SIC 3731 Ship Building and Repairing
SIC 3731
This category covers establishments primarily engaged in building and repairing ships, barges, and lighters, whether self-propelled or towed by other craft. This industry also includes the conversion and alteration of ships, and the manufacture of offshore oil and gas, well drilling and production platforms (whether or not self-propelled). Establishments primarily engaged in fabricating structural assemblies or components for ships, or subcontractors engaged in ship painting, joinery, carpentry work, and electrical wiring installation are classified in other industries. Boat building and repairing are excluded as they are in a separate category, SIC 3732: Boat Building and Repairing.
336611
Ship Building and Repairing
The U.S. shipbuilding industry has two sectors: commercial and military. Since the mid-1970s the commercial shipbuilding has fallen off as international competitors have taken over the market. The United States holds just 1 percent of the global merchant marine with approximately 425 ocean-going vessels of 1,000 gross tons (GT) and over. The U.S. Navy, with a fleet of 288 in 2005, is by far the largest customer of the U.S. shipbuilding industry. Military naval spending during the 2000s was significant but relatively flat, and there were concerns building in the mid-2000s that the federal government may reduce or delay spending on marine vessels. In 2003 the industry's total shipment values equaled $13.41 billion and the industry employed more than 85,000 workers.
In the mid-2000s South Korea and Japan were the global leaders in the shipbuilding industry, with South Korea holding approximately 43 percent of the world market and Japan holding about 29 percent. During the first half of the 2000s China began investing heavily in the industry and had increased its market share to 18 percent by 2003. Thus, the Asian market accounts for 90 percent of the annual gross tonnage. According to the Maritime Administration, U.S. shipyards delivered four commercial vessels and four military vessels during 2003.
With the end of the cold war in the early 1990s, the U.S. military industrial base began shrinking dramatically, as did the nation's shipbuilding industry, dependent as it was on defense orders. This situation made it all the more imperative that a means was found to get the U.S. industry moving in another direction. In January of 1990, an American shipbuilding concern received the first order for a commercial oceangoing vessel since 1984. Ship owners, including American companies, favor foreign shipyards because of cheaper prices and faster order turnaround time. The Merchant Marine Act of 1920 (commonly known as the Jones Act) does require that all intercoastal traffic must move in U.S.-built vessels, but government subsidies in Japan, Korea, and Germany ranged from 20 percent to 30 percent of the cost of the ship, enabling these builders to capture almost all of the commercial shipbuilding business.
With the lockout of U.S. shipbuilders from the commercial market in the face of government-subsidized competition, the U.S. shipbuilding and repair industry suffered. The number of active U.S. shipyards fell from 229 in 1984 to 93 in 2003. U.S. military expenditures vary from budget to budget and are continuously subject to funding cuts and delayed implementation. However, military procurement is the main and significant source of shipbuilding revenues for the industry's largest military contractors, Northrop Grumman and General Dynamics.
The United States has four shipbuilding regions: the Atlantic Coast, Gulf Coast, Pacific Coast, and Great Lakes. All four have capabilities to construct commercial and military ships. The Great Lakes yards, however, can only export ships that fit within the constraints of the Welland Canal and the St. Lawrence Seaway. For this reason, Great Lakes shipbuilding employment is only a small percentage of the industry total in the United States. The Atlantic Coast has the largest percentage of total employment, followed by the Gulf Coast, with the Pacific Coast third.
In the United States, most major shipbuilding yards are owned by conglomerates or large corporations. One of the problems with this type of alignment is that it places the shipbuilding division in competition with other divisions of the corporation for investment dollars for expansion, modernization, or other purposes. With an average return on equity of 6 percent in the shipbuilding industry, shipbuilding divisions have been losing the fight for corporate resources. An argument on behalf of this structure is that the parent corporation may have more success in obtaining favorable financing than a relatively small subdivision would have if it operated independently.
The shipbuilding and repair industry is a capital-intensive business requiring extensive initial capital to enter the industry and meet subsequent outfitting and technological requirements. These factors provide substantial barriers to entry, especially since the industry is not very profitable. The protection of the Shipping Act of 1916 is important to the survival of industry members because it helps them to consistently attract sufficient cargo to cover initial outlays and fixed costs. The conference system was created to help protect this act. Through agreements enforced among the member groups, the conference system stabilized freight rates and the production of new commercial vessels. The stability of this system is necessary for individual shipbuilders to establish a cost structure and pricing policy.
As compared with the shipbuilding industry overseas, there has been relatively little cooperation among the yards in the United States. In Norway and Sweden, for example, research is sponsored jointly by the major shipyards. Other shipbuilding and shipping organizations abroad jointly sponsor computer programming and economic studies for the common benefit. U.S. shipyards operate independently as they seek contracts competitively. Limited though these exchanges may be, they have stimulated programs of research, ship computer programming, and ship construction techniques.
Despite the strong government ties to the industry of the Maritime Administration and Navy-supported programs, until very recently there was little government intervention in industry-wide planning, quotas, and other programs. This restraint reflects policies of antitrust legislation, as well as the traditions of free, competitive enterprise. Unfortunately, U.S. shipyards have been denied many benefits they could acquire from cooperation, such as the use of standard parts and components (as employed profitably by Japanese shipbuilders). Benefits could also be gained from exchanges of engineering and other technical information.
The basic production facilities of the industry are the shipbuilding positions, either shipways or docks, along with work areas, essential supporting shops, and engineering and design capability. Heavy-duty equipment is used for bending, rolling, forming, cutting, and welding plates and shapes; for forming pipe and sheet metal; and for performing a wide range of machining operations. In addition, shipyards require storage facilities—open areas for steel, piping, subassemblies, and other items requiring minimal protection; and shelters for machinery, equipment, stores, outfits, and other items requiring protection from rain, sun, or pilferage. Facilities for the assembly of heavy steel include large cranes and handling and conveying equipment. The shipyard also must have piers where the ships can be outfitted after launching. These piers are equipped completely with service facilities such as fire mains, electrical power supply, compressed air, and fresh water.
Ship repair is a sustaining element in the maritime industry. It has enabled many shipbuilders to ride the storm in a capital-intensive and cyclical industry. Selection of a repair facility depends upon the magnitude and type of work, the preference of the ship or boat owners, and the proximity of the repair facility to the ship or boat. Periodic and emergency maintenance and repair work are essential to keep vessels operable. During the 1990s, a report by Ocean Shipping Consultants, an industry trade group, predicted a positive outlook for the repair industry. This trend can be attributed to the aging fleet of operational ships and the decision by ship owners to extend their useful life.
Repair crews also are called into action when it becomes necessary to use merchant and naval ships from the reserve fleets located strategically on Atlantic, Gulf, and Pacific coasts. All vessels must also undergo special surveys every five years in addition to regular repairs for them to remain seaworthy. Economically, many ship owners have found it more profitable to increase the life of their existing fleet due to the high building costs of a new vessel. The results are increased surveys and repair work for the yards. Finally, environmental issues arising as a result of accidents and oil spills put pressure on ship owners to improve maintenance standards.
A critical requirement for a successful repair yard is its ability to meet schedules and complete work rapidly and satisfactorily. Many shipbuilding facilities have repair yards capable of dry-docking vessels of 400 feet or more. In 2003 there were 28 major ship repairers and 37 topside ship repairers, according to the Maritime Administration. These firms handle a majority of the repair dollar volume, with the rest going to smaller docks or pier facilities. The remaining shops do special or limited repairs...
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