Building boom: North Pacific fleet makeover will generate billions

There’s a big catch in the Port of Seattle, and it has everything to do with fish and ships.

“Maritime is everything in Washington. Statewide, the economic impact is in the billions. It’s a huge contribution, but it’s hidden in plain sight. So we started the Washington Maritime Federation to tell that story,” explains Mark Gleason who now directs the group having come over from the Alaska Bering Sea Crabbers nearly six months ago.

“Almost all, if not all, the catcher-processors are here. That distant-water fleet is a huge contributor to the economy here, but people don’t know about it. In fact, nobody had really sharpened their pencils and dug deep to understand the value of our fleet. So with the Port of Seattle, we commissioned the McDowell Group to create a report,” said Gleason.

That mammoth undertaking, released in conjunction with Pacific Marine Expo in November 2016, for the first time put all the numbers in one place — the type of boats fishing, fishery revenue potential, and vessel operational costs among many other categories. Also hidden in plain sight in the report that lists out just about every variable involved that makes up West Coast fishing was a hard realization: The North Pacific fleet is getting old and will need to be modernized for the sake of safety.

It’s estimated that more than 5,000 boats greater than 30 feet fish the waters commercially off Alaska. Of these, 400 boats greater than 58 feet have federal permits, yet they average 40 years old. Because some of these boats range from 98 feet in the case of smaller trawlers to more than 400 feet for processors, the greatest economic boon for shipyards will be among these boats. And with stakes in the billions, there’s going to be some major competition not just from Washington state and West Coast yards, but in other parts of the country, as well.

New boats are sexy, but maintenance keeps the yards going.” — Mark Gleason, WASHINGTON MARITIME FEDERATION

“The fleet modernization is already underway, but it’s been quiet. Around 35 to 37 percent has been completed at Puget Sound shipyards. But I think it’s a realistic expectation to capture 50 percent of that business,” said Gleason. “That’s not to take anything away from the Gulf of Mexico yards. They build great boats. But we have the physical capacity and brain power to do it here, and I think we can be competitive.”

The newest boat coming to Seattle, having been built by Eastern Shipbuilding in Panama City, Fla., is the Araho, a 194-foot catcher-processor owned by O’Hara Corp. based in Rockland, Maine. Having transited through the Panama Canal, she will berth at Pier 91 in Seattle and be outfitted with new trawl doors to catch groundfish in the Bering Sea. Although not as sexy as a local boat launch, and not as lucrative to a local yard hoping to win the build contract, outfitting her locally is still money in the bank for the Washington economy.

Conversely, the 191-foot longliner Blue North was built at Dakota Creek Industries in Anacortes, Wash., and delivered in the spring of 2016. Although designed by Skipsteknisk AS in Norway, that boat was a boon for the economy and local morale. However, while it may seem counterintuitive, big builds like the Blue North are not where the greatest economic value of the shipbuilding boom is predicted over time.

“Blue North is a beautiful vessel. But a yard builds it one time. What keeps a yard going over time? Maintenance. New boats are sexy, but maintenance keeps the yards going,” says Gleason.

That may be true, but to get to that point, there are still many, many boats that need to be completed first. Here are some numbers: Since 2000, nine freezer-longliners or Amendment 80 boats have been built or significantly overhauled. If all of these were only Amendment 80 boats, that only replaces half the fleet, which was built an average of 37 years ago.

In fairness, the fleet was delayed in making significant upgrades until 2012 with the passage of the North Pacific council’s Amendment 97, which removed a major blockade to replacing Amendment 80 vessels. Creating a way to maximize their catch without increasing capacity or catch limits allows owners to apply multiple permits toward a new, state-of the-art vessel.

O’Hara is replacing both the Defender and the Enterprise with the new Araho. The 268-foot trawler being built for Seattle’s Iquique U.S. at Eastern Shipbuilding will replace two of its four Amendment 80 boats. Fishermen’s Finest is doing a one-for-one swap of an A80 boat.

Their new 262-foot America’s Finest is being built at Dakota Creek Industries and is scheduled for delivery in November 2017. And finally, proving the economic impact isn’t just keel up construction, U.S. Seafoods had a 230-foot ex-Navy vessel repurposed in 2016 at the cost of $30 million, which is less than half of the $65 million to $85 million estimate to build a new catcher-processor, according to the company.

Not all new boats cost that much, of course, though some cost even more. The top end to replace the biggest floating processors comes in around $130 million, but keep in mind they have an average gross revenue of $16 million per year. A little farther down on the spectrum, Bering Sea/Aleutian Island trawlers might cost $15 million to replace, while bringing in $2 million gross per year, on average.

With numbers like that, companies don’t exactly stroll into their local bank and ask for a loan. It’s a complicated process and often requires the assistance of the federal government and various programs already on the books. Washington state Rep. Gael Tarleton represents Seattle’s historic Ballard shipbuilding district and is putting forward a bill that would provide tax credits to qualified vessels and a manufacturing credit to shipyards to help them stay competitive. That savings, it is hoped, would be passed on to the fishermen.

For crabber and small trawler owners, this could come as welcome news. Both types of vessels have generated little interest in modernization until recently, in part because their annual earnings are relatively small compared to the cost of a new vessel. Compounding this block is that the most common terms for a new vessel loan is less than 12 years with an APR of 5 to 7 percent. And loans become harder to get when there is no asset other than the vessel to hold as collateral.

“We are working with state and local leaders to make sure financing is realistic to the fisheries,” said Gleason, who is also working to educate the banking community on the importance of the fishing industry to the local economy.

A full dock at Fishermen's Terminal in Seattle is a reminder of the fleet's value to the local economy. Doug Stewart photo.

A full dock at Fishermen’s Terminal in Seattle is a reminder of the fleet’s value to the local economy. Doug Stewart photo.

But even without new incentives, an estimated $1.6 billion in modernization projects will be completed within the next 10 years. Estimates put the total effect on the Washington economy over this time at $785 million and predict up to 750 new jobs with approximately $40 million to $60 million in wages.

To make sure there is a workforce in place, development initiatives are already underway, and not just in vocational schools, but starting in the K-12 curriculum.

“We are investing in our workforce and making sure we have that next generation in the pipeline, so the younger kids have somewhere to work. Not every kid is going to go to college. But it’s important to know we can provide good family wage jobs in Washington state without a college degree,” explains Gleason.

That labor force won’t be limited to shipbuilding, as other fleet improvements include the upgrades of Pier 91, Fishermen’s Terminal and Harbor Island.

“And don’t forget, we also have a huge tug and barge fleet and extensive passenger ferries,” adds Gleason. “We’re going to need a lot of qualified people.”

About the author

Jean Paul Vellotti

Jean Paul Vellotti is the Boats & Gear editor for National Fisherman.

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