Wednesday, June 25, 2008

Why China should build nuclear ships

That is Nuclear cargo ships. Its really simple when oil was 20$ a barrel the cost of shipping a container from Shanghai to the east coast was 3000 dollars but with oil at 120$ a barrel the cost has gone up to 8000 dollars (its not a direct multiple as ships have slowed down to save oil. So freight costs are not as high as they would be at the old speeds but the shipping times are higher and those costs do show up in other places like the cost of carrying inventory) In fact cost of shipping has gone up by so much that US steel made from Brazilian Ore in Pittsburgh at 40$ an hour labor is now cost competitive with steel made from ore exported from Brazil to China, processed at 1$ an hour and reimported to USA. As a result manufacturing has started to switch back to USA with furniture factories opening everyday in North Carolina. So how does this relate to Nuclear cargo ships like the ill fated NS Savannah? Well Nuclear cargo ships as the name suggests do not use oil and instead have nuclear reactors ala aircraft carriers. Now the NS Savannah when run in the 60s and 70s never saw a profit but that was the age of cheap oil and lax environmental regulations on oil ships. Also the Savannah was built as a goodwill demonstrator with of all things 10 passenger cabins and a swimming pool ( a swimming pool on a freighter?) Also the oil ships of the time could discharge their dirty ballast into harbors and did not have to use separate bunkers for low sulphur diesel when operating in port. In todays regulatory environment with high oil costs a nuclear cargo ship starts to look very nice. It could even be run at around 5000 dollars to ship a container from Shanghai to the east coast or even at 8000 dollars but in half the time ( unlike oil ships who are limited in their range and speed by the oil they can carry for nuclear ships all the fuel they will need for 30 years is put in at manufacture) by running much faster. That would mean it would still be economical for Walmart to import everything from across the world than to buy from local manufacturers even in an age of expensive oil. Hence I predict China building their own Nuclear cargo ships soon and also expect a loud outcry from so called US environmentalists(trade protectionists in disguise) against allowing Nuclear ships into US harbors (not that it will be so effective all China has to do is offload at Mexican ports and ship the rest of the way by train along the Trans Texas corridor)

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