The physical infrastructure of global trade, and the most consequential strategic buildup most investors aren't modeling.
China now builds more than half the world's ships, controls the planet's largest merchant fleet, and has embedded military-conversion requirements into civilian shipbuilding by law. The financial models pricing its commercial fleet haven't caught up.
"Whoever commands the sea, commands the trade; whosoever commands the trade of the world commands the riches of the world." Sir Walter Raleigh
Shipping is the one layer of the global economy that cannot be faked. Earnings reports get revised. GDP figures get restated. Central bank language gets managed. But a ship either moved or it didn't. The Baltic Dry Index either went up or it didn't. A vessel either transited Hormuz or it diverted around the Cape of Good Hope, and that costs one million dollars in extra fuel.
I grew up across Saudi Arabia, South Korea, China, and India, four economies with completely different relationships to maritime trade. South Korea built its post-war economy on shipyards. Saudi Arabia exports 10 million barrels a day through a strait 33 kilometers wide. China controls the yards, the fleet, and increasingly the ports. India sits at the intersection of every major Indian Ocean trade route and can't build a large ship to save itself.
I track shipping because it tells me what's actually happening in the global economy before the data does. And right now, what's happening is the largest peacetime maritime buildup in modern history, and almost no one in finance is modeling the full implications.
"A ship either moved or it didn't. That's the only macro data that can't be managed."SHIPPING & MARITIME POWER · MANDAVKAR
Four indicators that give me a real-time read on the physical economy. Not opinions, not guidance, physical movements of actual goods through actual ships.
Composite of Capesize, Panamax, and Supramax spot charter rates for dry bulk vessels. Roughly 70% of Capesize movements are China iron ore, making BDI the most honest real-time read on Chinese industrial demand available to a public market participant.
~70% of Capesize volume = China iron ore importsComposite spot freight rate for a 40ft container across eight major global routes. Leads European goods CPI by 4–6 months. The Red Sea disruption was a Drewry story before it became an inflation story, the container market priced it first.
4–6 month lead indicator on European goods CPISpot charter rates for crude oil tankers, VLCC, Suezmax, and Aframax classes. When BDTI diverges from OPEC production statements, the tankers are telling the truth. The 2019 COSCO sanctions episode proved this: rates surged 150% before OPEC acknowledged any disruption.
BDTI divergence vs. OPEC guidance = real signalThe gap between vessels detected by RF satellite and those broadcasting AIS from Chinese waters. Since China's PIPL (November 2021), up to 80% of ships in Chinese waters have gone dark to global AIS tracking, a structural intelligence asymmetry with no Western equivalent.
Up to 80% dark · 6 of 10 largest ports in blackout zoneThe March 2026 60-day Jones Act waiver, the broadest since WWII, expires mid-May 2026. The domestic tanker fleet comprises only 55 vessels serving all US routes with zero Jones Act-compliant LNG carriers in existence. When the waiver expires, supply chains snap back to constrained capacity. Extension vs. expiry is a binary event that moves US East Coast product crack spreads and Algonquin gas basis.
Waiver expires ~May 2026 · 0 domestic LNG tankers · Algonquin basis tradeHow a state-directed industrial strategy built the world's dominant maritime power, and what it means for freight markets, defense planning, and global capital
Dhruv Mandavkar · March 2026 · 12 min read
In 2024, Chinese shipyards completed 55.7% of global shipping output by deadweight tonnage, won 74.1% of new orders, and held 63.1% of the global order backlog. Seven of the world's ten largest shipbuilding groups are Chinese. Most yards are fully booked through the end of 2028. This is not a cyclical story. It is an industrial policy success story of the kind that only state capitalism with a 20-year time horizon can produce, and it has implications that go well beyond freight rates.
Source: BIMCO, Clarksons, iMarine, Matrixbcg 2025 · Yards booked through end-2028 · 5.5× order-to-capacity ratio
China's shipbuilding market share stood below 10% in 2001, the year it joined the WTO. That figure is now 74.1% on new orders. The mechanism that produced this shift is documented. In 2006, the Chinese government formally designated shipbuilding a strategic industry. What followed was one of the most precisely executed industrial policy campaigns in modern economic history.
