by GuestfromEU » March 20, 2019, 9:51 am
Bookworm wrote:Reading your response brought a hypothetical idea to mind. Could a private (financially well-grounded) enterprise build and maintain a single heavy-duty icebreaker designated for Great Lakes use only? Obviously it couldn't be everywhere at once and more regulations than I'm aware of might make it unworkable. I have no one in mind. Simply like to learn from the many educated posts I read.
Sure, it's possible, but it would be very unprofitable. To build a mission capable icebreaker of this nature would cost a minimum of US$125-150m at the very low end, when considering not only construction costs but also engineering and development. To be effective, the beam would be larger than 78', thus relegating it to the four lakes as Seaway transit is not possible. The operation period would be December through March/April, with no feasible options for work during the remaining 8-9 months of the year. I cannot think of any other new ships worldwide that justify the expense of building a new ship, only to let it sit idle for a healthy majority of the year. It would be along the same lines of Algoma building a new bulk carrier to be used only during the fall grain rush. The economics simply aren't there.
With the USCG and CCG providing services, and the extremely high day rates this private icebreaker would charge for their assistance, any shipping company would gladly take the free (or low cost) services offered by the governments. Let's say the hypothetical going rate is $5,000/hour for this hypothetical new icebreaker. During four months of use, averaging 100 hours of hired time per week, that's $500,000/week. Operating expenses are deducted (fuel, wages, insurance, etc), so let's say a net profit of $250,000/week. That's $1,000,000 per month net profit, $4,000,000 for the entire winter (assuming it works to aid the 2 or 3 ships still sailing into February). These are all very hypothetical numbers that are probably on the very, very optimistic end. As a private company, the operator of this icebreaker is in the business to generate a profit, but let's assume the entire $4m goes into paying off the construction loans. With interest, it would be 50+ years before that loan is paid off (all the while not generating a profit). This also assumes constant winter weather and income generated each year, something we all can agree does not happen. Very likely there would be years this private icebreaker would never be needed. Rarely would it ever be needed beyond the four month estimate. If this private company was seeking outside financing, no lender would consider this ROI as anything serious.
The only comparison I can think of is the Erika Kobasic. This is a private tugboat that shipping companies can contract for ice assistance. This tug is also dating from the 1940s, so it does not have the expense of paying off construction loans of a new ship. The price shipping companies pay for use of this tug is not cheap, but reasonable enough to justify when needed. I believe they charge per hour used, but I could be mistaken. This being said, she only operates in the Lake Michigan area - you don't see this tug traversing all over the lakes to aid anywhere needed.
All of this does not factor in that icebreaking is a complex affair. Icebreakers don't simply ram ice to break it up - there is a science behind how they choose to approach every scenario, taking the ice formation, thickness, and downstream conditions into effect. The private company would have to liaise with the respective Coast Guards and follow their plan of attack, something that may or may not even be possible.
[quote="Bookworm"]Reading your response brought a hypothetical idea to mind. Could a private (financially well-grounded) enterprise build and maintain a single heavy-duty icebreaker designated for Great Lakes use only? Obviously it couldn't be everywhere at once and more regulations than I'm aware of might make it unworkable. I have no one in mind. Simply like to learn from the many educated posts I read.[/quote]
Sure, it's possible, but it would be very unprofitable. To build a mission capable icebreaker of this nature would cost a minimum of US$125-150m at the very low end, when considering not only construction costs but also engineering and development. To be effective, the beam would be larger than 78', thus relegating it to the four lakes as Seaway transit is not possible. The operation period would be December through March/April, with no feasible options for work during the remaining 8-9 months of the year. I cannot think of any other new ships worldwide that justify the expense of building a new ship, only to let it sit idle for a healthy majority of the year. It would be along the same lines of Algoma building a new bulk carrier to be used only during the fall grain rush. The economics simply aren't there.
With the USCG and CCG providing services, and the extremely high day rates this private icebreaker would charge for their assistance, any shipping company would gladly take the free (or low cost) services offered by the governments. Let's say the hypothetical going rate is $5,000/hour for this hypothetical new icebreaker. During four months of use, averaging 100 hours of hired time per week, that's $500,000/week. Operating expenses are deducted (fuel, wages, insurance, etc), so let's say a net profit of $250,000/week. That's $1,000,000 per month net profit, $4,000,000 for the entire winter (assuming it works to aid the 2 or 3 ships still sailing into February). These are all very hypothetical numbers that are probably on the very, very optimistic end. As a private company, the operator of this icebreaker is in the business to generate a profit, but let's assume the entire $4m goes into paying off the construction loans. With interest, it would be 50+ years before that loan is paid off (all the while not generating a profit). This also assumes constant winter weather and income generated each year, something we all can agree does not happen. Very likely there would be years this private icebreaker would never be needed. Rarely would it ever be needed beyond the four month estimate. If this private company was seeking outside financing, no lender would consider this ROI as anything serious.
The only comparison I can think of is the Erika Kobasic. This is a private tugboat that shipping companies can contract for ice assistance. This tug is also dating from the 1940s, so it does not have the expense of paying off construction loans of a new ship. The price shipping companies pay for use of this tug is not cheap, but reasonable enough to justify when needed. I believe they charge per hour used, but I could be mistaken. This being said, she only operates in the Lake Michigan area - you don't see this tug traversing all over the lakes to aid anywhere needed.
All of this does not factor in that icebreaking is a complex affair. Icebreakers don't simply ram ice to break it up - there is a science behind how they choose to approach every scenario, taking the ice formation, thickness, and downstream conditions into effect. The private company would have to liaise with the respective Coast Guards and follow their plan of attack, something that may or may not even be possible.