Over the past year and a half, the Port of Los Angeles has been working with a Long Beach-based firm that seeks to redevelop and reopen a shuttered ship building facility at the port.
Gambol Industries has proposed spending $50 million to convert the now-closed Southwest Marine shipyard into a state-of-the-art, union-staffed ship building facility that would seek to build large commercial vessels.
Gambol has also promised 500 to 1,000 blue-collar jobs when the proposed facility is fully operational. With the average wage of a United States production worker in the shipbuilding trade hovering close to $20 an hour, according to Department of Labor statistics, this could be a lifeline for many in the union trades in the bleak Southern California employment market.
Despite efforts in the early 2000s to bring a shipyard to the neighboring Port of Long Beach failed for lack of believable business plan by applicants, Gambol claims that it has not only the investment but a business plan that will guarantee success.
But, is there the business to support a new large-scale ship building facility in Los Angeles?
Southwest Marine, the previous operators of the Los Angeles facility, shuttered in 2006 after trying to make a go of it for nearly 25 years.
And over the past 40 years, the West Coast has seen shipbuilding facilities vacate at a staggering pace.
There are currently six major, or first-tier, shipbuilding yards in the United States. These are facilities categorized as fully developed, large shipyards building large naval combatants and/or deep-draft, ocean-going merchant ships. Only one of these, General Dynamics-NASSCO in San Diego, is on the West Coast.
In addition, there are currently 14 so-called second-tier ship building yards in the US. Second-tier facilities are categorized as well developed, mid-to-large sized shipyards capable of building mid-sized to large merchant and naval vessels, offshore drilling rigs and high-value, high-complexity smaller vessels. All but one, Todd Pacific Shipyards in Seattle, are located in the Gulf, East Coast or Great Lakes regions.
There are also 77 active small ship builders nationwide, each specializing in building smaller commercial vessels, such as tugs, towboats, offshore service vessels, fishing vessels, ferries and barges. Only 14 of these 77 are located on the West Coast and of these, only one – fishing boat builder Van Peer Boat Works in Fort Bragg – is located in California.
Since the 1970s, 45 West Coast ship building firms – including one first tier, 10 second tier, and 34 small yard operators – have either gone out of business or reverted to ship repair-only facilities.
This means that in the past four decades, the number of ship building yards on the West Coast has declined by 78 percent from 71 facilities to 16 – leaving only a single fishing boat builder left in California.
And the kind of contracts that Gambol envisions are not exactly overflowing the in-box of shipbuilding firms. Last year, only five major cargo vessels were delivered from US yards. These were built by two shipyards – NASSCO and Aker Philadelphia. In fact, the total US output of commercial oceangoing vessels has not risen above ten vessels a year since 1983. All told, a total of 33 oceangoing cargo vessels larger than 10,000 dwt have been built at US yards in the past decade, most at Aker and NASSCO.
While it is certain that there is business out there for a small shipyard that is efficient and can sell itself, there appears to be almost no market for a shipyard seeking to build major commercial vessels, as Gambol has said it envisions doing in Los Angeles.
And the news is not just bad for cargo vessels. Currently, only one US-built cruise ship – completed in 1958 – is operating in the world cruise ship fleet (of vessels over 10,000 dwt). All of the nearly 20 large cruise ships currently on order worldwide are being constructed in Germany, Finland, or Italy.
Also worth mentioning is that one of the major reasons for the large WWII ship building development at the ports of Long Beach and Los Angeles was close proximity to Henry J. Kaiser's steel mills in Fontana, California. Kaiser also had similar facilities near the Bay Area shipyards to provide steel. None of these facilities, or others like the U.S Steel plant in Utah, exist on the West Coast today. Steel for any new vessel would have to be shipped in, either via rail or via ship, and most likely from outside the United States.
China currently produces more than 40 percent of the world's steel and is the world's largest exporter of steel. The four major world steel exporters – China, the European Union, Japan, and Russia – account for 70 percent of the world's steel production. Meanwhile, US steel production has dropped by nearly 50 percent since 2007. While the US still boasts more than 50 sizable steel producing firms, the two largest – US Steel and Nucor – don't even rank in the top 10 largest steel producing firms in the world (by production tonnage), coming in at 11th and 14th respectively.
In addition, the facility Gambol envisions using is not in the best of shape.
Originally built during World War I, the facility received a major upgrade during World War II and another, its last, back in 1959. The ten or so buildings on the facility are World War II-vintage structures and none of the facility's numerous dry docks and construction finger slips that cranked out more than two dozen Navy destroyers in WWII exist today. Even taking into account Gambol's proposed plan to invest $50 million in the facility, the bottom line is that the facility, for all intents and purposes, has remained virtually unimproved for more than 50 years.
And with the Los Angeles City Council's decision on Tuesday to uphold the port's position that the shuttered facility's two slips must be filled in to meet the schedule of a needed port dredging project, Gambol is now in search of a new location at the port.
In reality though, the only place available in Los Angeles is the Southwest Marine location. There is no doubt that Gambol's $50 million investment proposal was built upon taking over a facility that at least had the structural skeleton of a shipyard – with slips, crane ways and buildings – in place. Without this skeleton, Gambol would have to recreate it elsewhere, undoubtedly at much greater cost and effort.
Tuesday, February 1, 2011
