D. Analysis of Operating Costs of Selected Dry-Cargo Operators

Examination of the operating revenue and expense statements of drycargo shipping companies in the coastwise and intercoastal trades reveals a very mixed pattern. Some companies engage in such activities as terminal, towage and lighterage, or stevedoring operations, as well as carrying freight. Some operate ships chartered from others, and some charter their ships out. Other factors affecting the operating formula include the types of ships used, the cargo consist, the routes served, the extent of participation in offshore trades, and the proprietary relationships of the operators.

The dissimilarity between operations limits the areas in which general or significant statistical comparisons can be made. With the qualification that all measurements are merely broad indicators of a general situation, however, some information pertinent to the aims of this study can be obtained from a selective analysis of certain key elements of income and expense.

The analysis that follows is based on operating data submitted to the Interstate Commerce Commission by coastwise and intercoastal shipping companies subject to regulation. While the data are open to public inspection and are, in part, published in I.C.C. quarterly and annual reports, the identification of individual companies is avoided here. Without full explanation of all the circumstances causing variations between operations, direct comparisons would be subject to possible misinterpretation.

There is an interesting general similarity of pattern in the relationships between certain key factors-labor expenses and freight revenue-among operators known to be engaged in carrying break-bulk dry cargo as an inportant part of their business. Labor expense includes shipboard wages and cargo expense and, as used here, wages include payroll taxes and welfare contributions. In the following tabulation, nine operators are listed in the order of their total labor expense ratios to freight revenue:

1953 Labor Expenses in Cents per Dollar of Freight Revenue
Nine Selected Carriers of Break-Bulk Dry Cargo in
the Coastwise and Intercoastal Trades

The general characteristics of the above pattern are a narrow range of variation in wages and a much wider range of variation in cargo expense.

Except for one operator with a wage cost of 22.8 cents per freightdollar, the range in wages is between 1.6 and 18.8 cents, or ximately four cents. The range in cargo expense, however, is from 25.1 to 57.9 cente, or almost 33 cents. It should be noted that the measurement of wages in terms of freight revenue produces doubtful results for purposes of comparison to the extent that wages are affected by chartering operations. If a company obtains freight revenue from the operation of time or voyagechartered ships, the wages are paid by the owner of the ship and are hidden in the operating statement under the heading of charter expense. The owner, however, reports wages not only for the ships he operates himself, but also for the ships he has chartered to others. In either case, the relationship of wages to freight revenue is distorted. One intercoastal operator, for ample, not included in the tabulation, operated entirely with chartered stipe in 1953, and reported a wage bill of zero. Seven of the nine operators in the above tabulation used chartered ships for part of their 1953 operatime and three of the seven also chartered ships to others in that year. The fact that there is some degree of error in the wage ratios shown is recognised, but there is no way by which the error can be measured, nor can it be determined whether the indicated range of wage ratios would be increased or decreased if the error were eliminated.

All ratios of expenses to revenues are affected also by the freight rate structure of the individual operator. For example, two companies could operate identical ships, pay identical wages in dollars, and carry identical arts of payable tons of cargo, but if one carries high-rate and the other -rate cargo, the first will have a lower wage ratio to freight revenue than the second.

The lower costs of stevedoring in foreign as compared to domestic parts is responsible, at least in part, for the relatively low cargo costs of the last operator on the list, most of whose freight revenues were frei. No conclusions are warranted as to the reasons for the variations in cargo coste shown. In summary, the above tabulation indicates that from me-half to three-fourths of total freight revenues are dispensed for crew wages and cargo expenses.

Then we examine the labor cost relationships of operators that cant be classified as break-bulk carriers we find a different and more varied pattern, as shown below:

13 Labor Expenses in Cents per Dollar of Freight Revenue
Sir Selected Carriers of other than Break-Bulk Dry-Cargo
In the Coastwise and Intercoastal Trades

'ships built during World War II. While the second World War ended in 1945, delivery of ships continued into 1946. Thus, the fleet's average age of 12 years, as of December 31, 1954, approximately equals the number of years since the midpoint of shipbuilding during the last war.

