CMA CGM chairman and chief executive Rodolphe Saadé acted remarkably quickly in announcing support for American shipbuilding, after he pledged to order new ships at US shipyards yesterday.

The promise came only a day after US President Donald Trump announced to bring shipbuilding “home to America, where it belongs”, with promises of tax incentives for those shipowners willing to order ships at American shipyards.

Ordering new ships in US yards appears a smart move by the French container line giant. There is a growing likelihood that fees of up to $1.5m per port call for shipowners with China-built ships, pushed by the US Trade Representative, will become a reality by the middle of this year.

CMA CGM is likely to be looked upon more favourably than its rivals by committing to build ships in the US.

The announcement comes only a week after the company was confirmed to have ordered 12 ultra large boxships at a Chinese shipyard.      

CMA CGM is one of the few big carriers that operate a fleet of US-flagged containerships, which are a legacy of its purchase of former American-flag container line APL. 

APL no longer operates any vessels built in US shipyards, but CMA CGM has stated that it will boost APL’s American-flag fleet within the next four years, potentially from 10 ships to 30 ships.

Such a move would require the employment of at least 700 additional American seafarers, as US flag operations require a 100% American crew. This comes during a period of a US seafarer shortage.        

A 2011 US Maritime Administration study stated that US-flag crew costs were some five times higher than for vessels flagged on open ship registries.

CMA CGM might be able to the bear the extra cost by limiting its exposure to the huge financial burden of USTR port levies. But where it will source all the US seafarers to crew an additional 20 US-flag boxships has not been made clear.                              

Nevertheless, the crewing question should be an easier problem to solve than trying to build new containerships in the US.

Signing a shipbuilding contract is not a particularly difficult thing to do, but ensuring a vessel is delivered on time and within budget is going to be a challenge.

The US shipbuilding industry has been hollowed out over decades and has been chiefly dependent on one client — the US government via the Navy and Coastguard — since the early 1980s.

This followed the 1981 withdrawal of merchant shipbuilding subsidies, which offset high US shipbuilding costs versus cheaper Asian shipbuilding pricing, by the Reagan administration.

More detail on CMA CGM’s newbuilding orders is expected in the coming weeks, but so far there is no mention of how many ships, or their capacity, are expected to be ordered.

At least two American shipyards are still in the game in containership construction. Philadelphia-based Philly Shipyard, now owned by South Korean shipbuilding giant Hanwha, has orders in hand for a trio of 3,620 teu vessels for Jones Act carrier Matson.

The newbuilding contract for these vessels were signed in 2022 and was valued at an eye-watering $1bn, or at least six times higher than prevailing Chinese prices.

Other American shipyards capable of building cargo carrying vessels include the General Dynamics-owned National Steel and Shipbuilding in San Diego, with a track record in building medium range product tankers. 

Nevertheless, all appear to be tied up with long-term military shipbuilding and ship repair and have limited, or no, availability to construct a long series of merchant vessels.

Saadé’s announcement of his support for US shipbuilding was made in the Oval Office with Trump. The President stated afterwards that “we’re going to be announcing next week or the week after a massive new programme for building very large, the largest ships in the world.”

If Trump was referring to a potential CMA CGM order for giant containerships then the only US shipbuilding facility with a drydock large enough to build a boxship in excess of the current largest vessels is Norfolk, Virginia, based Newport News Shipbuilding.

But again, this shipyard is committed to naval shipbuilding construction and is presently building two giant aircraft carriers, with the possibility of 10 more being ordered over the next few years.     

Previous attempts

Previous attempts by national governments elsewhere to revitalise their merchant shipbuilding industries have not ended well. 

Brazilian president Luiz Inácio Lula da Silva pushed through a national shipbuilding strategy from the early 2000s, in a partnership with experienced Japanese and South Korean shipyards.

Backed by a plethora of orders for tankers and drilling rigs from state-owned Petrobras, the brand new shipyards managed to construct only a handful of vessels, all delivered late. The programme was ultimately shut down in 2017, with billions of taxpayers money squandered and thousands of shipyard workers thrown out of work.   

Nevertheless, Saadé’s promise to build new containerships in US shipyards is likely to be the first of many such announcements by foreign shipowners as they seek to win favour with the Trump administration, and attempt to avoid the brunt of the USTR’s massive port fees.

But actually delivering the ships, and how to fund the huge cost differential with Asian shipyards, is going to be a considerable challenge.

Providing Saadé ensures any cancellation or delivery delay clauses in the shipbuilding contracts are stacked in CMA CGM’s favour, the risk could all be on the US government’s shoulders.

While Trump’s interest in detail might be lacking, for shipbuilding contracts the devil really is in the detail.