Coast and West Coast, corridors present the most serious current and projected gridlock problems. On the East Coast, gridlock caused on-shore delays in container deliveries sometimes now exceed the number of days involved in the container's Atlantic crossing. The most immediate problem blocking this development is said to be a lack of adequate shore-side infrastructure. It seems likely that most of these movements will be by RoRo feeder barges or RoRo vessels, with distance dictating the choice between barge and vessel. Either design should be able to at least partially avoid expensive container handling facilities and make use of existing infrastructure and roadstead sites. There is a clearly existing transportation need. With the proper choice of equipment operators could accelerate this development. Perhaps the TOTE and Matson SUN-built RoRos will find a home here? It is difficult to assign a newbuildings figure for these trades in the presence of so many variables.

There are current domestic trades shipbuilding opportunities for fleet replacement and expanded needs for our OPA '90 and other coastwise and Gulf of Mexico energy related services; fleet replacements for the non-contiguous services; and vessels for expanding ferry needs in passenger and passenger/vehicle services in coastwise, Great Lakes and inland services.

These opportunities are likely to continue and expand as they become more clearly defined during the course of the decade. What does this mean for U.S. shipbuilding? In reviewing the domestic transportation scene we can probably agree upon the areas of need, and upon the vessel design and shipyard construction solutions.

The problem that remains is that of attracting the equity capital and long term debt financing necessary to fund these projects on a basis which is sufficiently economical to allow project success. In the end, U.S. shipbuilding opportunities during the current decade will be constrained, not by transportation needs, or vessel design or shipyard capacity, but by the lack of reasonably priced capital which is likely to be dedicated to meeting national waterborne transportation needs.

This article is reprinted, in part, with permission of MarineNews. Mr. Cook discusses the vibrant opportunities in the Passenger and RoRo/Passenger Ferry segments in the June 10, 2002 edition of MarineNews. For a copy, call 212-477-6700 or e-mail: [email protected]

About the Author H. Clayton Cook, Jr., B. S. Princeton University, LLB The University of Virginia. Mr. Cook served as General Counsel of the U. S. Maritime Administration from 1970 to 1973, where he was responsible for the implementation of the Merchant Marine Act of 1970, and the drafting of the Federal Ship Financing Act of 1972. Upon completing his government service, Mr. Cook joined Cadwalader, Wickersham & Taft as the partner responsible for the development of that firm's Washington Maritime practice. Mr. Cook continues his law practice today as Counsel to Bastianelli, Brown & Kelley, Chartered, in that firm's Washington, D.C. offices. He is also a partner in Management & Transportation Associates, Inc., a management consulting firm based in Essex, Connecticut. Mr. Cook's email address is [email protected]

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