Global Shipping Update with Sal Mercogliano

Ajouté : 2026-05-31

[00:00:02][music] >> Welcome to the Proceedings podcast. I'm Bill Hamblet, the editor-in-chief of Proceedings at the U.S. Naval Institute.

[00:00:14]It's Wednesday, May 27th. Good to have you on board, everybody. Today, we're going to talk about the Strait of Hormuz and the global shipping industry.

[00:00:22]This episode is brought to you by Booz Allen. From rugged 5G on warships to unmanned systems deep below the ocean, Booz Allen builds technology that works where it matters most. Their AI-driven mission-ready capabilities help the U.S.

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[00:00:46]Okay, my guest today is Sal Mercogliano.

[00:00:49]He's the host of the very popular YouTube channel What's Going On with Shipping. Sal's also an associate professor of history at Campbell University in North Carolina. He's an adjunct professor at the U.S. Merchant Marine Academy. He holds a Bachelor of Science in Marine Transportation from the State University of New York Maritime College, SUNY Maritime, along with a Merchant Marine Deck Officer License, Unlimited Tonnage, Second Mate.

[00:01:13]He earned a Master's in Maritime History and Nautical Archaeology from East Carolina University and a PhD in Military and Naval History from the University of Alabama. Sal, welcome to the show.

[00:01:25]>> Bill, thanks for having me. It's a pleasure.

[00:01:27]>> I love your show. I always learn something from watching a What's Going On with Shipping episode.

[00:01:33]Uh so, let's start off with the Strait of Hormuz because that's been front and center in everybody's attention, whether you're in the merchant shipping industry or in the Navy, uh for the last, you know, coming up on 3 months here. Basically, been closed since the end of February. Can Can you give us a sense of the overall impact on global shipping? How many ships are stuck in the Persian Gulf? What are the main products that haven't been moving, and what what's the total cost of the global economy?

[00:01:59]>> Yeah, I I think the first thing Bill is this is unprecedented. We've never seen the shutdown of the Strait of Hormuz like this. Uh even if you go back to the tanker war of the 1980s, the strait never shut down.

[00:02:12]So, this is an unprecedented event. What we're seeing right now is somewhere in the range of about 800 deep draft vessels are stuck on the other side of the Strait of Hormuz in the Persian Gulf. Now, on an average day you had about anywhere from about 130 to 140 ships transiting through the Strait of Hormuz. Now, you know, on a daily basis we're lucky to be in single digits.

[00:02:34]Sometimes we break in the double digits.

[00:02:37]Uh this has been a massive dislocation across the global economic system. So, the the stat you probably hear the most is 20% of oil comes out of the Persian Gulf, but in truth, 11% of total trade in the entire world goes through the Strait of Hormuz.

[00:02:55]So, we're missing 20 million barrels a day of oil. Now, that's being made up for in some ways. There's a million barrels per day coming out of a pipeline across the UAE to Fujairah. There's a 4 and 1/2 million Excuse me, that's almost 5 million pipe million barrels per day pipeline coming to Yanbu on the Red Sea coast. But, the big thing is what we're not getting out of the Persian Gulf in large measure is things like liquefied natural gas from Qatar, liquefied petroleum gas. We're not getting fertilizer, uh urea, map, dap. Uh we're not getting ammonia. We're not getting helium. So, what we've basically done is put a clamp on the kind of the femoral artery of global shipping. And it's having an impact. We're seeing the escalation cost in bunker fuel to move goods around. That's making everything more expensive to move.

[00:03:45]We're seeing the dislocation of shipping. We're seeing new trade routes being uh resurrected and moved around.

[00:03:51]We're seeing certain countries benefiting from this. Russia in particularly is benefiting greatly from this because Russia, which had been under a lot of sanctions because of the Russia-Ukraine war, are now coming out of sanctions because we need Russian oil, and we need Russian diesel, and we need Russian liquefied natural gas. So, it's a massive kind of shifting. We really have not seen anything on this scale since the Suez Canal closed in 1968.

[00:04:18]>> Wow. So, I remember it was what, um, 4 or 5 years ago when the the uh container ship Ever Given went sideways in the Suez Canal, and the the statistic I heard several different places, uh, from economic reporting was that the cost of that closure, that, you know, and that was an artery, right? So, you used femoral artery to describe the the Strait of Hormuz, but the the Suez Canal is another significant artery in the global economy. At that time, when the Ever Given went sideways for about 6 days, the cost to the global economy was what I heard, $400 million per hour.