Academic research by Myrto Kalouptsidi at Harvard, published in the Review of Economic Studies, found that Chinese subsidies reduced shipyard costs by 13–20% between 2006 and 2012, worth $1.5–4.5 billion in production subsidies alone. A broader CEPR study by Barwick, Kalouptsidi, and Zahur estimated total subsidies of approximately $91 billion between 2006 and 2013, 69% in entry subsidies for new yard construction, 25% in production subsidies, 6% in investment subsidies. Between 2010 and 2018, an additional $132 billion in state support flowed primarily through preferential loans from state-owned banks. Without these subsidies, Kalouptsidi's model found China's market share would have been cut to less than half.
The policy framework is explicit. Made in China 2025 listed shipbuilding as one of ten strategic manufacturing industries, with targets for five globally competitive companies, 40% maritime equipment market share, and 80% parts localisation for advanced vessels. The 2019 merger of CSSC and CSIC created a single entity with $110+ billion in assets and roughly one-third of global ship production. By July 2025, the merger was complete: 530+ vessel orders totaling 54 million DWT on a single Shanghai Stock Exchange listing.
China's dominance is not uniform. By segment in 2024: bulk carriers at 75% of new orders, container ships at 81%, tankers at 74%, LPG carriers at 48% versus Korea's 46%, China surpassed Korea in LPG for the first time. South Korea's remaining structural advantage is LNG carriers, where Korean yards (HD Hyundai, Samsung Heavy Industries, Hanwha Ocean) hold approximately 62–75% of the orderbook. This is the one segment where Chinese quality perception still carries a measurable discount in secondhand markets.
That edge is closing faster than consensus expects. China's Hudong-Zhonghua Shipbuilding, a CSSC subsidiary, delivered nine LNG carriers in 2025 and has ordered six ultra-large 271,000 m³ VLNG carriers for delivery 2028–2031. As recently as 2019, China had a single yard capable of building large LNG carriers. The cost gap runs approximately 10–15% in China's favour at $200–210 million versus Korean equivalents. Chinese-built LNG carriers trade at a 2–5% secondhand discount due to residual quality perception, but that perception is eroding with each delivered vessel. The LNG carrier segment is the last meaningful technology gap, and it is closing on a timeline that most LNG infrastructure investors are not modelling.
The global container orderbook stands at 10–11 million TEU, representing 31–33% of the active fleet, the highest ratio since 2008–2010, which produced a decade-long supply overhang. Fleet growth is projected at 8.2% annually through 2025–2028 against essentially flat TEU-mile demand growth. Red Sea diversions currently absorb roughly 12% of excess capacity. If routing normalises, structural oversupply materialises immediately.
The structural logic is circular in a way that market commentary rarely captures. Chinese yards' massive output is contributing to overcapacity that will compress freight rates. Lower freight rates accelerate adoption of newer, cheaper tonnage, mostly Chinese-built. Which strengthens Chinese yards' order books. Which produces more tonnage. ONE (sixth-largest carrier globally) has already forecast net losses for H2 FY2025 citing overcapacity. Carriers are reducing average speeds by 2.3% to limit effective supply growth. The yards producing the most supply are state-owned enterprises indifferent to the consequences, which means the market correction that would normally slow production is not coming from the supply side.
The USTR Section 301 investigation was initiated in April 2024. Fees were finalised in April 2025 and took effect October 14, 2025: $50 per net ton on Chinese-operated vessels at first U.S. port call, rising to $140/NT by 2028; $18/NT or $120 per container for non-Chinese-operated but Chinese-built vessels. For large megaships the levy translated to roughly $550–1,600 per container over the 2025–2028 ramp-up. China retaliated with special port fees on U.S.-linked ships at Chinese ports.
On October 30, 2025, following the Trump-Xi meeting, the USTR suspended all Section 301 port-entry fees for one year. China suspended its retaliatory measures simultaneously. The political economy was transparent: U.S. importers facing $550+ per container in additional costs lobbied hard, and the short-term disruption cost exceeded the political will to maintain pressure. BIMCO data showed China's share of newbuilding contracting fell from 72% in H2 2024 to 52% in H1 2025 during the period of uncertainty. When the lever was relaxed, that share began recovering. The West has identified the problem. It has not identified a solution that is economically viable without replicating the state capitalism model being criticised.
