Everybody has opinions. Here are a few that we would like to share.
Is the Jones Act Going Away? (September 2005, September 2006)
September 2005--The other day, I was asked why the Jones Act would not go away. I responded that there is one reason that guarantees the continued existence of the Jones Act for the foreseeable future—the OSG/Kvaerner transaction. This is in addition to the recent announcements by Maritrans/Bender, US Shipping/SENESCO for confirmed projects and various other projects that might or might not happen from other independents. The Jones Act, regardless of one’s thoughts on it, relies on the mutual tension of the three main groups to maintain the existence of it for entirely different reasons:
• The shipyards want to maintain it so there is a limited market and guaranteed business.
It is ironic that several of the owners and shipyards want other “competing” programs to fail. This is a dangerous position in that there are too few ships to make the market a place for competition killing tactics. When there are too few ships for the market, the shippers and charterers might find a way to dispense with Jones Act ships. And that would be bad for the Jones Act.
September 2006--The answer is probably "No." Too many ships are being built by a wide variety of companies including OSG, US Shipping, Crowley, Maritrans and others. It is interesting to see that the tankships are being built by NASSCO and Aker-Philadelphia while the tank barges (ATBs and ITBs) are being built by Bender, VT Halter and other Tier 2 yards. The ships being built are the tankers which were the major "pinch point" for Jones Act sustainability because if too few tankers were not started in construction by this year, then something would have had to happen in terms of exemptions or recrafting the regulation.
What is Happening with the US Owners? (September 2006)
September 2006--This has been a big year for announcements. Crowley is building a large fleet, Maritrans is continuing with its barge program, OSG has been in a newbuild and acquisition mode and US Shipping has entered the major league new construction business. Seacor is teasing the market with a new construction program. OSG has stunned the market with the Maritrans announcement (25 September 2006), but in hind sight, it is obvious because of the Capital Construction Funds (CCF) and OSG's outright drive for growth (Artzen, Smith and Berglund). The only thing OSG has to worry about is potentially running afoul of anti-trust rules (but then again, anti-trust has been effectively ignored for years and Kirby has set the standard quite high).
Our assessment: Watch what happens to Keystone. Does Rand/Lower Lakes sell out or continue? TECO? Seacor will continue to surprise. Kirby will also continue to surprise.
Updated: 25 September 2006
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