[00:04:54]So, I think more traffic, more valuable goods move through the Strait of Hormuz than through the the Suez Canal. So, it's got to be more than probably a half a billion dollars per hour, right? And now it's been 3 months, we're or almost 3 months into this. So, that's a that's a huge hit.

[00:05:13]Um, I'm curious if you have heard any any, you know, specific statistic on what the cost per hour is to the global economy.

[00:05:20]>> Yeah, it's a tough one to nail. I mean, Ever Given was the start of my YouTube channel. I mean, that's literally where we started the whole thing is when Ever Given got stuck. But, Ever Given was unique, too, because, I mean, there was a way around that. You can go around Africa, and we saw that with the Red Sea crisis in 2023 to 2025. Hormuz is different. I I mean, yeah, you can use some of these pipelines to move some oil, but not all of it. And so, what what you have is kind of a cul-de-sac stuck with goods not able to get in or out and and that's creating the big problem. UNCTAD, the UN Conference on Trade and Development, have been putting out basically monthly reports on the disruptions that we're seeing. It's very hard to get a cost on this because it's affecting different countries in different ways. For example, in the Philippines, there's gas shortages. So, you have rationing going on. You know, in the developed countries, it's not having an immediate impact except for what you're seeing at the gas pumps.

[00:06:13]But, in underdeveloped countries, you're seeing a much larger impact and some of these impacts are not going to be felt for much, you know, further out. You know, fertilizer not getting into the ground, that's not an immediate impact, but we're going to see it in lower harvest yields. We're starting to see it with the increased bunker costs and the associated costs to move goods around the world. So, yeah, we're we're talking about billions of dollars every day that this is impacting global trade without a doubt. I mean, you're seeing a massive relocation of tankers to the United States. Some have estimated that we've gone from 20 very large crude carriers arriving in the Gulf Coast of the United States up to as many as 60 coming in. So, I mean, you know, we're just seeing a massive relocation on how we move goods around the planet.

[00:06:57]>> Wow. Wow. Okay. So, peace talks between the US and Iran seem to be focused at least in large part on reopening the strait. In your opinion, what would be a positive development and what would a bad agreement to reopen the strait look like?

[00:07:12]>> Well, what we have is kind of two opposing blockades going on. The Iranians at the very beginning, when the US and Israel started their strikes on February 28th, the Iranians lashed out at commercial shipping in the not just the Strait of Hormuz, but the Persian Gulf. We had ships hit off the coast of Kuwait and Iraq. We had ships hit in the Gulf. And what happened was shipping kind of locked up. And what has happened over the past 3 months is Iran has tried to take control of the Persian Gulf. In In created something called the Persian Gulf Strait Authority, the PGSA. And what they're trying to do is kind of regulate traffic through the Persian Gulf. They're arguing that, well, listen, the Panamanians and the the Egyptians do this with their canals, the Danes do it with their strait, the Turks do it with their strait. We're going to do this now, and we're going to try to control shipping in and out. The US has countered that with obviously their blockade, a blockade of Persian Gulf Strait of Hormuz, Gulf of Oman, Iranian ports. And so, we're kind of in dueling blockades here. And one of the things I think that the US kind of misjudged is the impact on the Strait of Hormuz. I mean, I was in the military for a long time. I worked with Military Sealift Command. We knew that Iran would make plans to kind of interdict the strait.

[00:08:26]But I don't think everyone envisioned, number one, that the war would last as long as it did, and number two, the impact that the Iranians were going to have and how commercial shipping was going to react to it. I mean, commercial shipping locked up very quickly in not going through the strait. And we did have a a kind of a a preview to that in what happened in the Red Sea in the end of 2023 and early 2024.

[00:08:49]And I think, you know, any agreement that gives the Iranians control of the strait is a massive problem. I mean, the US has a vested interest in the Persian Gulf. We have military forces that are actually on the ground in the Persian Gulf with uh prepositioning sites. We have Gulf allies in that region. And I think one of the countries, you know, the countries that get forgotten here are countries like Kuwait, Bahrain, and Qatar, which have their only access through this the Persian Gulf. And they need to be able to get to the sea. And so, I think the US has got to have an agreement with Iran that allows it for the free passage of ships. That's a basic tenant in the UN Convention of the Law of the Sea, which ironically neither the US or Iran have ratified, but it's it's is essential tenant to make sure that there is free transit through the strait.