"The LNG carrier segment is the most likely battleground: it combines strategic importance, technological complexity, and financial significance above $200 million per vessel. Watch the Korean LNG carrier orderbook as the leading indicator of whether Western energy security can remain independent of Chinese-built infrastructure."SHIPPING & MARITIME POWER · THESIS 01
China's Beidou satellite system gives Beijing real-time visibility over its entire merchant fleet. Here's what that actually means, and what it doesn't.
Dhruv Mandavkar · March 2026 · 8 min read
GPS was designed for navigation. You receive signals from satellites and calculate your position. The satellites don't know you exist. Beidou was designed differently. China's navigation satellite system has 45 operational satellites, more than GPS, Galileo, or GLONASS, and its Regional Short Message Communication service requires user terminals to transmit signals back to satellites. Those signals are processed by a Master Control Station on Chinese soil. Which means: Beidou knows where every terminal is, and every message transmitted passes through infrastructure Beijing controls. This is not a security vulnerability in Beidou. It is a design feature.
All Chinese fishing vessels are compulsorily required to install Beidou Vessel Monitoring System terminals and keep them operational at all times. The government subsidises up to 90% of installation costs. Over 60,000 fishing vessels are equipped, with temporal resolution of 3 minutes and spatial resolution of 10 meters, averaging 406 position reports per vessel per day. Hainan province fined 233 fishing vessels for disabling their Beidou systems, demonstrating active enforcement rather than passive monitoring. Starting January 1, 2025, IMO resolution MSC.496(102) requires all newly installed Class A AIS units to support Beidou for vessels in Chinese waters. This is the template for merchant fleet integration.
The scale of this monitoring capability is worth pausing on. 406 reports per vessel per day across 60,000 vessels is approximately 24 million position data points per day from fishing vessels alone. The merchant fleet integration is less complete but directionally consistent: China's Maritime Safety Administration mandates Beidou compatibility for vessels operating in Chinese waters. At the current trajectory, China will have real-time position data on every vessel in its waters, and on Chinese-flagged vessels globally, while having simultaneously made those same waters substantially opaque to external monitoring.
China's Personal Information Protection Law (PIPL) took effect in November 2021. What followed was dramatic. Unseen Labs, a French RF detection company, conducted an 8-day satellite campaign in the East China Sea and found that more than 60% of ships had disappeared from AIS screens; up to 80% of ships detected by RF satellite were not broadcasting AIS. VesselsValue reported AIS signals from Chinese waters dropped by 90% after PIPL entered force. State media CCTV justified the suppression by arguing that foreign intelligence agencies use AIS data to surveil Chinese port activity. They were right, that was the point.
Six of the world's ten largest container ports are in China. This is not a marginal intelligence asymmetry, it is a structural blackout at the centre of global trade. Shipping analysts, freight brokers, and insurance underwriters all rely on AIS data for vessel utilisation estimates, port congestion metrics, and freight demand modelling. Since November 2021, their models have been operating with a persistent 80% data gap at the world's most important trade hub. Most have not explicitly acknowledged this in their methodology notes.
Most COSCO oceangoing vessels carry a political commissar, typically a former PLA officer, embedded alongside the commercial captain. The system is documented in a 2024 China Maritime Studies Institute report by Conor Kennedy at the U.S. Naval War College. These commissars provide a direct command-and-control channel for national security tasking that operates independently of commercial shipping management. Xi Jinping has revitalised the system since 2015. The commissars represent the human layer of the Beidou tracking architecture: real-time positioning data paired with embedded personnel who can receive and act on direct instructions without going through the commercial chain of command.
Real-time tracking does not automatically translate into real-time command capability. Merchant captains are not soldiers. Civilian crews have no damage control training, no military discipline structures, and no institutional incentive to operate in war zones. The naval planning literature is clear: the constraints on converting civilian fleet tracking into military operational capability are significant, particularly in contested environments where vessels would be large, slow targets with no defensive systems. The China Maritime Studies Institute's institutional judgment as of 2024 was that China's civilian merchant fleet is "probably unable to provide significant amphibious landing capabilities under realistic conditions" through at least 2030. The honest analytical position is that Beidou gives China a persistent intelligence advantage over its fleet's location and communications, not a proven capacity to command it as a military force in conflict conditions.
