SHIPPING: War Boom

Not since the days of proud, fast Clipper Ships has the U.S. shipping industry looked as rosy as it did last week. Two years ago it was kept afloat only by Government subsidies averaging $12,500,000 annually. Now the U.S. merchant marine .is making money and the Government dole has been cut to only $125,000 annually.

Biggest single reason for this startling recovery is that for the first time since about 1860, the U.S. merchant marine is hauling the bulk of U.S. foreign trade. Before World War II low-cost foreign ships carried at least 70% of U.S. overseas exports and imports. Now British and Allied vessels are busy on Empire routes; most Axis-owned or controlled bottoms have been driven off world trade routes. Furthermore, total U.S. foreign trade is booming. In the first six months of 1941 U.S. exports rose 36% over 1939, imports jumped 42%. Hence U.S. shipowners get a bigger cut of a bigger pie.

To get this cut the ships make longer voyages than ever before. Scores of U.S. freighters ply routes new to them—around the Cape of Good Hope, for example, and into the Red Sea, with airplanes, tanks, guns and food for Allied forces in Africa. Others plough the Pacific to Australia, India and the Straits Settlements, come back deep-laden with rubber, tin, wool, hemp. For its trade links with Latin America, the Good Neighbor program must depend on U.S. ships.

Meanwhile ocean freight rates have soared, further boosting revenue per sea mile. Rates on six basic commodities (see chart) are 50% above last year, 110% above 1939. Charter rates on deep-sea routes now average $7 to $8.25 a ton a month v. $1 to $1.75 before the war. Hence many a coastwise shipowner has chartered (or sold) most of his vessels, practically retired to a life of Scotch and bridge at the Propeller Club.*

In this sellers’ market shipping profits have been easy. Five big publicly owned operators cleared $4,967,000 in 1941’s first six months, highest ever and 200% over last year. Speculators have not overlooked shipping stocks, last week pushed them to the highest level since 1931 (see chart).

In Washington this week, Congressmen hauled out the old Neutrality Act, prepared to rewrite the sections keeping U.S. merchantmen out of the war zones (see p. 77). If these provisions become law, U.S. overseas shippers will 1) get more cargoes at still higher rates, 2) have their ships completely armed and convoyed at Government expense. They will also have to make slower (because convoyed) trips. But with new Maritime Commission ships becoming available to them at the rate of about one a day in 1942, overseas ship operators should still make plenty of money.

* Because Maritime Commission terms discourage them from buying new ships, coastwise and intercoastal shipowners have to charter or sell their vessels to cash in on the overseas shipping boom.