[00:09:36]>> Yeah, and there's been discussion about, you know, Iran creating a toll booth, right? And that that in in my uh estimate, that's anathema to the idea of the UNCLOS and and free shipping around the world. It it um while the you know, the the Panama Canal and the Suez Canal are regulated by uh Panama and by the Egyptians and there are costs to going through that. Um why why is it different in your words? Why is it different for the Strait of Hormuz? Why why should we not allow a similar regime be set up by Iran for moving ships through the Strait of Hormuz?

[00:10:11]>> Well, Panama and Suez are very straightforward. They're canals. There's regulatory issues. There's administration. There's There's dredging. There's, you know, lock up keeping Panama. There's pilotage.

[00:10:20]There's a whole reason for that. But if you even look at the Danes and and the Turkish example, the Danes and Turk control both sides of that straight. The Iranians don't. I mean, if you look at how the 12-mile limit and how UNCLOS defines territorial waters, a good chunk of the straight is not in Iranian waters. It's in Omani waters. And so, you know, just by that definition, Iran does not control the straight. I mean, and even if it did, it doesn't have the right through Article 37 of UNCLOS to prevent this free transit through the area. And I think if you surrender that over to the Iranians, if you give Iranians control of that, then you can have, you know, Spain or Morocco do it with the Strait of Gibraltar. You can have Indonesia do it with Malacca and Lombok and Sunda. Uh there's a lot of potential. You have China do it with with the Taiwan Strait. I I mean, there's a lot of issues here that come into play.

[00:11:10]And I think that, you know, one of the tenants of the US Navy has been the idea of freedom of the seas. And this has been all the way back to 1794 with the first Navy Act and the you know, the construction of Constitution to go deal with Barbary pirates. Uh I think the US did fail in not having allies on board.

[00:11:27]Very difficult to do that in in the environment that was existing because what we're starting to see is the arrival of European forces. We've got the Charles de Gaulle battle group coming in. We've got the Dragon, HMS Dragon just went through the Suez Canal.

[00:11:40]We're seeing allied navies come in and I think it's really important. One of the big differences this conflict had over something like the Tanker War is the Tanker War was a gradual kind of increase over time. Started in 1980 and and kind of really hit a crescendo toward the end of the '80s. This turned on on February 28th and it was on and then it was you know, instantaneous. And I I think this goes to a larger issue in that commercial shipping is very risk adverse. They do not like to take chances and even if you create a backdrop, an insurance scheme like the US has created, the problem with that is is if I'm a shipper, I don't want to take the chance of my ship being hit.

[00:12:19]More importantly, I don't want my ship to be lost because it's not just the loss of the ship and the cargo and the crew, it's the future revenue I lose from that ship. And so I'd rather have that ship bottled up for weeks or even months and get it back on the backside than to take a chance cuz what we've seen is the Iranians are not hesitant to strike and even some cases seize ships.

[00:12:39]They seized two Mediterranean Shipping Company container ships that tried to run the strait and brought them into Iranian waters.

[00:12:46]>> Well, we don't want to set a bad precedent as you point out, right? It would be against UNCLOS Article 37 and it was it could also be something a precedent that other countries around the world could look at and go, oh, well, we'll set up our our toll booth in these other straits.

[00:13:02]It also we we published a piece by a retired Navy JAG officer a few weeks ago that just pointed out the fact that what should exist in the in the Strait of Hormuz is transit passage, which is different from innocent passage and transit passage is is probably more important, especially more important to the free movement of of cargo around the world. And so you don't want to you don't want to hinder that that freedom of transit passage through the Strait of Hormuz. Yeah, all great points.

[00:13:32]You you talked about a minute ago you you touched on the Houthis 2023-2024 when they started attacking ships in the Red Sea, the Bab el-Mandeb, global freedom of navigation has been impinged since then, right? So, we've still still isn't great through the Red Sea. There are still a lot of companies that aren't willing to send their ships there, still sending ships around Africa to avoid that that um you know, choke point. Um and now compounded by the Strait of Hormuz closure, how are those constrictions affecting the shipping industry? And I'm just like how how have companies added capacity to sail longer routes?

