Shoring Up U.S. Shipbuilding

Spoiler Alert: we already know what to do. Some of it just isn’t physically possible. Help isn’t going to come from South Korea.

Just two days following Donald Trump’s historic election victory, positioning him to become just the second U.S. President to be elected twice, in separate, non-following terms, the headlines curiously turned to shipbuilding. Which is a nice thing, since the average American thinks very little about that industry on a daily basis. Digging deeper, it seems that America’s once dominant shipbuilding industry needs help, and the incoming administration thinks that the answers can be found in South Korea.

First things first: South Korea does build ships; a lot of them. And they do it well, quicker, and far below the cost of doing it here in the United States. That’s true, at least when it comes to the deep draft, blue water markets. I could argue that our mid-tier and smaller shipyards do a fine job in producing ferries, pilot boats, CTV’s, towboats, barges, and a raft of other workboat platforms. They do this in series, with quality and with pretty good speed. Separately, however, why domestic shipyards seemingly cannot match many of the benchmarks of the Asian yards is an easy thing to understand. At this point, calling the South Koreans for “help” isn’t going to solve the problem.

• Geography

When it comes to building less expensive vessels in a cost- and time-efficient manner, we already have all the answers. And, therein lies the main problem. That’s because there are three primary obstacles to improving our output here in the Colonies. Two of these might just be insurmountable, and the third [?], I question if it is as big an issue as some might make it out to be. I learned most of this long ago on a road trip to the U.S. West Coast, where I was fortunate enough to meet then-NASSCO chief Fred Harris. What he had to say, I’ve never forgotten.

Back then, when visiting Mr. Harris’ NASSCO offices, one of the first things that you noticed was the enormous conference table located adjacent to his office. On it, laid out one-by-one, in pictures and bulleted details, was what he deemed the entire South Korean model of building ships in series, quickly, with quality and in a progressively economic fashion. I’m told that this display never changed, and was more or less, a permanent fixture in his office. In theory, it didn’t seem that hard, but he then went on to explain why, here in the United States, duplicating the Korean model was easier said than done. Arguably, no one did it better than Harris.

He started by explaining the issue of “lay down” space. Or, as I was soon about to learn, this involved large tracts of land immediately adjacent to the drydocks where materials and steel could be laid in sequence, at specific times and then be lifted and put onto the newbuild skeleton in rapid succession. Unfortunately, this is something that, in our often urban-located yards, is in incredibly short supply. And, even if it weren’t, the approvals and hand wringing that went along with procuring more lay down space was, and remains, a terribly difficult task. At least, here in North America.

At one point during this very informative interview, he beckoned me over to the window, and pointed out to a seemingly vacant and unused piece of property on the periphery of the shipyard’s boundaries. It might have been an acre; it might have been less. I can’t remember. But NASSCO wanted it, for the reasons already enumerated above. Again, I don’t know if that ever happened. But if it did, it probably wasn’t without the usual EIA stuff, city council meetings, and all the rest.      

Virtually every shipyard in the United States that plays in the blue water, deep draft markets, grapples with the same issue. And, the significance of this piece of the efficient shipbuilding puzzle cannot be understated. That because, in part, if a China-based yard needs more “lay down” space and there’s a city block or neighborhood in the way, then that’s probably no issue at all. And, there probably won’t be an Environmental Impact Assessment before they fire up the bulldozers to get it done. You couldn’t do that here, and arguably, nor should you be able to. So, the reality of geography for our yards is a huge hurdle to overcome.

• Vertical Integration

You only have to look back several generations to understand the roots of our domestic shipbuilding industry. And, those roots include the production of steel, typically co-located with the yards, where the steel production output was within hand’s reach. The names of some of these storied yards, those that still exist today (and some that do not), still contain the words “steel” or “iron.” Not only that; production was typically geared to what they already knew the shipyard would need to fabricate that particular ship. Here in the United States, the vertical integration of the steel industry with shipbuilding efforts has all but gone away.

The cheap, local sourcing of steel in foreign yards is a very difficult thing to overcome for U.S. builders. Not only is that steel less expensive – the umbrella corporation can often decide where to takes its losses or to break even, in the shipyard or at the smelter – it is far more convenient to obtain. It gets to shipyard quicker, and that translates into a much faster delivery schedule. That clears the way for the next newbuild.

• The Cost of Labor

This much-discussed aspect of the cost of shipbuilding is a little harder to define. At least it is, for me. My general sense is that the differential between the cost of domestic shipyard labor here and abroad, especially where it intersects with other industrialized, first world countries, is on the wane. At the same time, I wouldn’t make that assumption when it comes to comparing U.S. labor costs to those in China.

To be fair, the growing worries about the availability of skilled trades for a shipbuilding industry that wants to gear up to satisfy both the government and private sectors are more than justified. We all know what happens when the availability of a commodity drops as the demand increases. All that said; I place the issue of labor costs in a distant third place when it comes to the discussion of U.S. shipbuilding efficiencies.

• The Way Forward

US Deputy Secretary of State Kurt Campbell reportedly declared during a September US House of Representatives Foreign Affairs Committee hearing that, “The most important thing we need to do over the next 10 years is increase the speed at which US Navy ships are designed and built.” I would agree with that, especially since today’s Chinese shipbuilding capabilities apparently exceed ours in an exponential way. Similarly, I would add that it will be just as important that we ramp up our ability to produce merchant ships with likewise alacrity. The Navy can’t operate without a robust merchant fleet to support that sealift effort. And, I don’t see our “friends” from overseas eager to jump in and help where we fall short.

The need for domestic series-build models in all sectors – whether that means tankers, boxships or anything else – cannot be understated. The South Korean model of doing so is probably the bible. And, the Japanese have also shown themselves to quite capable of the same thing. For example, anyone who has ever stepped onto a 1980-1990 vintage Japanese-built (or operated) crude oil tanker noticed immediately the wholesale duplication of every possible piece of equipment. The cargo systems and control rooms across dozens of hulls were virtually identical: three main cargo pumps, two eductors, two stripping pumps and cargo control rooms with mimic boards and controls that never varied. A Chief Mate who had served on one of these vessels could step onto another and be up and running in minutes.

Fred Harris also told me that one of the real values of the Korean model was that, in theory, each successive ship in any series that slid down the ways into the water would be cheaper and quicker to build than the one before it. I certainly believe that to be true in a vertically integrated, sprawling no-real-estate-limits, South Korean yard. We already know what we have to do. Can we do it here? I’m not the guy to ask.

Domestic shipbuilding is critical to our national security, and for that matter, our economic prosperity. Conveying that reality to the general public is as equally difficult task. But, if a President-elect is talking about shipbuilding as a priority less than 48 hours after election day, then that’s a welcome step in the right direction. Surely, that’s one thing that we can all agree on?

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Joseph Keefe is the Editor of MarineNews magazine, and a 1980 graduate of the Massachusetts Maritime Academy. A licensed mariner, his career has spanned more than 40 years in the maritime, shipping and energy sectors. His work has been featured in more than 15 industry periodicals. Today, he contributes to all of the New Wave Media tiles, as needed. Reach him at [email protected]