C. Nature of the Transportation Service Offered

The coastwise and intercoastal shipping industry is comprised of some seventy operators. Although a few companies have both dry-cargo ships and tankers, the companies are about equally divided between dry-cargo ship operators and tankship operators. The tanker companies, however, operate much the greater number of ships-273 tankers versus 10 dry-cargo ships as of December 31, 1954.

Nearly all tankers regularly in coastwise and intercoastal service are owned by the major oil producing and marketing companies or by independent owners chartering tonnage to the majors. A few transport firms hold themselves out to render such transportation services on a contract basis. There are no common carriers. Section 303 (d) of the Interstate Commerce Act provides that, "Nothing in this part shall apply to the transportation by water of liquid cargo in bulk in tank vessels ....." In other words, the tanker portion of the coastwise and intercoastal transportation business is essentially a private industry carrying its own goods and is exempt from the regulation of the Interstate Commerce Commission.

As opposed to the tanker operation, the dry-cargo section of the coastwise and intercoastal business is mostly one of common carriage--about one-half of the companies and about two-thirds of the ships being so engaged. The other half of the dry-cargo operators have about one-third of the ships, a few are in contract-carrier service and the remainder are in "exempt" service. Dry-cargo carriers are exempt from I.C.C. regulation if they carry no more than three commodities at a time. Such commodities are mostly coal, sulfur and fertilizer materials.

In summary, in coastwise and intercoastal shipping virtually all of the tanrurs and about one-third of the dry-cargo ships are in other than common-carrier service.

1. Prewar and Postwar Traffic. Except during World War II, when virtually all of the ships in domestic service were requisitioned by the Coverment for use elsewhere in the national defense effort, the total coastwise and intercoastal traffic has gradually increased in volume. Following World War I the total traffic increased until by 1939 it totalled 135 million tons. For each of the years 1950-1953 the total has been around 155 million tons. For these and other tonnage figures, see Table 5; for percentage distribution figures, see Table 6.

1 All cargo tonnage figures: (1) are in tons of 2,000 pounds; (2) exclude carryings in ships of less than 1,000 gross tons; and (3) exclude noncontiguous trade.

2. The Decline of Dry-Cargo Carriage. In the coastwise and intercastal trade, carryings in dry-cargo vessels have not kept pace with the traffi, in Larkers.

le 5. Cargo Carried by Dry-cargo Ships and by Tank Ships in Interroastal Commerce and in the Foreign Trade of the U. S. During 1999 and 1953--in Millions of Tons of 2,000 Pounds

Table 6. Cargo Carried by Dry-cargo Ships and by Tank Ships in Chartwise and Intercoastal Commerce and in the Foreign Trade of the U. S. During 1939 and 1953-in Percentage Terms

From a figure of forty-two million tons in 1939, dry-cargo coastwise and intercoastal carryings continually declined, reaching eighteen million tore in 1953. Tanker traffic in this same segment of trade increased from to 13 million tons in 1953. The distribution in 1939 was 31 and 69 periry-cargo traffic and tanker traffic, respectively. By 1953, the decline in dry-cargo carryings plus the increase in tanker traffic changed the distribution figures to 12 percent dry-cargo and 89 percent tanker.

Attention should be directed to the decided increase in the transpertation of chemicals and related products by liquid cargo ships. The Buvement of this commodity group, comprised mainly of coal tar and industrial icals in tanker ships, gradually increased from 650,474 tons in 1950 to -,591, 27 in 1953. The dry-cargo transportation of chemicals and related procats, consisting largely of phosphate fertilizer materials, amounted to Bightly over two million tons annually during the period 1950-1953.

3. The Decline of Cargo Carried by Common Carriers. There follows a breakdown of cargo traffic carried in 1953 in the coastwise and intercoastal trades by each type of water-carrier service.