[00:14:15]Are profits up or down because of that?

[00:14:17]Is shipbuilding demand up or down to deal with these impingements on global freedom of navigation?

[00:14:25]>> So, when the Houthis launched their attack, remember this comes in the wake of October 7th 2023 with the with the attack out of Gaza by Hamas and then Israel's reaction to that and their invasion of Gaza. The Houthis announced an attack against Israeli-owned, Israeli-flagged ships. This was the very kind of dramatic landing on board Galaxy Leader, the seizure of that of that car carrier, and then attacks on shipping throughout that region. The US responded with a series of operations, initially Prosperity Guardian and then an offensive operation called Poseidon Archer, and then that was followed up a year later in 2025 with Rough Rider.

[00:15:02]The US learned a couple of key things.

[00:15:04]Shipping was was actually at a very interesting inflection point at that point. We were coming out of COVID, coming out of the global supply chain crisis. There was actually overcapacity in the in the world shipping. We had too many ships and shipping companies were getting ready for the mass scrapping. We were going to be sending ships to South Asia, to Bangladesh, Pakistan, and India to go get scrapped. But what all of a sudden happened was because of the danger of the Houthi, and I'll note that the Houthi weren't a a a major threat. I mean, they attacked a grand total of across 2 years of maybe 130 ships. Uh they sunk four of them, killed less than a dozen merchant mariners out there. But what they did was cause war risk insurance to go up. It got very expensive to sail through that region, and since there was an alternative route around Africa, that's what shipping did.

[00:15:51]Shipping started to route around Africa.

[00:15:53]And fortunately, a lot of shipping companies had excess capacity, especially the container liners. They could put more ships on it. It actually turned out to be profitable for many shipping lines to go ahead and do this.

[00:16:04]>> To go around Africa, what's that, an extra 2 weeks, 3 weeks?

[00:16:07]>> It's about anywhere from 10 to 14 days, and it added maybe about a million dollars in fuel cost to go around. But if you have a container ship, and to give you an idea, even a a moderate-size container ship, an 8,000 TEU container ship is worth a quarter of a billion dollars with all the cargo on board.

[00:16:25]When you start talking about a 24,000 box ship, you're talking about a billion dollars. If your war risk insurance goes from what what it did go from, 0.15% the value of the ship up to 1%, you're talking about 10 million dollars you got to pay. And so, you know, 10 million dollars plus a Suez Canal toll, I'm going to go around Africa. And that's what ships did. They started going around Africa. And that routing took place, and it's become very much the the the route that we see being used today.

[00:16:53]We had just started to see a return to that route in September last year, September 2025, we saw the first US-flagged vessel go through that region since January of 2024. But with the outbreak of the conflict in in the Persian Gulf, and the fear that the Houthi may restart their attacks, shipping is once again kind of avoided that area. And it really highlights the danger of maritime choke points.

[00:17:19]Something that you know your readers see all the time is is the value of these choke points. Bob al-Mandab, Suez Canal, Strait of Hormuz. I mean it's just you know absolutely essential about 15% of global trade goes through the Bob al-Mandab and the Suez Canal. I mean that that artery that's that's a main artery that goes between Europe and Asia. And what the Houthi were able to do using weaponry very similar to what we see with the Ukrainians and the and and the Russians using in the Black Sea, you know, unmanned surface vessels, unmanned aerial vessels, drones, excuse me, guided missiles, and even ballistic I mean we've seen ballistic missiles being used against commercial ships. One of the interesting things is we see the resiliency of commercial shipping. It's very hard to sink some commercial ships, especially fully loaded bulk carriers.

[00:18:07]You know, if you hit a fully loaded bulk carrier with a ballistic missile it's like hitting the earth, you know, loaded with ore or grain. It's they're very tough to sink. However, what we did see is that commercial shipping rerouted. And and I think that was the big issue. The Red Sea operations by the United States were very effective in countering the Houthi, but they were not strategically successful to bring commercial shipping back in. And I think that was a lesson that really should have been thought about with the operation against Iran starting in February 28th.