"The most important implication of Beidou is not tactical. It is informational. China has real-time data on the location of tens of thousands of vessels globally while having made its own waters substantially opaque to external tracking. This asymmetry takes decades to reverse."SHIPPING & MARITIME POWER · THESIS 02
Western shipping operators are only beginning to understand that their vessels' Beidou transponders are feeding a database they have no access to. The firms building satellite RF detection capability to fill the AIS gap, Unseenlabs, HawkEye 360, Spire Maritime, are building infrastructure that the shipping industry will eventually pay for. The market has not yet priced the data asymmetry itself as a commercial opportunity or a structural risk in shipping equity valuations.
COSCO controls 371 berths across 39 global ports. Here's what the network actually looks like, and what it means for geopolitics, freight markets, and the Indian Ocean.
Dhruv Mandavkar · March 2026 · 7 min read
COSCO Shipping Corporation is owned by SASAC, the Chinese government body that oversees state assets. In January 2025, the U.S. Department of Defense added COSCO to its list of Chinese military companies. COSCO operates the world's largest merchant fleet: 1,300+ vessels, 113 million DWT, 554 container ships serving 629 ports in 145 countries. In FY2024 it reported revenue of RMB 233.9 billion ($32+ billion) with net profit doubling to RMB 49.1 billion. It is simultaneously one of the world's largest commercial shipping companies and, by the DoD's formal designation, a Chinese military company. Understanding the difference between these two things, and why the distinction is less clear than it appears, is the point of this piece.
COSCO acquired 51% of Piraeus Port Authority in 2016 for €280.5 million, adding a further 16% in 2021 for €90 million, reaching 67% controlling ownership. The transformation is one of the most striking case studies in Chinese port strategy: throughput went from approximately 700,000 TEU in 2008 to over 5.4 million TEU in 2024, a 600%+ increase, one of the fastest growth trajectories in European port history. Xi Jinping called Piraeus the "Dragon's Head" of China's European logistics infrastructure during a 2019 state visit.
The security concern is real but often overstated. A 2023 European Parliament study concluded that Chinese military activism at Piraeus is "virtually impossible" given Greece's NATO anchoring. The actual risk is not PLA naval basing in the Mediterranean. It is infrastructure dependency and intelligence access, COSCO's operational control of Europe's fastest-growing container port gives Beijing visibility into cargo flows, vessel schedules, and trade patterns that no satellite can provide with equivalent granularity. The dependency dynamic is the vulnerability, not the missile threat.
When COSCO sought a 35% stake in Hamburg's HHLA Container Terminal Tollerort, six German cabinet ministers objected on national security grounds. Chancellor Scholz approved a reduced 24.99% stake, deliberately structured below the 25% threshold for governance or veto rights under German corporate law. COSCO has no access to strategic know-how, IT systems, or sales intelligence under the agreement. The episode is the clearest single data point on European navigation of Chinese port investment: they recognise the strategic risk formally, object loudly, and then accept a modified deal because the economic cost of full exclusion exceeds the political will to pay it.
Beyond Piraeus and Hamburg, COSCO holds stakes in Zeebrugge (~95%), Rotterdam (35%), Valencia, Bilbao, and Vado Ligure (40% each), Istanbul, Abu Dhabi, Singapore, and Busan. The $2 billion Chancay mega-port in Peru opened November 2024 during a Xi Jinping state visit, the first deep-water Pacific port on South America's coast capable of handling the largest container vessels, positioning Chinese logistics infrastructure at both ends of the Pacific trade corridor simultaneously.
Separate from COSCO, China Merchants Port Holdings controls a 70% stake in Hambantota (Sri Lanka) on a 99-year lease, the Doraleh Multipurpose Port in Djibouti (adjacent to China's first overseas military base), and 90% of TCP Participações in Brazil. Hutchison Port Holdings, technically Hong Kong-based, operates Felixstowe in the UK and the largest operations at Rotterdam. It is worth noting the Hambantota framing accurately: multiple scholarly analyses from Chatham House, Georgetown Journal of International Affairs, and The Diplomat document that the 99-year lease was not a debt-for-equity swap. The $1.12 billion payment went to Sri Lanka's foreign reserves, not to repay Chinese loans. Chinese lending constituted less than 5% of Sri Lanka's total debt servicing. The "debt-trap" narrative originated primarily from U.S. and Indian geopolitical discourse and is analytically contested.
