Business of Shipping: Smooth Sailing Ahead for Jones Act Operators

oil tanker at sea
By Igor Karasi / Shutterstock

By Ira Breskin (Business of Shipping) – It should be smooth sailing for the foreseeable future for operators of large Jones Act vessels, speakers said last week at the 32nd annual Marine Money Conference in New York.

The placid market forecast assumes that the supply-demand balance will remain largely intact. That’s because there is a paucity of new tonnage—either being built or on order—to serve what should be stable demand from this protected market for tanker and container ships, said Pal Lothe Magnussen, president and CEO, American Shipping Co. ASA.

AMSC owns nine product tankers and a shuttle tanker that it bareboat charters to Overseas Shipholding Group Inc., a US-flagged operator.

Also, there appears to be insufficient political muscle to weaken provisions of the Jones Act, also known as the Merchant Marine Act of 1920, or to successfully push for an increased number of exemptions, panelists said.

The Jones Act limits carriage between most US ports to carriers whose ships must be built in US yards, registered in the US, crewed by American seafarers and largely owned by American shareholders.

The last Jones Act market demand-based disruption occurred in January 2015 when Washington lifted its decades-old ban on the export of crude oil. This gave foreign-flagged carriers the opportunity to haul domestic crude to offshore refineries for processing. Previously, US flagged carriers exclusively carried this crude oil between US-based refineries for processing.

Now, the only plausible, but unlikely demand surge for US-built tonnage could come from the Navy, should it seek to replace aging gray hulls in the 44 ship Ready Reserve fleet, said Will Terrill, president and CEO of US Ocean LLC. A modest number of these government-owned ships are either unfit or unable to meet rapid deployment criteria, he said.

US Ocean LLC supplies US-flagged heavylift ships to Intermarine, its affiliate.

Ira Breskin is a senior lecturer at SUNY Maritime College in the Bronx, NY and author of The Business of Shipping (9th edition), North America’s most comprehensive industry-focused book explaining and analyzing marine transportation and related industries, both domestic and international.