[00:18:39]>> Another factor that has had a had a huge impact on shipping is tariffs, right? So the US has imposed a significant tariff regime on just about every country around the world that took place you know about a year ago, a little over a year ago, and that shook things up. And then other countries responded with their own tariff regimes. So it on top of Strait of Hormuz, on top of Houthi threats, Red Sea, Bob al-Mandab, how has the you know the imposition of significant tariffs had an impact on shipping around the world.

[00:19:13]>> Well, President Trump in his second administration has used shipping and trade in a way that we really haven't seen in a long time. I mean, you get an executive order on shipbuilding out of this president, you get the introduction of the Ships Act. You have the the the US trade representative come out with a Section 301 investigation on Chinese shipbuilding and dominance. And then you have literally the leveling of these massive tariffs. Now, I will argue that President Trump uses tariffs to achieve a political end. That's usually what he's out to do in some way. So, it's not really an economic uh you know, lever he's he's using an economic lever to achieve a political solution. And one of the problems you do have is that when President Trump called upon the world to assist in opening the Strait of Hormuz, I think he's very accurate when he says, "Listen, the vast majority of the world use the Strait of Hormuz more than the US do." And that's true. I we do use it and and we can't under undersell that, but for the rest of the world, the Strait of Hormuz is extremely important, but it's very hard to get allied support over when you've initiated trade wars against them. And I think that's one of the problems that the US has to do. I I keep coming back to this issue that you can't solve everything militarily.

[00:20:24]You've got to have political and economic levers that you also use. And so, the US with the use of the tariffs has had a massive impact. As a matter of fact, there was a study just out from the UN talking about this that actually tariffs probably have a greater impact on the global economy than the disruptions we're seeing in the Black Sea, the Red Sea, and the Persian Gulf right now. Now, I don't know about that in the long term because what we've seen is tariffs being used and measured and brought back in to try to restructure the US economy. And the tariffs are an aim by the United States to reorient trade to try to get an imbalance down, but what we've seen with the recent Supreme Court case is a massive restructuring of that. We're going to see, you know, a lot of money coming out of the US Treasury to refund people for the tariffs, but President Trump has tried a new structure of tariffs. And and and we're seeing that levied right now.

[00:21:18]One of the very first laws the United States ever passed in the first Congress were tariff laws.

[00:21:23]They were tariff laws to basically fund I think we forget that the way the US generated most of its revenue throughout its history was through an external revenue service called the Coast Guard that did basically monitoring trade coming in and out of the United States with custom collectors and port collectors generating that. It's only in 1915 we changed that around and we create the internal revenue with the income tax. So, I think President Trump was trying to create a balance, but tariff and trade is really hand in hand.

[00:21:51]We've seen a lot of countries use these mechanisms in the past and now the US is trying to use it.

[00:21:57]>> So, at at a grand scale after the liberation day in April of 2025 when the when the a lot of those tariffs were imposed, right? What what major changes did you see in shipping either coming to or or from the United States? So, fewer containers coming to the West Coast from China and Japan for example, did it did it change the you know VLCCs going to the Gulf Coast? Like what what kind of what what were the big changes that that that sort of manifested quickly after those tariffs were put in place?

[00:22:31]>> So, what was really interesting to watch was if you look at the numbers for 2025 versus 2024, they're almost identical. I mean I mean the amount of trade coming in and out of the United States was about the same. However, if you look at the details, the monthly reports, they were much different. So, when President Trump initiates that tariff in April, what you saw was all of a sudden trade into the US began to drop precipitously.

[00:22:54]And we saw reports of US ports being empty. There are no ships in the port. I was I was dealing with reports of no ships in the port of Seattle when people were taking pictures of a dock that it's not used for traffic at all. So there's never going to be a ship on it.

[00:23:07]>> [snorts] >> Uh but what we saw was a dip when normally you would see kind of a spike.

[00:23:12]And what it did is, you know, shipping is like water on a sidewalk. It's going to find the cracks. And that's exactly what happened. Trade, you know, where normally would peak in the second quarter in April and May was at its lowest level in 2025, but once the renegotiation of the tariffs went in, what we saw was a big spike. What what what trade companies did, what what consumers did is they knew tariffs were on the horizon. They moved cargo ahead of the tariff, so they front-loaded it.

[00:23:38]So we had a lot of cargo coming into the United States early. So we saw big numbers coming in early on. We saw that dip in the second quarter, and then what we saw was a gradual rise in the third and fourth quarter with goods coming in.