On September 25, 2019, OFAC designated COSCO Shipping Tanker (Dalian) as a Specially Designated National for transporting Iranian oil. Roughly 50 COSCO VLCCs were effectively blacklisted. Confusion about whether sanctions extended to the parent company's 1,000+ ship fleet caused panic in tanker markets. VLCC spot rates surged from approximately $40,000 per day to over $100,000 per day in Q4 2019, a 150% move in weeks. OFAC partially delisted the subsidiary on January 31, 2020, in a move linked to U.S.-China trade negotiations.
The lesson is not that OFAC sanctions are effective, in the short term they clearly worked. The lesson is about market concentration risk. A single designation affecting one COSCO subsidiary moved global VLCC rates by 150%. That is the transmission mechanism: Chinese market concentration in global shipping creates a direct channel through which geopolitical risk reprices freight markets in ways no standard financial model captures ex ante. The 2019 episode was the preview. The next iteration will involve more vessels, more market segments, and a political context less likely to produce a six-week reversal.
India routes approximately 17% of its exports through Middle East ports and is bordered by the Indian Ocean on three sides. China's String of Pearls, Gwadar near the Strait of Hormuz, Hambantota as an Indian Ocean waypoint, Kyaukpyu providing a Bay of Bengal bypass, and Djibouti as an active military base adjacent to Bab el-Mandeb, creates layered logistics infrastructure encircling the Indian Ocean. India's counter-strategy, the "Necklace of Diamonds," strengthens partnerships with Vietnam, Oman, Indonesia, Japan, and Singapore. The Quad's Indo-Pacific Partnership for Maritime Domain Awareness has committed $120+ million in support for satellite-based regional surveillance.
The honest assessment of India's position is uncomfortable. India's commercial shipbuilding output is less than 1% of global production at 0.072 million GT per annum, with yard costs running 25–30% above international peers. The government approved a ₹70,000 crore (~$8.3 billion) package in 2025 to revitalise the sector, meaningful, but orders of magnitude below China's cumulative investment base. India is a maritime power by geography and a maritime weakness by industrial capacity. That gap is the most important constraint on India's strategic autonomy in the Indian Ocean, and it will not close in a decade. Indian capital markets analysts are not pricing the strategic implications of that dependency into infrastructure or logistics equity valuations.
"The same mechanism that makes COSCO useful as a policy lever makes it dangerous as a market concentration risk. A single OFAC designation moved global VLCC rates 150% in 2019. The next episode will be larger and less reversible."SHIPPING & MARITIME POWER · THESIS 03
The Jones Act, global cabotage laws, and the trillion-dollar structural distortions that become lethal during crises
Dhruv Mandavkar · March 2026 · 15 min read
On March 18, 2026, President Trump issued the broadest Jones Act waiver since World War II, a 60-day suspension covering oil, natural gas, fertilizer, and coal across all US domestic routes. The trigger was the Strait of Hormuz closure. The revelation was this: the United States, the world's largest petroleum producer, could not move its own fuel between its own ports without emergency executive intervention. That structural fragility is the central story of maritime cabotage. It extends to 91+ countries and affects hundreds of billions of dollars in trade. And almost no financial model captures it.
Sources: MARAD US-Flag Fleet Report Jan 2024 · Balsa Research Nov 2025 · NBER Working Paper 31938 · Purdue University 2022 · CRS Report R45725 · Progressive Policy Institute 2025
The Merchant Marine Act of 1920, Section 27, codified at 46 U.S.C. § 55102, requires that any merchandise transported between US coastwise points must move on a vessel that is simultaneously US-built, US-flagged, US-owned (75%+ by citizens), and US-crewed. All four conditions must be met at once with no exceptions.
"US-built" means every major component exceeding 1.5% of the vessel's steelweight must be fabricated domestically, and the hull assembled entirely in a US yard. Engines and outfitting may be imported. "US-crewed" means all licensed officers must be citizens, no exceptions, with 75% of unlicensed crew meeting the same standard. Adding more than 7.5% of hull steelweight abroad permanently strips coastwise eligibility. A Korean-owned shipyard (Hanwha acquired Philadelphia's Philly Shipyard in December 2024) now builds the majority of new Jones Act commercial vessels, an irony that reveals the law's internal contradictions.
The law applies to all 50 states, Puerto Rico (cargo), Guam (with a relaxed build requirement), and all offshore oil platforms, but not the US Virgin Islands, which was purchased from Denmark three years before the Act's passage and explicitly excluded.
