Rouge waves and rough waters are ahead for shipping, globalization, and logistics but are boomers to blame for our woes? Captain John Konrad says yes.
OPED by Captain John Konrad (gCaptain) Container shipping stocks are collapsing as rates and demand for many cargo segments continue to rise. Recession fears are growing almost as much as new job listings. Inflation is spiraling while trucking rates collapse. China decides to print more money as the US Federal Reserve raises rates. Labor negotiations have ground to a halt. The US Navy watches as mines continue to drift around the Black Sea and does nothing to protect seafarers risking their lives to navigate ships loaded with Ukraine grain. The US Secretary of Transportation Pete Buttigieg pushes hard on electrifying the roads but hardly ever mentions ships, shipyards, or the US Maritime Administration (DOTMARAD) at all.
Buttigieg is not even willing to focus on maritime issues long enough to defend what has been the cornerstone legislation of Pax Americana for over 100 years the Jones Act.
He is not alone.
The situation in Europe, the Middle East, and Asia is even worse with chaos in the Black Sea, pipeline explosions, and rising tensions in the South China Sea. A global drought threatens to close the world’s most carbon-efficient means of transportation as waterways and lakes are evaporating worldwide. Germany is selling some of its busiest terminals to China as Chairman Xi continues to harass Taiwan. Fights over the transport of oil continue as new ones emerge over the transport of the millions of tons of copper, lithium, and precious metals needed to improve corporate ESG and build a new electric grid for millions of trucks and railroads. Meanwhile, the US Navy currently scores very weak and doesn’t have enough warships to protect all the world’s oceans. It doesn’t have defensive ships either. The US Navy no longer has even a single fireboat to protect its own ships from fire in San Diego and it repeatedly underfunds both Military Sealift Command and Secretary Buttigieg’s DOTMARAD “ready” reserve fleet which recently achieved a Cumulative Fleet Success Rate of only 40.7 percent.
Cargo is no longer king, confusion is.
All of this reminds me of the Bill Murray quote from Ghostbusters “Human sacrifice! Dogs and cats living together! Mass hysteria!”
But that quote is misleading as it assumes Hollywood and the media care about shipping. They don’t. Despite the due to the worst energy crisis, the worst international food crisis, the worst US Navy shipbuilding crisis, the worst ship mine crisis, the worst transportation infrastructure crisis, the worst part congestion crisis, and the worst transportation stoked inflation crisis in many decades. Despite all this focus on shipping I challenge you to find a single mainstream media interview with our nation’s port and shipping czar, DOTMARAD’s Commandant Ann Phillips. While European media outlets cry for more American LNG exports they don’t even call to ask why Phillips has stalled on issuing ship terminal permits.
The majority of the business world doesn’t know the word DOTMARAD at all. The entire world breathed a sigh of relief when the giant containership Ever Given was freed from the Suez Canal but the problems have only gotten worse since then.
The question is what is the common denominator on all these problems and why does the United States seem to have the most severe maritime problems despite the growing strength of the dollar and comfortable distance from geopolitical hotspots?
The problems in United State’s maritime industry are because it was the first to be deregulated and outsourced to foreign labor so the workers Buttigieg’s DOTMARAD relies on to maintain ports, shipyards, terminals, barges, ferries, and ships are older than almost every other workforce in American industry.
Our maritime workforce is top-heavy with boomers.
Also Read: The End Of The World Is Just Beginning For Shipping
gCaptain has reported on many of these problems from China’s port lockdowns to deglobalization. From US Navy’s new apathy towards protecting commercial shipping to President Biden’s threat to punish foreign shipowners. These, along with countless editorials, have kept the gCaptain team incredibly busy since the outbreak of Covid so we have missed a few topics. We also failed to report on one enormously important topic.
Related Book: The Abandoned Ocean: A History of United States Maritime Policy
Boomers are making nearly every problem in transportation and logistics worse.
While that’s an accurate statement it’s a bit misleading and unfair. A more accurate statement would be that the baby boomer generation is not only the largest generation but also the best trained and educated. This generation built the most complicated but successful system of international trade the world has ever seen. The problem is now they are retiring en masse resulting in major skill shortages throughout the maritime world.
It’s their exodus that’s causing the most problems.
Can Generation X Save Shipping
This is especially bad for shipping because the boom and bust cycles of shipping created huge gaps in employment. Generation X is now taking over the most skilled jobs in the maritime workforce but my generation will fail for two big (and lots of small) reasons. First, X is a much smaller generation than the boomers. Second, X entered the workforce in the 1990s which was a terrible decade for shipping.
