1/Yesterday, @SenateCommerce@commercedems heard from Max Vekich on his appointment to @FMC_gov. He is a former congressman (D-WA) 83-91 & has worked for @WestCoastPorts. As the name implies, it oversees all west coast ports & its board is made up of all the major ocean carriers.
2/The only story I have seen on this is from @JOC_Updates, with the title "FMC nominee gets rare Senate grilling amid US shipping disruption."
The @FMC_gov is the Federal agency charged with oversight of international shipping.
5/Vehick was pressed by @SenatorTester & @SenJohnThune concerning the issue of American exports sitting on the dock, in particular agriculture. As a senior supercharge for the @ilwulongshore he stated that he wanted the @FMC_gov to learn more about ocean carriers' practices?6
6/When queried by @SenatorFischer about this issue further, he dodged the question but said the least that can be done so to ensure there is "a can to put the products in." But, no guarantee that container will get on a ship and out of the terminals to be exported.
7/Next up will be RDML Ann Phillips for the position of @DOTMARAD. I am sure that right now she is underging a crash course in learning all things maritime so that she can be prepared for @commercedems@SenateCommerce to question her on the current shipping & supply crisis.
8/The issue at play here is that nominating politicians, industry advocates, or a generic military officer to fill key roles in @FMC_gov & @DOTMARAD demonstrate the low level of priority and concern the government has consistently shown toward the maritime sector...
9/In the midst of this crisis we need people on the @FMC_gov and @DOTMARAD who can step onto the job on day 1 (278 days since the new admin) & provide not just leadership, but new ideas.
If one has to first learn on the job, the best one can expect is to maintain status quo.
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1/Everyone is saying US ports are empty, but for most of these observers, this is their first time looking at the ports and ship data.
Here is some context:
▶️US Container Import Volumes are tracking on the high side for Q1, with only 2022 being higher.
▶️West Coast Mexican & Canadian ports just exceed the capacity of @PortofLA by itself, so the US needs cargo to flow into its ports.
▶️The four biggest US ports are extremely dependent on China imports:
@PortofLA 62%
@PortNYNJ 27%
@portoflongbeach 65%
@GaPorts 35%
It takes about 2-3 weeks to sail from East Asia to the West Coast about 4-6 weeks. With the tariffs going into affect on all cargo loaded after April 9, those ships have arrived on the West Coast and they will be on the East/Gulf Coast mid-May.
2/As I have stated previously:
▶️The idea that US ports are empty or the ships are not sailing to the US is false as in this video.
▶️What is happening is the data for the ports are showing the dip in imports, with @PortofLA showing a 35% drop in Week 19 (May 4-10).
▶️The thing to watch is the container volumes departing China for the US and the slight uptick at the end of April.
The 145% is extreme, but is the mark up enough to deter companies from ordering inventory to replace everything that came in during Q1? Also, is there even a suitable alternative to the Chinese manufactured goods and what will be the overall cost differential, especially for low-cost, but high-mark up items?
3/The question is how does industry react? @FreightWaves and @FreightAlley asked 20 firms across four sectors:
▶️Automotive and Transportation
▶️Retail and Consumer Goods
▶️Technology and Electronics
▶️Industrial and Manufacturing
They range from revised financial guidance and pausing productions; to @Walmart resuming some Chinese suppliers; shifting productions to other countries; and some like @whirlpoolusa see them as a competitive advantage.
1/Everyone has to be careful about misreading shipping data. This chart from @MarineTraffic shows normal density for containerships and shows icons for all vessels destined for the US.
2/The data from the @PortofLA is showing that cargo for this week (which is coming in before the Apr 9 loading date) is expected to be 56% over the same week last week. This is on top of a record Q1 with a lot of front loading.
@PortofLA 3/The Blank Sailings everyone is hearing of is currently at 10% with 75 sailings out of 718 between 28 April and 1 June. These cancellations are not unusual; in May last year there were 19 blank sailings to the West Coast and 22 in May.
2/First, the issue is the lack of contracts with the current yards and the fact that nearly all shipyards have one sole customer...the @USNavy. Therefore they have to be burdened with a sea of @NAVSEA rules and inspectors.
3/Globally, we have seen a reduction in global shipbuilding capacity from 700 yards in 2007 to 300 in 2022. That is a reduction of ship construction capacity from 2000 ships to 1200. Plus, this capacity is focused on 9 companies in China, Korea & Japan.
1/The damage to USS Harry S Truman (CVN-75) has me thinking along the same lines as when USNS Big Horn (T-AO 198) ran aground off Oman and left the Lincoln battlegroup without an oiler.
What if Truman was damaged in battle and what is the historical comparison that the US Navy can look towards?
2/Much like I compared Big Horn's loss to that of USS Pecos in January 1942, the situation early in the Pacific War may provide a good example for the @USNavy for a potential peer-to-peer conflict in the Pacific.
3/At the start of the Pacific War in December 1941, the US Navy had 3 carriers in the Pacific with another 3 in the Atlantic (not counting Ranger). The US faced off against 6 Japanese fleet carriers as brought to bear off Hawaii.
How did the US carriers fare in the first half of the war?
1/I don't think the author of this article understands how the ocean can be used to fight the #LosAngelesFire #PalisadesFire.
First, what is needed is water to supply fire engines and tenders (tankers). When the fires burned through residential and commercial areas, the water pipes are opened and every structure pulls on the system.
2/Water systems are designed to operate off reservoirs, elevated tanks, pumping stations, or a combination of all. Normally, pumping stations fill elevated tanks during low-consumption periods. The tanks & reservoirs use the weight of the water and gravity to push water through the pipes.
3/As was noted by the director of @LADWP, the tanks were drained due to consumption and as fires opened lines.
The system pumps could not refill the tanks & charge the pipes. This resulted in the loss of pressure on all the hydrants, which has happened in past fires.
The US builds 0.1% of the world's ships; China 51.0%.
The issues are not just economy of scale, but how the nation supports the sector in terms of corporation taxes, availability of financing, and depreciation of ships.
Shipbuilding is critical not just for the commercial sector but also the military; in terms of construction and repairs.
2️⃣ International Freight
The only US-flag ships in international trade are receiving a stipend through the Maritime and Tanker Security Programs, along with military charters under US Transportation Command.
Most of these ships are owned by foreign companies with US subsidiaries, i.e. Maersk Lines, Limited, APL, or Hapag. Part of the building program should target to replace the foreign-built ships with US-built vessels.
The US can establish a tax discount program for Shippers that allows them to move cargo on US ships and earn tax discounts/rebates.
There also needs to be work with the Dept of Defense to provide priority escort to US ships in contested regions such as the Red Sea with the US covering war risk to incentive shipping on US flag ships.
3️⃣Coastal Shipping
Current law requires US-built, crewed, flagged, and owned (which is more restricted than trucks, rail, and air; but they still possess cabotage provisions).
There should be programs to promote short-sea shipping akin to the James River/I64 barge program.
However, the greatest hindrance to coastal shipping is the need to double-handle cargo in ports and the low cost of trucking vice shipping. What has historically undercut coastal shipping was the development of the Interstate highway and pipelines.
In some areas, we need to alleviate restrictions, such as a waiver to reflag LNG tankers into the fleet until domestic ships can be built.
A program needs to be developed to replace the aged Great Lakes fleet, the coastal tanker fleet, and ferry replacements (the Washington State system is in dire need).
Also, we need to see the application of infrastructure funds to improve the Mississippi system to make it more robust from seasonal issues (this is the 3rd year in a row that low water is hindering export of grain).