[00:23:50]And and you know, that's what we saw.

[00:23:52]One of the things that the global supply chain crisis that happened during COVID, when everyone was short on toilet paper, was a lot of people who were shipping learned, "Okay, I need to change the way I do business." If you're a military logistician and you have a a node where 100% of your logistics goes through, that's a vulnerability. That's a massive vulnerability that if the enemy learns about it, they can strike it and it could your military ability.

[00:24:16]Commercial shipping was very much like that because they were doing just-in-time logistics. They didn't care if they were going through a single node. And what came out of that was really a a principle of military logistics. "Hey, we need to diversify.

[00:24:29]We need to have some resiliency built in." Now that costs money, but it's not like you have to, you know, have everything evenly split. You just need to have the mechanism in place. So what happened is when President Trump announced his tariffs, all of a sudden it's like, "Well, this is going to go into effect on this day.

[00:24:45]Well, if I can get my goods landed before that day, I'm going to be in good shape. So let me reroute my cargo from coming to the East Coast of the United States to the West Coast because I can get it here faster." And what we saw is some military-style logistics being applied to the commercial industry. It was really fascinating to watch how people adjusted to that.

[00:25:04]>> Wow. All right, I'm going to switch topics a little bit and talk about uh shipbuilding. And so, we've talked uh on on our channel and in the pages of proceedings for the last year and a half, we talked a lot about naval shipbuilding. Um but a lot of uh you know, naval shipbuilding is often uh often benefits from having a strong domestic commercial shipbuilding industry to support it. And you know, it's been uh a lot of conversation about how uh the Chinese navy is benefiting from the fact that the Chinese shipbuilding industry uh on the commercial side just has, you know, uh orders of magnitude of all kinds of collaborative processes that support both sides of of shipbuilding.

[00:25:46]But in your uh most recent episode yesterday, I think it's still your most recent episode, um [snorts] you focused on this and you said China now controls 70% of the global new order book for commercial ships. And then you you touched on at the end, can the United States make a comeback in the industry? So, I was blown away by that because the most recent things I'd seen were were that China was about maybe 50% and then all the others make up about 50% of uh you know, global shipbuilding. Uh South Korea and Japan being the other two biggest, not nearly as large as either of them as as China. Then there's some Europeans and the US is less than 1%, which is really uh a paltry sum. But um so, talk about that a little bit. You know, are there any successful yards in the United States today? And and what do you think it'll take to turn you know, shipbuilding around in the United States? Or or will it ever come back? Do you think it's even even something that's going to that's got a chance of coming back in in terms of commercial shipbuilding?

[00:26:47]>> Yeah, that report by BRS was really fascinating. They do an annual report.

[00:26:51]And then like you said, 70.9% of the global order books now resides in China, which is just a massive number.

[00:26:57]It's just huge. And one of the one of the big things that if you look at that data and I got an episode I'll have coming out talking about this in more detail is Korea and Japan are building the same amount of ships, the same tonnage of ships. The problem is China is getting the new builds. The basically where the global fleet is growing, they're getting that growth and it is disproportionate. It is a massive amount they're doing it. I I firmly believe that a commercial and military shipbuilding industry is symbiotic. I think it feeds off each other. There are some in the US who who oppose that idea and and and let me say this about that.

[00:27:32]I I think it's really important to know.

[00:27:34]Building a commercial ship is much different than building a navy ship.

[00:27:37]They're two different beasts. It's apples and oranges. However, there are some commercial ships that are in some ways more sophisticated than naval ships. Liquefied natural gas carriers, there's some very sophisticated ship construction, but the key here is that it broadens your labor base and one of the big problems we've had is since the 1980s when the US embarked on the 600 ship navy and decided to basically end commercial shipbuilding in the United States to basically export it to offshore it, to send it to Europe, Japan, and Korea, which was fine. They were our allies. We had no problem with that. What we did was really kind of shoot ourselves in the leg and and what it did is it put US shipyards at the mercy of government contracts, which can fluctuate. Whereas commercial shipbuilding allows some cushion. More importantly, it allows you to train a workforce in commercial standards that you can draw upon, pull into navy building yards, yards that build specifically for the US Navy, and construct it. I think that is what has hurt us more than anything else in the past 40 years has been that decision because by the end of the 1980s, the US had gone from being, you know, you know, basically building 10 to 6% of the global shipping down to 1%, down to a fraction of where we're at today. And I do think that the US has an opportunity.