At its post-WWII peak, the US had 4,446 flag vessels. There are now 92 Jones Act-eligible ocean-going ships, a 52% decline since 2000 alone. The fleet contains zero dry-bulk carriers capable of intercontinental trade, zero LNG carriers, zero VLCCs. Its 55–56 tankers average 25 years of age. Twenty-eight of them will exceed nominal service life by 2030. No regular Jones Act cargo service operates between any two contiguous US states, the entire ocean-going fleet serves only non-contiguous routes: Hawaii, Alaska, Puerto Rico, and Guam.
Building a vessel in the US costs 4–8 times the equivalent South Korean or Chinese price. Matson's three 3,620-TEU Aloha-class containerships at Philly Shipyard cost approximately $330 million each. Maersk simultaneously ordered vessels six times larger from the same Korean-owned Hanwha Ocean for roughly $272 million each. Operating a Jones Act vessel costs 2.7 times more than a foreign-flagged equivalent, crew costs alone run approximately $17,000 per day above international rates.
No Jones Act-compliant LNG tanker has been built in approximately 40 years. Constructing one domestically would cost $500–700 million versus ~$200 million in Asia. The consequence is absurd by any standard of economic logic: in winter 2018–2019, New England imported LNG from Russia's Yamal project while the Sabine Pass export terminal in Louisiana was simultaneously shipping LNG to Asia. There was no mechanism to connect supply to demand within the same country by sea.
New England's Algonquin gas hub routinely spikes to $25+/MMBtu in cold winters, multiple times higher than Henry Hub in Louisiana, because the Jones Act severs New England from the domestic gas market. The region competes for global LNG spot cargoes at JKM-linked prices rather than accessing cheap domestic supply two days away by ship. Puerto Rico pays up to 30% more for LNG than it would absent cabotage constraints, while the Dominican Republic, without a Jones Act, sources 96.4% of its LNG from American terminals.
"The world's largest LNG exporter imported gas from Russia to heat New England, because a 1920 law made it impossible to ship it domestically by sea."JONES ACT & MARITIME PROTECTIONISM · MANDAVKAR
The 60-day waiver, announced March 18 and citing authority under 46 U.S.C. § 501(a), the national defense pathway that requires no MARAD vessel availability survey, covers oil, LNG, fertilizer, and coal on all domestic routes. Its scope is unprecedented since WWII. The trigger was the Hormuz closure: with only 55 Jones Act tankers serving all domestic routes and the global tanker fleet redeploying away from the Persian Gulf, the US had no domestic surge capacity. Jones Act tankers were locked into long-term charters. New England entered the crisis with approximately 18 days of heating oil supply against a healthy 30-day level.
The waiver's estimated price impact is modest, approximately 3 cents per gallon on the East Coast. Critics are correct that the Jones Act accounts for only roughly 6.5% of US gasoline distribution. The more important signal is political: for the first time since WWII, a sitting president demonstrated willingness to waive the Jones Act for an extended period across multiple commodities. The taboo has been broken. Historical waivers were narrow and brief, Katrina (18 days, petroleum only), Sandy (12 days), Maria (10 days after an 8-day delay that became politically infamous). The March 2026 waiver is categorically different, and its expiry around mid-May 2026 is a binary event that markets are not pricing.
| Event | Duration | Scope |
|---|---|---|
| Hurricane Katrina (2005) | 18 days | Petroleum only |
| Hurricane Sandy (2012) | ~12 days | Petroleum only |
| Hurricane Maria (2017) | 10 days (8-day delay) | All products, Puerto Rico only |
| Colonial Pipeline (2021) | ~Days | 2 company-specific waivers only |
| Hormuz Crisis (March 2026) | 60 days | Oil, LNG, fertilizer, coal, all routes |
Sources: DHS official statements · Winston & Strawn maritime law analysis · CRS IN10790
The Jones Act survives because its beneficiaries are concentrated and politically organised while its costs are diffused. The American Maritime Partnership claims 40,000 vessels, 650,000 jobs, and $154.8 billion in annual economic output (PwC, 2019, using IMPLAN multiplier modelling). The underlying ocean-going fleet directly employs approximately 3,380 mariners. Major operators, Matson (NYSE: MATX, ~$3.4B revenue), Crowley Maritime (~$2.8B), TOTE/Saltchuk, and Kirby Corporation (NYSE: KEX, the largest US inland tank barge operator), each have structural reliance on the law. Kirby's SEC filings explicitly state Jones Act repeal would "adversely impact the company's business interests." Sea transport industry lobbying reached $20.6 million in 2025 (OpenSecrets).