Also Read Goodbye China, Hello Deglobalization – Shipping Woes Push USA Factory Boom
Anecdotally I’m at the tail end of GenX and my class of 2000 at New York Maritime College graduated less than 100 students. Today over 1,500 students are enrolled at the school. I was one of only a handful of classmates who found work as an officer aboard ships while many classmates left the industry altogether. Today many companies are desperate to hire young officers.
Some nations in Europe and Asia did slightly better at supporting maritime jobs throughout the 1990’s but many of those nations are facing an outright demographic collapse. And which nations are demographically collapsing the fastest? Maritime nations.
Global Demographics
“The truly terminal demographies of Germany, Italy, Japan, Korea, and China are looking at least a 4 percent reduction of GDP annually,” says Peter Zeihan, author of The End Of The World Is Just The Beginning. “China is the worst off… its labor force peaked in the 2010s. In the best-case scenario, the Chinese population in the year 2070 will be less than half what it was in 2020.”
China’s growth has been a major contributor to the shipping industry’s growth this century. Many believe that China grew so fast because it wanted to become the next superpower but Zeihan suggests it was because they had to. Peak Boomer was their last opportunity to build out infrastructure for a declining, not growing, future. If they had spread their investments over a longer time horizon they would not have the workforce available to build the infrastructure party officials believe they need for the coming decades.
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Keep in mind that even before this revision, the Chinese demographic wasn’t simply already terminal, it was already in a state of collapse.
The graphic w/o the yellow bars is the 2020 data.
The yellow bars are the theoretical missing millions. pic.twitter.com/rcJYFYFvd9— Peter Zeihan (@PeterZeihan) June 30, 2022
Zeihan also says that Russia invaded Ukraine now for the same reason. If Russia had delayed invasion plans any further they would simply not have the population needed to support the war effort.
Port congestion and the boomer exodus
“Anyone believing port congestion is improving might want to read up on the operational updated provided by Hapag Lloyd,” warned shipping expert Lars Jensen in a LinkedIn post this summer. “There is typically a lot of attention on North America when discussing this, hence below are excerpts of a few examples related to Europe, Asia, and Latin America instead.”
Ningbo: Most terminals are under severe yard and berth congestion. The port might be affected by strong wind / monsoon, which might cause port closure and lower vessel productivity.
Yantian: Due to strict COVID-19 controlling and preventing measures, vessel productivity has decreased with longer port stays.
Shekou: Pilot availability is limited and pilot service might not be available at time requested due to COVID restrictions.
Hong Kong: Reefer facilities and resources at HKSPA is limited and utilization is on high level. Vessel berthing will be prioritized for pure loading vessels or vessels with loading volume more than discharge volume
Singapore: Priority is given to export calls to relieve the yard density which is around 80%.
Antwerp: upcoming holiday season will lead to reduced labour availability.
Rotterdam: With the start of the holiday season, the first labour related impacts are visible with less gangs being deployed. In addition, several COVID infections have been reported within the workforce. Yard level at DDE has risen again to 85% with special concern about open 40’ positions. Reefers at DDE are at 100% of the plug utilization. ECT and RWG stopped to accept empty containers this week.
Hamburg (CTA): The ongoing tariff negotiations are having a negative impact on labour availability. Due to the strike the waiting time of import heavy vessels has increased again.
Hamburg (CTB): Last week’s strike and the ongoing labour dispute with the union are increasing the delays accumulated at CTB even further. Slight rise in COVID infections reported at the work force negatively impacting the already tense labour situation. Extreme waiting time for vessels.
Le Havre: High amount of vessel activity in the port of Le Havre is leading to labour shortage.
Poland, Denmark, Sweden, Finland: Limited trucking availability.
Benelux: Summer holiday season is arriving, and most vendors already announced less trucking capacity with approximately 50% of usual transport capacity.
Ecuador: Due to ongoing nationwide protests, export shipments are being affected as their containers are not arriving at established CY cut off. Import shipments also delayed due roadblocks in interstate roadways.
Costa Rica: a cyber-attack to Government Customs System took place since week 17 and many tasks are manually performed. This causes delays at gates for in/out cargo. Route 32 in Costa Rica is closed again due to landslides
Mexico: trucking services delayed due to port congestion at several locations.
While Lars does not describe the reason for all these port problems, it’s clear just from reading them that both skilled and expert labor is in short supply.
Those figures are from late summer and much has changed but I post Lars’ comment to remind you how bad the situation was just a few months ago. Is the situation any better today? This month imports have fallen off a cliff at America’s busiest port – Los Angeles – as ships have fled from West Coast ports because of union negotiation stalemates at ports and on rail but US East Coast congestion remains a serious issue and other segments are in big trouble with LNG ships piling up in Europe, oil tankers pilling up in Singapore, and grain piling up on rivers of both Ukraine and the United States.
Can Millennials Save Shipping?