[00:28:55]If you look at the new proposed shipbuilding plan put out by the US Navy, in it is some aspects of commercial shipping, what are called console tankers. These are commercial tankers under long-term charter to the United States that move fuel around the world for the Defense Logistics Agency, but also for the US Navy. One of the missions that's happening right now out in the Indian Ocean to support the Lincoln Battle Group, the Bush Battle Group, the Tripoli, and the Boxer is commercial US tankers bringing fuel out to replenish the capital ships, the Bush, the Ford, the Tripoli, but also the MSC, the Military Sealift Command oilers out there. I think this is very key. And what I would love to have seen is at the same time that the Navy introduces their shipbuilding program, the Maritime Administration under a new administrator, Steve Carmell, could have introduced their shipbuilding plan, which I thought would have been interesting. NASCO Philadelphia, which is now under Hanwha, a new shipyard down in Texas, Gulf Copper, the old Amfels, which built a couple of commercial ships. There are commercial capabilities where we can build. The big issue is we've got to get online and do support for this. There is no way that the US can compete against China. Japan and Korea are having a hard time competing against China. They've got to do a lot to keep their share of shipbuilding going on. The US has to do the same. I think one of the things that we keep seeing are these kind of black swan events that demonstrate the vulnerability of US shipping, whether it's Ever Given in the Suez, whether it's the Black Sea, the Red Sea, whether it's the Dali taking out a bridge in Baltimore. There's a lot of indications that what we need is to get US shipbuilding and the US maritime infrastructure back up and running. That develops a supply chain that benefits not just commercial shipping, but also Navy shipping. And let's also remember Army shipping for the Army Corps of Engineers, for the Coast Guard. Again, it focuses on the maritime dimension of the United States.

[00:30:57]>> Is Is China's great advantage just that they've got government subsidies and a low labor rate? What What makes China such a shipbuilding juggernaut?

[00:31:08]>> Well, it's funny when you look at China shipbuilding in the 1990s and 2000s, it was a massive mess. It was terrible. It was It was all over the place.

[00:31:14]What they did is they brought structure to it. They consolidated. I mean, you look at a company like the Chinese Chinese State Shipbuilding Corporation, CSSC. It's a behemoth, 310,000 employees. It builds more ships than Korea builds. And it's just one company that does it. So, China has a lot of advantages. Obviously, cheap capital, cheap labor, cheap oversight. I mean, cheap everything. I mean, it's just literally across the board. They can do that. What the US has the opportunity to do here is technology, I would argue.

[00:31:45]One of the big things that we're looking at right now, Secretary Duffy, the the Secretary of Transportation just recently had a conference on this, is where can we bring technology in to allow things happen. One of the good things about US shipyards maybe being in in so far backwards is we can reset them and bring in new technology, AI, automation. You know, those are elements that are really important. One of the things we've seen is US yards have pumped up during periods of key technology. In World War I, it was oil-fired ships. One of the things the British were very scared about in World War I is that our oil-fired ships could sail the world's oceans and not have to stop at coaling stations like their ships did. That was an advantage the British had. That's why they controlled all the maritime choke points for coaling.

[00:32:30]Our ships didn't have to do it. It was such a big threat to them that they had us cut back on our shipbuilding program to join the basically the sign the Treaty of Versailles. In World War II, we came up with a modular shipbuilding.

[00:32:42]It was it was Henry J. Kaiser, it's Freedom's Forge, it's that technology.

[00:32:47]And I think right now one of those areas we're looking at is is automation. I think it's a key one. I think AI is a big one, especially in ship design and ship construction, and also in propulsion. Maybe modular nuclear reactors could be the next big step for us. If we can come up with a propulsion system that is clean, that can fuel a ship for 20 years, that you can slide in and more importantly take out at the end of its life and recycle, that could be a big bonus for the United States. And I think, you know, if we introduce that maybe into some auxiliary vessels of the Military Sealift Command, maybe in some coastal vessels operating the US, start putting a track record down for those vessels, then we could sell that on the world stage. Other nations are looking at it right now. Korea's looking at it, Japan's looking at it, China's looking at us. We have probably the best track record for nuclear propulsion at sea in terms of the military, but it's a much different plant. It's it's not a Virginia, it's not a it's not it's not a a Bush class or a Ford class nuclear plant. We're talking about something lower power, molten salt, much safer to use, and more importantly last you for the entire life of the vessel. You don't have to refuel it.