The national security argument is genuinely partially valid. TRANSCOM commanders have consistently testified that Jones Act ships contribute to the military sealift pool, and approximately 29% of needed surge capacity mariners serve on Jones Act vessels. But the same law has presided over a collapse in US commercial shipbuilding to 0.04% of global output, a national security failure by its own standard. The paradox is that the law intended to preserve industrial and military capacity has instead produced a concentrated, uncompetitive fleet of 92 aging vessels that requires emergency suspension whenever a real geopolitical shock arrives.
The Jones Act is not unique, it is the most extreme version of a global pattern. Approximately 91 countries maintain some form of maritime cabotage law. The consequences follow a consistent pattern: higher domestic shipping costs, smaller domestic fleets, and supply chain brittleness during crises. The economic literature (OECD STRI; UNCTAD 2017; World Bank logistics performance data) consistently finds that stricter cabotage correlates with higher logistics costs as a share of GDP, reduced coastal shipping modal share, and worse freight connectivity for island and archipelagic nations.
Fleet shrank from 55 vessels (1996) to 11 by 2024 despite, or because of, the protectionist regime. The Productivity Commission (2023) found port inefficiencies alone cost $600M/year and concluded Australian-flagged vessels are "not a prerequisite to meeting maritime skill requirements." Operating cost premium: $5–8 million per vessel per year.
Fleet grew from 6,041 vessels (2005) to 32,587 by 2019. But logistics costs remain 14–23% of GDP versus ASEAN average of 8–10%. It is cheaper to ship a container from Shanghai to Jakarta than from Jakarta to Padang in West Sumatra, a route one-sixth the distance. The October 2024 Third Amendment (Law 66/2024) tightened restrictions further.
No domestic build requirement. Any EU-flagged vessel may serve any EU cabotage route. Result: 40% of EU freight moves by sea versus 2% in the United States. Island routes (Sardinia, Greek islands, French overseas territories) remain oligopolistic due to natural market structure, not cabotage law design.
Active push to expand cabotage from 11% to 30% modal share. AFRMM tax (10% on cabotage freight) funds fleet development but creates its own distortions. Market is highly concentrated: Aliança (Maersk subsidiary) holds 52–57% share; Log-In (MSC) holds ~30%. Operating a Brazilian-flagged vessel costs roughly 70% more than chartering a foreign equivalent.
No domestic build requirement, Canada repealed its 25% import tariff on ships in 2010, after which the two main Great Lakes carriers ordered 18 new vessels from Chinese and Croatian yards. Key distinction: Canadian cabotage protects operations without requiring domestically-built ships. The result is a small but commercially viable fleet of approximately 70+ vessels on the St. Lawrence Seaway system.
India partially relaxed cabotage in May 2018 to recapture the 33% of Indian containers being transshipped via Colombo and Singapore. Results were mixed. In March 2026, the same month the US waived its Jones Act, India reversed the relaxation. The two largest democracies moved in opposite directions on cabotage in the same week.
Sources: Australian Productivity Commission (2023) · UNCTAD Transport & Trade Facilitation Series No. 9 (2017) · World Bank LPI · ANTAQ Brazil · OECD STRI 2025 · CRS R45725 · Transport Canada 2024 Annual Report
The peer-reviewed evidence on Jones Act costs is now substantial and increasingly rigorous. Kellogg and Sweeney (NBER Working Paper 31938, published in the Journal of Law and Economics 2025) used actual Argus Media freight rate data to estimate a net welfare gain of $403 million per year from Jones Act repeal in petroleum markets alone, with East Coast consumer surplus increasing by $769 million. Olney (2020, Journal of International Economics) found the law has reduced domestic waterborne trade and increased coastal consumer prices by approximately 1.35% since 1997. Hillberry and Jimenez (Purdue, 2022) found Puerto Rico bears a $1.4 billion annual welfare burden, exceeding most countries' tariff barriers by a factor of seven. The OECD (Gourdon & Guilhoto, 2019) estimated abolishing just the US-build requirement would increase economy-wide value-added by $19 billion annually.
