The United States needs to embark on a national shipbuilding and commercial shipping mobilization prioritizing nuclear-powered ships, according to Stephen Carmel, Administrator of the U.S. Maritime Administration (MARAD)
A successful precedent was the public-private partnership that mass-produced Liberty and Victory ships that helped win World War II, he said.
Carmel spoke to an audience of maritime executives, union leaders, port executives, maritime educators, maritime academy cadets, and U.S. Navy and Coast Guard officers at the San Francisco Bay Area Maritime Summit organized by Congressman John Garamendi (D-Ca).
The event took place at the Cal Poly Maritime Academy campus at Vallejo, California, on September 10th.
Congressman Garamendi and the SHIPS Act
Congressman Garamendi opened the summit by saying the United States was on the cusp of a great change: “We are going to make the American maritime industry, once again, a key part of America's economic and national security future. All of you have been at this, perhaps all of your career, but we're on the cusp of the change. It's happening as we gather here today.”
Garamendi warned that the United States has allowed its shipbuilding and commercial shipping capability to decline to the point that: “The risk was that we could not … meet the need that the military would have if there were to be an event in the Pacific.”
Garamendi, a co-sponsor of the SHIPS Act, which supports building a fleet of new American ships, expressed the hope that the legislation would be enacted by the end of 2026.
House lawmakers have approved “an amendment adding portions of the previously stalled SHIPS Act proposal to their draft defense policy bill, marking a tactical pivot among the proposal's bipartisan co-sponsors who previously introduced the maritime-focused legislation as a standalone measure,” according to Inside Defense.
Carmel Calls for Nuclear-Powered Ships
MARAD Administrator Stephen Carmel followed Garamendi, calling for a national shipbuilding strategy emphasizing nuclear-powered ships.
He said prioritizing U.S. cargo is key and would have to be assured by low-cost ships derived through mass production that would lower unit costs similar to what happened with the construction of Liberty and Victory ships built during World War II.
He explained: “In the Second World War we did better because we began with something we do not possess today, a broad industrial base that could be converted and expanded. Even then, wartime merchant programs required nearly 5,800 ships and an emergency workforce of 1.7 million people. The lesson was never that America could summon fleets from thin air. The lesson was that mobilization succeeded because there was an industrial system already available to mobilize. A system has to work before the crisis. You cannot surge what does not exist; you cannot sustain what you do not use. That truth matters now because the maritime world does not change in a straight line. From time to time, technologies arrive together and reorganize the entire system. Each great transition has two hats: a new way to move cargo and a new way to move information.”
To support the transition, Carmel proposes building a new fleet of commercial ships powered by nuclear energy: “Nuclear propulsion can change physical constraints that have governed maritime transportation for more than a century. Artificial intelligence can optimize the network whose complexity exceeds the capacity of any human planet. The leapfrog that we will achieve is not the reactor. The leapfrog is a new architecture of trade the reactor enables. Put them together and old assumptions stop being fixed. Speed and range become different questions.”
Because nuclear-powered ships can operate without being refueled, unlike current ships fueled by heavy fuel oil and diesel, the new ships will be able to operate with less downtime, thus reducing transit times and enhancing profitability for carriers and shippers: “Economies of scale are upended as what counts as scale moves from size to velocity. The relationship between fuel and cargo changes. Direct calls can compete differently with transshipment, routes can move, inventory can move faster. And let's just think about what that means for just a second. At any one time, there is on the order of 1.5 trillion dollars of cargo at sea … imposing hundreds of millions of dollars in inventory carrying costs every single day. Removing just one day from average transit time could free roughly 50 billion dollars in working capital and save a global economy about 10 billion dollars annually one day. When speed is free, returns are enormous. Ports that were peripheral can become central. Goods that were uneconomic to trade can enter the market; cargo that flies may shift to the ocean. Industry already optimizes brilliantly within constraints set by fuel costs.”
Carmel recalled the failure of the first American nuclear-powered merchant ship, the Savannah, which failed commercially because it lacked the regulatory, insurance, and safety collaboration of the maritime industry: “The next American nuclear merchant ship must not sail as an isolated demonstration. It must sail between prepared ports under accepted rules with insurance financing, trained crews, qualified yards of fuel cycle cargo and another ship coming behind it, another ship behind that and another ship behind that. A ship without a system is an experiment. A ship inside a system is an industry, and this time we intend to build the industry.”
Carmel said the United States cannot succeed by going head-to-head with China, but by leapfrogging ahead with new technology: “China took roughly 63% of global shipbuilding orders last year. The United States took less than 1%. China has spent decades constructing a system optimized around scale, state-directed, capital-dense manufacturing clusters and enormous yards. Competing ship for ship and yard for yard will mean competing on China's terms at China's choosing. America has won its greatest victories another way by changing the terms of competition. “Carmel urged that Congress support a new framework for the new system, and we must do it in the American way through an economy of high wages, high productivity, advanced technology and expanding opportunity.”
That framework must start with a solid foundation: cargo: “If we want ships, we need cargo. If we want shipyards, we need fleets. Cargo is the first turn of the flywheel because predictable cargo creates credible revenue, and credible revenue is what capital can finance. That is why cargo preference must be more than a statute on paper. It must be a promise the government keeps. It is why the Maritime Security Program, the Tanker Security Program and expanded Cable Security Programs matter.”
Carmel is also proposing a reindustrialization of the Great Lakes region: “We will rebuild the Great Lakes as America's fourth coast where American cargo can sustain serious production of American-built ships.”
Title XI Loan Guarantees
The current MARAD Title XI loan guarantee program must change: “The Title XI program must become a bridge from public commitment to private confidence in repeatable financing of an American commercial fleet. The goal is not permanent dependence on a federal guarantee. The goal is to teach American finance to price a ship again until the guarantee is no longer needed. This is why we are right now rebuilding Title XI to make it broader, faster, a real shipbuilding financing, a shipbuilding and ship financing instrument. Insurance must move with finance, especially for nuclear propulsion.”
This is critical to avoid the danger of a nuclear-powered ship: “No port will admit no underwriter will cover, zoning and drawing. Liability insurance and port access are not secondary details. They are the operating architecture, and we are building them before the first keel is laid.”
Carmel said that MARAD’s support of new Marine Highway shipping that can carry cargoes between US ports on US. built, manned, and owned ships via the Jones Act can enhance US maritime cargo capacity and support new shipbuilding initiatives.