[00:33:56]>> Yeah, and modular and and and doesn't doesn't require sending people to nuclear power school, which is a huge expense, right? For the US Navy. I mean, it's a a worthwhile expense, but you know, we send our sailors and our officers who are going to operate the as you pointed out the Virginia class submarines or the Ford class carriers.

[00:34:15]We send them through a a year-long intensive nuclear essentially nuclear engineering school so that they can operate those you know, very high-power reactors safely. But a for a commercial ship, a small modular reactor could could be the answer. Yeah, I what I heard there is you know, the US could could make a comeback in shipbuilding. We got to look for our our niche, right? We got to look for you know, the specific advantage where maybe with technology, you know, we we can get back up on step and and and you know, find a find a specific advantage that we might have.

[00:34:53]Well, Sal, this has been a great conversation coming up on the end here before we sign off any saved rounds?

[00:35:00]>> I know I I will just say you know, the situation right now in the Persian Gulf is very fluid. I think even if we somehow broker a deal tomorrow and and you get everybody together. I think one of the things that we'll see is is we're not going to see a return to pre-war levels because there's a big concern. I think we've you know, one of the issues is the uncertainty. Every time there's risk and risk is different in the commercial world than it is the military world. They're going to re-look. It's going to be more expensive to do business in the Persian Gulf. It's going to be higher cost. It's going to take time for everything to return back to normality. I mean, if you look at the Tanker War, that was a that was a almost a 10-year long war and then on the heels of it came the Persian Gulf War. So it took a while to get really everything back into normal and I think that's the new norm. We're seeing such an amazing period of time on the world's oceans.

[00:35:49]What had existed for such a long time, the great blue commons that was you know, the result of World War the US Navy, the British Navy, the Canadian Navy, the Allied Navies created this highway on the world's oceans that led to the greatest rise in global you know, productivity and wealth the world had ever seen. It was literally fueled by the US Navy and the US military in doing that in vanquishing the German, the Italian and the Japanese Navy and now freedom of the seas is under threat I would argue. I mean, we have never quite seen this in our lifetimes, Bill.

[00:36:22]It's really fascinating. You got to go back into the pages of Proceedings and Naval History and go back and look at, you know, the 1800s and the 1700s to find something quite like this. So, I mean, the role of navies now are more important than ever before, and I I think we're really starting to see that.

[00:36:39]And, you know, when when you get guys like Admiral Brad Cooper and Admiral Paparo testifying, you're seeing that right now. They're They're They are very good at articulating why navies are so important, and that's why I think Proceedings is is such a important document. I got to say, I've been a life time member of Proceedings. It was a gift my wife gave me. One of the very first gift she ever gave me was a 1992 lifetime membership to USNI, so I've always appreciated it.

[00:37:05]>> Fantastic. I I forgot to mention when I introduced you that you've you've been a multi-time Proceedings author as well.

[00:37:12]So, you wrote you've written at least 10 articles for us so over the years about commercial shipping, about logistics, military logistics, and commercial the the nexus between you know, military logistics and commercial logistics. Really important stuff. So, Sal, it's been great to have you on the show today. My guest is Sal Mercogliano, history professor, Proceedings author, merchant marine expert, and host of the YouTube channel What's Going On with Shipping. If you haven't followed that that channel, I highly recommend it to you because it is the place I go when I'm wondering like, "What's going on with shipping these days?"

[00:37:47]It is appropriately named. So, thanks for your time and your insights.

[00:37:51]As always, I learn a ton of new information every time I talk to you.

[00:37:55]>> Thanks, Bill. I appreciate it.

[00:37:56]>> Okay. This episode is brought to you by Booz Allen. From rugged 5G on warships to unmanned systems deep below the ocean, Booz Allen builds technology that works where it matters most. Their AI-driven mission-ready capabilities help the US Navy operate and win in contested environments. No manual, no roadmap, no problem. Learn more at boozallen.com/defense.

[00:38:19]If you like the show, ring the bell, subscribe, tell a friend. Until next episode, remember, victory begins at the Naval Institute.

[00:38:27]>> [music] [music]