Maritime transportation moves about 80 percent of what the world’s economy needs to function. The historical relationship between global GDP growth and maritime trade has been consistent and does not appear likely to change. However, there is a push to transform the world’s economy from one powered by fossil fuels to one relying solely on renewable energy. This requires disrupting the centuries-long GDP-maritime growth link.
The International Energy Agency forecasts that the volumes of critical and rare earth minerals required to build the necessary equipment that will enable a “clean” energy transition must increase by four to six times the volume of 2020. The IEA ignored the global demand growth for traditional minerals critical for growing our economy, such as iron ore for steel and bauxite for aluminum. It also ignored the growing demand for agricultural grains as the world population increases and living standards improve.
Meeting the IEA’s critical minerals forecast means expanding existing and creating new supply chains. It means discovering new mineral deposits, opening new mines and building additional refineries to extract from the raw ores those prized minerals needed to make the components of these clean energy technologies. The maritime industry must overcome significant logistical challenges if it wants to deliver to market the staggering increase in mineral volumes required.
Growing mineral volumes will increase traffic on existing maritime trade routes and create new ones. More materials and goods being moved around the world means more ships. They, too, are constructed from materials that further increase future demand.
Expansion of the global merchant fleet faces two challenges. First, global shipyards are woefully short of capacity to build the additional tonnage needed while refreshing the existing fleet. Estimates show today’s shipbuilding capacity is 30-40 percent smaller than its last peak in 2011. Furthermore, projections of the annual tonnage needing to be delivered to handle the estimated maritime trade of the mid-2030s must be 30-50 percent greater than the 2011 peak. Therefore, providing the ships required to meet the increased maritime trade from the energy transition while keeping the existing fleet modern will require building 60-90 percent more annual ship tonnage than the industry can build today.
The global maritime industry’s second problem in adding new tonnage is its struggle to settle on a fuel decarbonization strategy. After successfully reducing global sulfur emissions from ship fuels after 2020, the maritime industry wants to reach net zero emissions by 2050. The industry is experimenting with various fuels and power systems without any definitive conclusion. This fuel uncertainty weighs shipowner decisions to build new tonnage and repower young ships. Choosing the wrong powering system and fuel could significantly affect vessels’ profitability and possibly shorten their working life.
Furthermore, the maritime industry faces the challenge of where to build the many new ships needed. In recent years, roughly 95 percent of all new ship tonnage was constructed in shipyards in China, South Korea and Japan. Europe delivers about 2.5 percent of new tonnage annually; the U.S. builds less than 1 percent. A nearly non-existent U.S. shipbuilding industry imperils our nation’s energy security in a transition. It puts us at risk of relying further on allies and non-U.S. companies for cargo capacity to meet our growing demand.
Therefore, it is incumbent on U.S. policymakers to examine existing maritime regulations. The Jones Act requires ships handling domestic cargo to be U.S.-owned, U.S.-built, U.S.-flagged and manned by U.S. crews. Policymakers should explore the steps necessary to rebuild the domestic shipbuilding machine that enabled us to win World War II.
This examination should also include determining the skills required for shipbuilding and how we can develop a strong domestic workforce. A more robust domestic shipbuilding industry is crucial for our economic well-being and critical for growing the U.S. Navy and Coast Guard fleets for national defense reasons.
The U.S. also needs to increase its mariner population to crew newly constructed U.S.-flag and U.S.-built ships. This manpower is critical for staffing the Department of Defense’s sealift fleet, which supplies and rearms our naval fleet during their worldwide missions.
We must address the twin demands of growing our commercial shipbuilding capacity along with our merchant fleet and increasing our ability to speed up military vessel construction. Meeting these demands is critical for the U.S. economy and our national defense.
G. Allen Brooks is an energy analyst with more than 50 years in the maritime and oilfield services industries. He currently serves as a senior fellow at the National Center for Energy Analytics.