The national security counter-argument has genuine but narrow validity. TRANSCOM commanders have consistently supported the law in congressional testimony, and some mariner pool contribution to military surge capacity is real. But the law has simultaneously presided over the near-total collapse of US commercial shipbuilding. The Cato Institute's "Rust Buckets" analysis (2019) put it starkly: the Act intended to preserve shipbuilding capacity and has produced 0.04% of global output. The disconnect between the law's stated purpose and its actual outcome is the strongest argument for reform.
These are not predictions. They are structural arguments about risks that standard financial models are not built to capture. The market's current pricing implies that none of the following are material. I think at least two of them are.
Korea currently holds 62–75% of the global LNG carrier orderbook. China is closing that gap at a pace that will achieve rough parity by 2027–2028. When that happens, the energy security of Europe, which rerouted from Russian pipeline gas to LNG after 2022, will depend on vessels built in Chinese state yards, tracked by Beidou, and legally subject to PLA requisition under the National Defense Transportation Law. The market prices LNG carrier construction as a commercial competition between Korea and China. It should be pricing it as an energy security question with no clear Western answer.
Korea 62–75% LNG orderbook · China parity by 2027–28 · $200M+ per vesselChina's fleet of military-specification RoRo ferries is documented, not speculative. The 2016 National Defense Transportation Law mandated it. Individual vessels have been named and tracked through PLA exercises. But consensus security analysis (CMSI, Naval War College, 2024) concludes that a kinetic Taiwan invasion using this fleet remains constrained through at least 2030, civilian crew incapability, missing port infrastructure, and targeting vulnerability are all real constraints. The more important implication is coercive: China can credibly threaten a blockade that would cost the global economy $10 trillion and exhaust Taiwan's LNG reserves in 11 days, using assets that look entirely commercial until they aren't. No standard financial model prices this option value.
$10T global GDP impact · 11 days Taiwan LNG · blockade > invasion riskSince China's PIPL took effect in November 2021, up to 80% of vessels in Chinese waters have gone dark to AIS tracking. Six of the world's ten largest container ports are in China. Shipping analysts, insurers, and financial models rely on AIS data for vessel utilisation, port congestion metrics, and freight demand estimates. A persistent 80% data gap at the world's largest trade hub is not a known unknown, it is an unacknowledged structural uncertainty embedded in every freight market model currently in use. The firms building satellite RF detection capability to fill this gap (Unseenlabs, HawkEye 360, Spire Maritime) are building infrastructure that the shipping industry will eventually pay for. That pricing event has not happened.
80% AIS dark in Chinese waters · RF detection gap = unpriced commercial opportunityWhen the 60-day waiver expires, foreign vessels must cease US domestic trade immediately. Jones Act requirements snap back in full. If the Hormuz crisis persists, the administration either extends the waiver (setting a precedent that erodes the law's permanence) or East Coast product supply chains return to constrained domestic capacity, repricing crack spreads and Algonquin basis. The pattern of escalating waivers is clear: Katrina (18 days), Sandy (12 days), Maria (10 days), Colonial Pipeline (days), Hormuz (60 days). Each crisis is broader and each waiver longer. Markets are not pricing the probability that the Jones Act becomes a law routinely waived in practice, a functional dead letter within a decade.
Waiver expires ~May 2026 · Algonquin basis · East Coast crack spreads · MATX KEX watchIndonesia's logistics costs run 14–23% of GDP, versus an ASEAN average of 8–10%. It is cheaper to ship a container from Shanghai to Jakarta than from Jakarta to Padang, a route one-sixth the distance. The October 2024 Third Amendment tightened the cabotage regime further. Meanwhile, India reversed its 2018 cabotage liberalisation in March 2026, the same week the US issued its historic waiver. The Philippines' logistics costs are 27.5% of GDP, the highest in ASEAN, driven by similar oligopolistic island-shipping dynamics. These cabotage-driven trade frictions exceed any tariff barriers these economies face from major trading partners, yet they receive essentially no attention in EM sovereign credit or equity analysis. For a 280-million-person economy targeting 8% growth, Indonesia's logistics premium is a binding constraint hiding in plain sight.
Indonesia logistics 14–23% GDP · Philippines 27.5% · India cabotage reversal March 2026