Don’t waive the Jones Act — scrap it, by Bloomberg News

Keene Sentinel

Another domestic energy crisis, another waiver of the Jones Act. –

In response to the ransomware attack on the Colonial Pipeline, which delivers about 45 percent of the fuel for the Eastern Seaboard, President Joe Biden’s administration said that it would allow two exemptions to the 101-year-old act, which restricts waterborne commerce between U.S. ports to ships that are built, crewed and owned by Americans. Citgo Petroleum Corp. and Valero Energy Corp. now have permission to use foreign vessels to transport oil products between the Gulf Coast and the East Coast

Hurricanes forced previous presidents to suspend the law to ensure deliveries of food, fuel and other goods. This time, Biden should face reality and bury it under the waves.

As with most protectionist measures, the Jones Act harms the very people it purports to help. Because oceangoing Jones Act-compliant ships are more expensive, and there aren’t that many of them, the law leads to higher prices for goods, more congested roadways and pipelines, and additional pollution from greater reliance on carbon-intensive transportation.

Its market-bending distortions could scarcely be exaggerated. As a direct result of the law, refineries on both coasts can find it cheaper to import foreign oil than to use domestic sources. Refineries in the Gulf Coast choose to send their products to Latin America instead of the East Coast. The U.S. may be a natural gas powerhouse, but it has no Jones Act-compliant liquefied natural gas carriers, which would cost two to three times as much as equivalent ships from South Korea. So Puerto Rico and Hawaii source their LNG from overseas, northeast ports look to Trinidad and Tobago, and U.S. natural gas goes abroad.

The act is even undermining the Biden administration’s vaunted green-energy plans. Offshore wind projects need Jones Act-compliant turbine-installation vessels. Right now, the U.S. has one — under construction, that is, and due to launch in 2023 at a cost of $500 million. Hitting the administration’s goal of 30 gigawatts of offshore wind-energy production by 2030 will require more vessels, which the law will only make more expensive.

It would be one thing if the Jones Act met its stated goal of sustaining a robust merchant fleet. But the number of Jones Act-eligible U.S. vessels in 2019 was 99, versus 193 in 2000. From 1960 to 2014, even as U.S. output more than quadrupled, the tonnage of domestic contiguous coastal shipping dropped by 44 percent. America’s few remaining commercial shipyards are expensive and superannuated: Indeed, some companies that shamelessly defend their Jones Act monopolies send their ships to China for repairs, which is cheaper even with the 50 percent tariff that they pay the U.S. government for the privilege.

The Jones Act survives because it supports the narrow interests of a handful of shipping companies and maritime unions, which pump out a reliable stream of campaign cash to the Congressional Shipbuilding Caucus. Never mind the costs to all Americans — especially those in Alaska, Hawaii and Puerto Rico, who depend heavily on maritime commerce.

There are better ways to build up coastal commerce and the maritime industry, from investing in neglected port infrastructure and public shipyards to changing the tax treatment of U.S.-flagged ships. Yet the Biden administration seems committed to preserving the Jones Act, whatever the consequences. Here’s a question for the White House to ponder: If this law is so successful and so vital, why does it so often need to be waived in cases of emergency?

Special Report: Hawaii Shippers Council on issues facing maritime industry

Pacific Business News
By Brian McInnis –

Worldwide ocean cargo shipping is playing catch-up from coronavirus-related delays at various ports, especially on the West Coast of the U.S. Mainland, but so far Hawaii has been largely insulated from additional costs.

That’s per Michael Hansen, president of the Hawaii Shippers Council, who spoke to Pacific Business News last week about trends in his industry. Hansen has been in the maritime business in Honolulu in various capacities since the early 1970s. He grew up surrounded by cargo containers; his father and both grandfathers were in the maritime industry, too.

The HSC was founded in 1997 on behalf of merchant cargo interests, or shippers, who entrust their goods for transport with ocean carriers. It was formed to support the Jones Act Reform Coalition, but also as a result of runaway costs of cargo ship construction in the U.S. as compared to peer nations, Hansen said.

The imminent threats of the day have changed.

Hansen identified a three-pronged issue as the main concern in Trans-Pacific shipping in early 2021: port congestion, which means backed-up quantities of ships and containers, due in part to a coronavirus-related workforce shortage, and in part by a surge in consumer spending; a shortage of containers in places like Asia as a consequence of them not being returned; and ship capacity shortcomings as urgency mounts to get cargo moved.

San Pedro Bay, which services the important hubs of the Ports of Los Angeles and Long Beach, has been especially affected by a backlog. Information attained from the Marine Exchange of Southern California by showed 46 ships at anchor there in January, twice the count of January 2020.

Hansen said the situation was similar at another primary West Coast port, Oakland/San Francisco Bay. He noted, however, that Hawaii’s two primary carriers, Matson and Pasha Hawaii, employ a fleet of smaller ships with mostly designated docks that allow them to bypass delays felt by other carriers. Matson, the publicly traded of the two companies, declared $193.1 million in net income in 2020, as compared to $82.7 million in 2019, spurred by heavy volume of service to China during the pandemic. Meanwhile, its container volume to Hawaii was down 0.6% in 2020. What is the consequence of the port congestions and container shortages, and how long will it last?

As a result, cargo freight rates, Eastbound and Trans-Pacific, have gone from around $2,000-$2,500 up to $4,500 for a 40-foot dry standard box. And there’s major container operators now saying, everyone is anticipating these conditions are going to last through midyear this year — at least. The big question is, will it continue long enough to actually [last into] the annual peak period prior to Christmas? In August, you start seeing cargo volumes increase for the Christmas season.

If that happens, the [carrier] companies will make lots of money, and freight rates will remain high. From what I can gather, freight rates on the Jones Act [domestic] side haven’t gone up that much, but certainly freight rates on the international side have risen substantially. How is this being felt in Hawaii?

Those freight rate increases on Trans-Pacific routes will be passed on to customers on the Mainland, there’s no doubt about that. But in the domestic Hawaii trade, we have not yet seen those kinds of major price increases in the freight rates.

The Jones Act freight rates are a whole lot higher than foreign flag freight rates, so we’re starting from a much higher level. But at some point I would expect [it could change]., depending on how long this situation of capacity shortage continues to exist. While we haven’t seen many problems or much movement in the freight rates in the Pacific domestic trade — Hawaii, Guam and Alaska — this is something that is certainly lurking in the background. Have people seen delays in getting things shipped here?

Matson, because of its unique position with dedicated terminals on the Pacific Coast, has been able to avoid these types of disruptions. And this is a major sales point for their Trans-Pacific service, because they guarantee they can deliver the cargo to the customer, and therefore charge more for freight.

Pasha, like Matson, operates relatively small containerships in the Hawaii trade — 2,300 to 2,400 TEU (20-foot equivalent units) capacity. While in the Trans-Pacific, containership capacity per vessel is approaching an average of approximately 10,000 TEU per vessel.

In 2020, the cargo volumes in Alaska and Hawaii are a bit depressed from 2019 levels. So we don’t have a capacity problem yet. That could change in the domestic trade once the lockdowns are over and the economy starts to open up again. That could be a definite possibility.