US cabotage protection 'makes transshipment too expensive to consider'

BANNING all but US flagged vessels from the cabotage market is getting increasingly costly for US consumers, says a recent paper from London's Drewry Maritime Research.

Such bans make transshipment between US ports expensive, discouraging the development of a feeder industry, which is increasingly important in the age of mega ships and development of hub ports.

"News that Matson has ordered two 3,600-TEU vessels from Aker Philadelphia Shipyard in the US for US$209 million each underlines the possibility that US flag protectionism is an increasingly expensive luxury," said Drewry. 

"Comparable vessels could be built in Asia for less than a fifth of that," said the paper, pointing out that Matson's last order for four 2,890-TEU vessels cost four times more than the market price.

Add to that, the stipulation that US flagged ships must be manned by a crew which is at least 75 per cent American. With maritime wage inflation for container vessels between 2,000-3,000 TEU that is a 31 per cent cost increase, according to Drewry's Ship Operating Costs 2012/13 report, up to $2,306 a day.

"US consumers will be concerned at the high price of protecting US domestic or coastal traffic for US flag ship, particularly at a time when even China, one of the most state-controlled countries in the world today, is beginning to have second thoughts," said the Drewry report.

China has recently announced plans to open its cabotage trade to foreign flagged ships if they are owned by Chinese companies.

"Most coastal container moves between EU ports can now be carried out at a free in-and-out rate of less than $75 per TEU without flag protectionism. Anyone can play the game, and many increasingly do between such regions as the UK and continental Europe, and between continental Europe and the Baltic. A third of the container traffic handled in Rotterdam, Europe's largest port, consisted of feeder and short-sea cargo last year, for example," said the report.

Despite the current Transatlantic Trade and Investment Partnership (TTIP) talks, no mention has yet made to this disparity in cabotage rules or any changes to the blatantly protectionist Jones Act.

"It is far worse for oil tankers. Only the largest carriers have enough business to call at small ports such as Boston directly," Drewry said.

Others have noted that Canada has sought to take advantage of US protectionism by developing deep water Halifax as a hub port for mega ships while the smaller Jones Act carriers handle the cabotage feeders along the US eastern seaboard.