Some who study the labor market hope that Millennials, with the help of online training and AI, can step in to provide the skill gap that retiring boomers are creating but there are a few problems with this theory. First, the average millennial is less interested in industrial operations like shipping and is more attracted to digital jobs they can do from home. Second, unlike America, many maritime countries don’t have large millennial populations. Third, rapidly escalating graduate school costs have resulted in a less-educated workforce while the popularity of MBA programs have reduced the level of technical skills.
What About Zoomers?
The next generation, so-called zoomers, are a relatively small generation that faces its own problems.
The biggest problem is that we are not training enough of them.
At a recent high-level US Navy event, I had to remind the Admirals in attendance that Secretary Pete Buttigieg’s DOTMARAD runs an entire college dedicated to ocean logistics. Sadly Buttigieg who has over 4 million followers on Twitter has never once shared an official United States Merchant Marine Academy (USMMA) which had a miserable 1,292 followers at the time of writing – tweet. Few transportation and logistics experts even seem to know that a US taxpayer-financed school – and 6 state maritime schools with large DOTMARAD subsidies – exist.
Complaining that Pete Buttigieg hasn’t reshared or liked any of USMMA’s tweets may seem like a minor jab but the younger generations want to be seen and noticed and appreciated. This is the TikTok generation and Buttigieg does not seem to care about getting them excited to learn about ships.
Even if they do, their work will be mostly ignored. While USMMA’s sister school – the US Naval Academy gets global attention – Commandant Ann Phillips’ cadre of Merchant Marine Academy professors and students are not covered by any press (except during times of scandal like the rape of Midshipman X) and are not invited into the Pentagon meetings, transportation summits, beltway think tanks, national security dialogues or the smoke-filled rooms where DC powerbrokers convene.
And, apart from being connected at the hip to Jones Act lobbyists and lawyers – neither DOTMARAD nor DOT reaches out to help organize these meetings with maritime’s best and brightest young leaders. They certainly don’t reach out and ask the media to shine a light on our important industry. They seem to prefer to keep all maritime affairs far from Buttigieg’s celebrity spotlight.
Some leading democrats we interviewed defend Buttigieg by saying he needs to stay fully focused on the climate crisis and his mandate to help minorities and disadvantaged communities. These are indeed noble causes but the argument is not logical. The DOT’s own Marine Highway short sea shipping program documents show that nothing could reduce carbon levels in our transportation system better than downshifting cargo air to trucks and from trucks to waterways. Waterways are 10 times more energy efficient than trucks and up to 100 times more efficient than air, yet Buttigieg is pouring significantly more time and funding into air transportation and roads. The climate change problem is deeply important to our best-educated youth and maritime solutions are among the most promising but Buttigieg doesn’t convey that message to zoomers.
And how about minorities? As mentioned this is a labor problem caused by the exodus of boomers. We need all hands on deck to fix this but the maritime industry has the oldest workforce and is one of the whitest because so much of the industry was outsourced to foreign companies and labor before equal rights legislation became a priority. To fix this problem we need ALL HANDS ON DECK and that includes leaning into minority (who are in fact the majority) recruitment and supporting minority-owned businesses. And, again, this is an important issue for many young zoomers just starting out.
What about disadvantaged communities? Anyone who has spent time in America’s busiest port cities – places like Newark, Elizabeth, Oakland, Long Beach, and Bay Town – know these are among the most disadvantaged community in the entire nation. Zoomers don’t want to work in dirty, crime-riddled, lower working-class ports… they do, however, want to work in communities like this if they are given the tools to help improve these places. But again, by ignoring DOTMARAD and its mandate to help shipyard towns and port cities, Buttigieg and his fellow democrats are missing out on the lowest-hanging fruit
Zoomers don’t want to work in a “dirty” industry with big social and environmental problems that are ignored by it’s own leaders. They do however want to work for a dirty industry that actively recruits our best youth and has the political leadership and desire to clean up its act.
It’s not just a Democrat problem either. Buttigieg’s predecessor – Republican DOT Secretary Elaine Chao who is the daughter of a powerful shipping magnate and wife of the most powerful Republican Senator – obtained hundreds of millions of dollars for state-of-the-art state maritime college training ships – but she failed to fund the federal academy and avoided talking about maritime affairs with the press.
The lack of press and attention also keeps our more conservative youth from learning about the industry. They may not be motivated by fixing climate change but many do want to help their nation succeed. A bigger problem for conservative youth, however, is the lack of attention US Merchant Mariners receive from the Pentagon. Republican youth are highly patriotic and want a chance to serve their country but while DOTMARAD does have a uniformed service – US Maritime Service (USMS) – the leaders in Washington (including USMS Commandant Ann Phillips) seem to be allergic to wearing the USMS uniform and many of their powers can only be activated by DOT Secretary approval (which Buttigieg has NOT signed off on). They tend to downplay the service component and very rarely give out medals or awards. The US Navy is worse. They make it a point to label US Merchant Marines as civilians by using the derogatory term “CIVMAR” and they are not open to discussions about veteran benefits or veteran health care. These are all red flags to our most patriotic youth.
