The US shipping industry is upbeat once more following the fallow years that immediately followed 9/11. Even Wall St views the industry with growing optimism.
There is a great deal of optimism in American shipping. Business is good. High freight and tanker rates have given many a shipowner a spring in the step, and there are great expectations for the LNG sector. And the cruise industry? Well, after entering the mercantile doldrums immediately following 9/11, the industry is once more riding the crest of a wave, with new ship orders and fully booked cruises. It is no surprise then that Wall Street gazes upon the shipping industry with starry eyes!
Overseas Shipping Group's head Morten Arntzen says the Wall St interest is because "It is a growing and consolidating industry with a great number of serious public companies with a focus on safety and quality. The stock market has woken up to this and is following the industry much more attentively now."
Tax incentives
He is not alleging there is no more 'gambling' or firms that are simply playing with assets. But, on the whole, companies are more serious and think more long-term than ever before. The values of both ships and shipping companies have risen in line with this and, at the same time, earnings have been good and profits tremendous. In addition, the US has introduced tax schemes that are more beneficial to shipping.
Arntzen refers to the US Senate approval in October 2004 of the restoration of the deferral of foreign-source shipping income for US shipping companies. The House of Representatives approved the same legislation the week before and President Bush signed it into law in November as part of the Job Creation Act of 2004.
"This means that companies like the Overseas Shipholding Group (OSG) will no longer be burdened with a 35% tax disadvantage when competing with the rest of the tanker world," says Arntzen.
More Jones Act ships
The legislation, which came into effect on 1 January 2005, also includes a tonnage tax arrangement for US Flag shipping, but had this already been in effect, OSG would have saved some US$95 million in taxes during the first three quarters of 2004.
The US Administration is also looking at proposals to sanction more Jones Act ships in an attempt to safeguard the shipbuilding industry from the effects of the wars in Iraq.
During the recent one-day seminar Shipping Without Borders, Morten Arntzen discovered that the wars in Iraq had left US shipping vulnerable. It was highlighted that the US-flagged fleet is too small and vulnerable to meet future needs. Several measures have therefore been proposed in order to build ships in accordance for both the Jones Act domestic trade and special schemes aimed at building ships for international trade that, if necessary, can be placed at the disposal of US Forces.
OSG alone plans to build 10-15 ships in accordance with these schemes and this, together with the takeover of Greek tanker company Stelmar and an order for four ships to transport LNG from Qatar, means that OSG will have a fleet of well over 100 ships.
The Jones Act requires that ships for the US have to be built in the US and have to have indigenous crews. This is expected to result in an upswing and renewed optimism in the troubled US commercial shipyard industry.
Those who attended the recent seminar were "extremely positive" about the developments and trends in the US. Speaking at the seminar was Robert Malone, the CEO of BP Shipping, about whom Arntzen said: "He left no doubt that BP Shipping is a company that is aware of its responsibilities. And fortunately, many of the other players in the industry share Bob Malone and BP Shipping's views on 'seriousness and professionalism'. Only serious companies can survive in this setting."