Ship Building on the Great Lakes

by MAFC on July 5, 2011 · 1 comment

In a recent issue of Freight Notes (No. 11), I reported comments made at a listening session sponsored by MARAD on the future of Great Lakes shipping. Some of those comments, which I said surprised me, questioned whether the shipbuilding industry on the Lakes had the capacity to build a new thousand-foot laker from scratch. These comments, made by members of the shipping industry, basically asked whether existing Great Lakes ship building companies had the skilled workers needed to build a new boat of that size.

I was surprised by the comments, because shipbuilding has historically been a significant industry on the Lakes. In the World War II era, for example, Great Lakes shipbuilders made a contribution to the war effort by producing a range of ships for the US Navy. In those pre-Seaway days, ships built on the Lakes had to make their way to the ocean through the canal at Chicago and the Mississippi River system to the Gulf of Mexico.

While shipbuilding remains a significant industry on the Great Lakes, its focus has moved to building smaller vessels and to repair and maintenance. This change in focus is understandable in light of the changes that have taken place in the commerce of the Lakes. In the nineteenth century and the first half of the twentieth century, many vessels moved on the Lakes carrying a wide variety of cargo and passengers. The 2010 Statistical Report of the Lake Carriers’ Association lists 59 US flagged vessels, both self-propelled and tug-barge units. Forty-eight of these are dry bulk carriers, five are cement carriers and six are tankers. Dry bulk has become so dominant that the Carriers’ Association’s annual report focuses on three commodities: coal, iron ore, and limestone.

Typically, these products move from ports at the head of the Lakes such as Duluth-Superior to power plants around the Lakes and industrial sites on the lower Lakes.

Not only is the number of vessels small and their focus tight, their age is also significant. The Carriers’ Association lists 48 self-propelled vessels. The oldest was built in 1906. None have been built in the last 20 years. Many have undergone more than one major overhaul, but steel hulls last a very long time in fresh water. Moreover, shipping companies are now facing major new costs to re-power those vessels to comply with EPA clean air guidelines.  With these costs and stagnant or declining cargo on the lakes, it is unlikely that any new lakers will be built in the near future.

Newer cargo vessels do exist on the lakes, but they are Canadian flagged and tend to serve a very different function than the US flagged fleet. The workhorses of the US fleet are thousand footers, the biggest boats that can make it through the Soo locks. Canadian vessels tend to be smaller, 750 feet or less, designed to move through the Saint Lawrence Seaway. On the Seaway they move the products of Canada’s agricultural and manufacturing heartland to the Atlantic coast. Even some of the newer Canadian boats have been built in Asia to take advantage of lower manufacturing costs. Chinese-built boats have been reported to cost less than half of a similar boat built in North America.

US flagged boats cannot be built in Asia. US law—the Jones Act—makes it illegal. Moreover, thousand-footers, the type of boats that would probably be built for the US fleet, have to be built on the Lakes because they cannot pass through the Saint Lawrence Seaway or the Mississippi River system to enter the Lakes.

Whether this matters depends on the direction of future Great Lakes commerce. Given the relatively flat level of Great Lakes shipping and the longevity of boats on fresh water, the existing fleet can probably maintain the status quo almost indefinitely. If we believe—as the USDOT apparently believes—that lake-borne commerce should be expanded both in total volume and in cargo type, then we will also have to confront the challenge of updating and expanding the existing fleet. Smaller vessels might be an option if this expansion includes other types of cargo, such as containers. In this case, we may have to consider some modification to the Jones Act to allow the purchase of vessels manufactured abroad. If the volume of lake borne cargo increases with, for example, a significantly resurgent US steel industry, on-Lake shipbuilding will required and we will have to confront the issues involved in reviving this industry. Partnerships with non-Lake shipbuilders may provide the skills needed to build ships for carrying freight on the Great Lakes.

These concerns may be proven wrong, or displaced by others. It depends on the direction that Great Lakes commerce takes in the coming years, and how the USDOT encourages this industry to develop. In the current economic and political environment, the outcomes are less than clear—and this clarity will perhaps be some time in coming.

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{ 1 comment }

Richard D. Stewart July 14, 2011 at 1:07 pm

Ernie,
in 2009 GMLRI did a study on the status of shipyards and their capacity on the Great Lakes.
You can find a copy on our website.
Richard

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