Put simply zoomers don’t want to enter an old and predominantly white industry with mediocre leadership that doesn’t respect their own service and will require them to live in the shadows or asks them to keep tight-lipped about industry problems. They want strong leadership, a seat at the table, racial equity, appreciation for their service and yes, the occasional “liked” tweet from bosses like Buttigieg and Phillips.
Could rapidly increasing wages retain Boomers?
Many boomers are already working beyond their planned retirement date and, in the well-paid maritime industry, have the wealth they need to retire. While many enjoy their job the pressure on performance is increasing exponentially while supply-chain chaos and Covid has caused most boomers to rethink work-life balance.
Also Read: The End Of The World Is Just Beginning For Shipping
Those that remain are not interested in new and emerging problems like port congestion but want to work on big “legacy-leaving” problems like climate change. This is resulting in the boomers who are staying put focusing on what boomers do best, using their high degree of education and expertise to create MORE complicated solutions (Wind Farms and Digitalized Fueled Decarbonation require a MORE skilled workforce) to global problems.
Complicated and human resources-intensive solutions that are setting Generation X up to fail.
Green Revolution Is Important But Complicated
“It’s hard to justify spending so much time on an advanced LNG regasification facility for cruise ships when the world is facing an energy crisis and famine,” said one industry executive. “What the world is asking for right now is big and simple coal and grain bulkers not complicated green hydrogen distribution systems.”
The recent conferences I have attended make this point clear. Nearly every session (and most of the “hallway chatter”) included questions about decarbonization and digitalization but only a few about Russian mines and world hunger.
“Today’s shipping conferences give me the same feeling as visiting the old Worlds Fair buildings in Queens or reading a vintage copy of Popular Mechanics,” said one GenX classmate of mine. “It’s yesterday’s vision for the future. I hate to say it but green hydrogen and next-gen wind farms feel a lot like the flying cars my parents promised that I’d own ‘once I grew up’. I am told my generation is cynical but I think we are just more focused on simple solutions.”
“Boomers are focused on getting what they want, while my generation wants to focus on what we currently need.”
Follow The Money And Power
Inter-generation strife is likely to increase as the baby boomers who do stick around will retain control over purse strings and board seats (we have already seen that Boomers vote and are unwilling to give up political control of government spending). Their goals may place more complexity and problems on already overburdened Generation X managers. That said Generation X will be well compensated for the added stress. Adding more complexity and stress to the system will accelerate the rate of retirement and the competition for Generation X’s talent is about to go into overdrive.
GenX’s Moment To Shine
“Generation X will benefit the most,” says Peter Zeihan. “Demand for skilled labor will accelerate alongside the massive shortage of skilled talent. This is Generation X’s moment to shine.”
If Zeihan is correct then the exodus of Boomers will lead to fierce competition among employers and Generation X salaries will climb faster than 2021 freight rates. And the smartest maritime companies have already started massive retention and hiring programs for Generation X.
How much the Millennials will benefit is anyone’s guess. They could catch some of the overflows that’s about to pour into the pockets of GenX or the entire system could collapse just when their moment to shine finally arrives.
The Future Is Foggy
The big question that remains is what are we missing? What are the second and third-order consequences of generational differences? One trend, for example, is for maritime and logistics companies to hire naval officers (this trend seems especially strong for US and Israel Navy officers in technology startups) over merchant mariners because most senior officers have advanced degrees the government paid for while many Millennial in the civilian shipping industry did not want the burden of student loans. Some civilians who did take out loans to fund higher education left the industry for more lucrative opportunities in finance, entertainment, or technology. The result is a more educated and experienced workforce on paper, but in practice, there is an experience gap because naval officers don’t have experience managing cargo ships. This is just one small example.
A bigger example is the Japanese stock market. Their largest generation peaked in the 1990s and the financial consequences have lasted decades.
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I agree w 90% of what’s in here BUT there is an unprecedented structural disconnect in play as well. As the Boomers retire en masse, the are liquidating their “normal” portfolios and ushering in a multi-decade capital shortage. https://t.co/hglL833Kdg— Peter Zeihan (@PeterZeihan) July 7, 2022
Will, there be more consequences as a result of the generational turnover? Certainly but the problem with managing the brilliant and effective but complicated interconnected and human resource-dependent systems baby boomers have created and the chaos they could create is difficult to predict.
And if Generation X does solve problems by returning us to simpler systems… what will that mean for the green revolution and the environment it hopes to protect?