I refer to a recent article titled “Report presents doomsday scenario for shipping” published in the Lloyd’s List daily shipping industry newspaper.
In it, some startling predictions are made, including:
- That dysfunctional shipping markets may trigger an outbreak of protectionism in trade and the creation of national fleets;
- the present shipping crisis has “arrived faster and stronger” than any before and is likely to last longer than even the infamous depression of the 1970s;
- the present seizing up of shipping markets might trigger a chain of events that will kill free market economics world-wide for a generation;
- many shipyards operating in free market economies such as Japan or South Korea will fail due to a combination of cancellations and shipowners not meeting progress payments;
- China, which has as taken enormous trouble to guarantee long-term sources of raw materials and plan its expansion of steel production and shipbuilding capacity, is likely to take a different approach
- it is quite possible China will control, directly or indirectly, more than a third of the world’s dry cargo fleet by 2012.
Currently all kinds of cargo ships are being withdrawn from service and laid up worldwide due to the global economic crisis, and there consequently being no cargoes to carry. Shipyards are cutting their order books. Shipping companies are, in addition to laying up ships, taking them off charter, selling them on the market or for scrap.
As an illustration, the map and photos show the vessels currently out of world rotation at anchor sitting at the Singapore hub due to declining freight market and economy.
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These vessels will sit idle with minimum crews until such time as there is work for them.
The problem is that if Australia doesn’t take action now, it could find itself in the position in the near future of being held to ransom by other nationally controlled fleets such as China who would have control of the shipping industry markets and thus dictate freight rates. As Australia relies heavily on its natural resources being sold to world markets at competitive rates, the final price of our products includes the cost of freight to the point of sale.
As a result of the demise of the Australian shipping fleet in the 1980’s and 1990’s, Australia has been selling its exports “at the waters edge” in Australia, for other foreign owned cargo ships to then take the cargo to the purchaser. Whilst this is fine in times like the last 20 years where there has been a buoyant international shipping industry competing for business and therefore offering cheaper market driven freight rates resulting in our products being competitively priced on the world stage, the risk is that these free market forces could be removed once the Global Economic Crises is over.
Australia and its exporters would then be held to ransom by these new global shipping powers. Our exports could quite easily be priced out if the market at the whim of foreign interests because Australia wouldn’t have the ability to get its own wares to market.
The solution? Instead of pumping billions of dollars into public coffers so we can all buy a Kevin 97 Plasma TV, the government could be taking demonstrable steps to guaranteeing this country’s ability to get its own future exports to world markets in its own ships.
How? By buying up large bulk carriers, general cargo ships, containerships and tankers at current fire sale prices and ‘mothballing’ them in Australian ports until such time as they are needed in the future.
Ships that cost $US50 million to build only a few years ago could be snapped up now for a fraction of that cost.
These vessels can be sailed to Australia and “rafted up” in key mothball fleet locations in non cyclone prone sheltered waters such as Brisbane’s Moreton Bay, NSW’s Jervis Bay and Melbourne’s Port Phillip Bay and other suitable and strategic locations around the coast.
The vessels will anchor in remote parts of these bays and be rafted alongside each other in groups of about 10 ships, separated by fenders. They will be shut down and all machinery coated in oil and grease and put into a state of suspended animation. A small team of dedicated marine engineers or navy personal or ‘skeleton crews’ will act as shipkeepers and supervise the ships to make sure they are fine and receive the minor maintenance they need.
Modern ships have a 30 year plus lifetime and if maintained in a state of suspended animation, there is no reason why these ships could not remain mothballed for up to 10 years if necessary and be in near perfect condition at the end of it.
When economic conditions return to a point that it becomes time to reactivate them (in possibly five or 10 years time), they are towed to a shipyard where they are drydocked, given a new coat of paint and all machinery serviced and restored to full operational condition; a process that could take a matter of mere weeks if necessary.
Sound crazy? Well the Americans have been doing this for years, with their reserve navy and merchant fleets ‘mothballed’ in places like San Francisco, Philadelphia, Pugent Sound and Beaumont Texas.
A reserve fleet is a collection of naval and merchant vessels of all types that are fully equipped for service but are not currently needed, and thus partially or fully decommissioned.
Such ships are held in reserve against a time when it may be necessary to call them back into service, and are usually tied up in backwater areas near naval bases or shipyards to speed the reactivation process. They may be modified, for instance by having rust-prone areas sealed off or wrapped in plastic. While held in the reserve fleet a ship will typically have a minimal skeleton crew to ensure that remain in usable condition.
The advantage for Australia is that for minimal upfront and ongoing cost, the government can guarantee Australia’s future economic viability for its exports by ensuring that it has at least some ships capable of getting our exports to market, as is our sovereign right.