Boom and bust

A basic economic tenet is that behind every economic boom there is a bust. What everyone wants to know is how long a boom will last.

Recent visits to Houma, La.-area shipyards suggest that the current boom has a long way to go before it plays out. Orders for brownwater equipment, particularly pushboats, continue to flow in to these southeast Louisiana yards.

Some long-term economic forecasts predict that current growth rates in the U.S. will continue for at least the next two years. That seems to match current backlogs at shipyards. Slots for 2007 yard capacity were sold out in 2006, and 2008 slots are nearly gone too. Late arrivals are taking the risk of being shut out until 2009. To meet the demand, boatyards are scrambling for employees. This appears to be a long-term problem that only a bust, if it ever arrives, will relieve.

Those who have witnessed boom/bust cycles in the brownwater shipyard industry understand that clouds will eventually appear on the horizon. For now, however, shipyards have been transformed into order takers. Buyers cannot be too picky or someone else will jump in and take their slot. New equipment can be put to work now, so there is substantial opportunity cost for delaying vessel orders.

The boom in shipyard work says a lot about the current and prospective health of the brownwater sector. The huge glut of excess barge capacity is gone, and the industry is retooling its fleet, albeit at substantially higher costs for raw materials such as steel. While some buyers are sitting on the sideline waiting for lower prices, which may or may not come soon, the reality is that equipment needs to be replaced just to maintain current capacity.

Another economic tenet is that “behind every economic bust there is a boom in the making.” Many of us always seem to forget that. The recent jump in shipyard work can certainly testify that the bust has ended and there is no apparent end in sight for the current boom.

For now, most shipyards are operating at full capacity and this should continue for the next few years.

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Workboat Staff

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