INIERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPI!ENT

RESEARCH DEPART11ENT

ERM76

FOREIGN PURCHASES OF U. S. SURPLUS SHIPS, 1946 - 19h8

Economic Resources and Mrarkets Staff

Prepared by: Arthur 17ubnig MI 76Howard Tolley

Approved by: Joseph S. Gould COPY NO. _

March 30, 1948

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TABLE OF CONTEWTS

PtgeForeign Purchases of U.S. Surplus Ships,

1946-1948 1-4

APPENDIX

Annex A - Foreign Purchases of U.S. SurplusShips Through i4erch 1, 1948 5-6

Annex B - Pricing of Surplus U.S. Ships PerMerchant Shipo Sales Act 7

Table 1 - Approved Sales of U.S. Surplus Shipsto Foreign Flag Operators 8-9

Table 2 - Financing of Approved Sale of U.S.Ships to Foreign Flag Operators 10-11

Foreign Puchases of U. S. Surplus Ships, 1946-1948

The sale of U. S. surplus ships to foreign-flag operators ended

March 1, 1948. It was cut off by legislation amending the Malerchant Ship Salee

Act to ban any further transfer of Government-cwned, war-built vessels out-

side the U. S. merchant marine. A redistribution of ocean tonnage which bc-

gan August 1946 has now run its course. It wrorked out as follours from August

1946 through February 1948:

(1) The U. S. M4aritime Commission sold or approved for sale to

foreigh-flag operators 12.2 million deadweight tons at a purchase price of

$950 million of which $575 million for 8.7 million dwt. of freighters and

$)375 million for 3.5 million dwt. of tankers.

Foreign Purchases of U. S. Surplus Ships

Million DW t. Million DollarsFlag of Dry DRegistry Cargo Tanker Total Cargo Tanker Total

Marshall Europe 6.4 2.1 8.5 402 222 624Latin America a/ 1,6 1.2 2.8 119 135 2`hAll Other 0.7 0.2 O09 55 18 73

Total 8.7 3.5 12,2 576 375 951

a/ Largely purchases by U. S. and Greek owners for transfer to Panamia_Honduras registry.

Source: Appendix to this study.

(2) By acquiring 12.2 million dwt., the purchaser countries P'dded

33 percent to the freight-carrying capacity of their mi-K-.'946 fleas i.e.

3' r.-rcont to dry cargo lift and 37 percent to tanker lift-,

Purchases as Percent of Mid-1946 Fleet

Flag of Registry Dry Cargo Tanker Total

Marshall Europe 27,0 26,1 26.8Latin America 96,o 93e5 9409All Other 26,6 544 2907

Total 31,2 3665 325:

a/ Largely purchases by U. S. and Greek owners for transfer toPanama-Honduras registry.

Source: Appendix to this study.

(3) To finance the acquisition of 12.2 million dcwt., the purchaser

countries paid out $690 million at once (all-cash transactions plus those

25 percent cash-down) and borrowed $260 million on ship mortgage credit from

the U. S. Maritime Commission,

Financing of Foreign Purchases of U. S. Surplus Ships

- million U. S. dollars -

Flag of Registry Sales Value Cash Payment USMC Credit

Marshall Europe 624.0 400h 0 224X0Latin America 2/ 253.7 237,1 16,6All Other 73,2 52,3 2Oo9

Total 95Oo9 689.4 261.5

a/ Largely purchases by tJ. S. and Greek o-vmers for transfer to Panama-Honduras registry.

Source: Appendix to this study.

-3-

(4) Since American shipowners had a prior call on the pick of the

surplus fleet, foreign operators got Liberty and Victory freighters mainly,

plus such T2 tankers as American oil companies did not care to bid in. They

got them at prices (no higher than Americans had to pay) which discount all

post-l939 inflation.

Purchases and Pricing by Type of Vessel

Sales Priceas Percent

Thousand Million of Pre-'JarClass Dwt. Dollars Building Cost

Coastal Freighters 180 30 61.8Liberties 6,490 325 42.6Victories 1,050 95 47.0C-1 and C-2Freighters 990 125 50.0

Coastal Tankers 50 10 89.2T-221s 3,400 365 77.3

Source: Appendix to this study

(5) Since the average USMIC ship mortgage runs 16 years, is amortiz-

able in equal annual installments, and calls for interest at 3-2 percent per

annum, the debt service of the purchaser countries is expected to average

$20 million a year from 1948 through 1964,

Estimated Dollar Drain to Repay USMC Credits

- million dollars a year -

1948-49 1956 1963-64

Amortization l5e6 16,3 7.7Interest 8,4 406 0.3

Total 24.0 20,9 8.o

Marshall Europe 21.2 17,9 6.3Latin America 1.5 10k 0.6All Other 1.3 1.6 1.

Source; Crude estimate by Research Department.

Now that further transfers to foreign countries have been banned, all

remaining ships in the USMC fleet will have to operate American flag or be

laid up. It may well become the official policy of the UJ.SA. to require the

carriage in U. S. ships of half the exports of ERP merchandise from the U.S.A,

Temporarily, therefore, American bottoms are apt to continue hauling, as in

late 1947, about 50 percent of the dry cargo freight to and from American

ports, about 2025 percent of tanker exports, and 75 85 percent of tanker

imports. These ratios are much hi,her than pre. war. They would be still

higher had not the U,S.A. diverted 12.2 million dwt. to foreign fleets.

Because of this redistribution, much of Liarshall Burope's war losses of ocean

shipping have been made good and certain extra-European economies have been

helped to get started as maritime powers, or greatly improve their status,

The day is thus much closer,, when, as pre-war, income from merchant shipping

can again add heavily to foreign-held dollar balances.

ANNEX A 5

FOREIGN PURCHASES OF U.S. SURPLUS SHIPS THROtJGH MARCH 1, 1948

By Class of Vessel

Number of Ships

Tankera/ Dry Cargos/(oastai kNajor coastal1

Purchasing Countryr TXPe Tpe _Zpe IAberty Victory C 2

United Kingdom 51 30 118 14 5Belgium 1 4 10Denmark 10 3 7Eire 2France 18 76 4Gree ce 7 99 2Iceland 1Italy 20 9 95Netherlands 7 5 3 28 32 9Norway 17 45 40Portugal 3Sweden 2 4Turkey 1 1 2 2 4

Marshall Lurope 8 120 47 477 61 78

Finland 1 2Poland 1

Eastern Europe 1 2 1

Canada 8New Zealand 2Union of South Africa 2 4 3

British Commonwealth (except 10 4 3 2the United Kingdom)

Argentina 3 2 2 17 12BrrazilChile 6Columbia 8Cuba 4Honduras 22 2Mexico 4Nicaragua 2Panama 1 71 65 7 16Peru 2 2 4Uraguay 2 2 2Venezuela 1

_ . . 54

Latin America 5 73 6 95 6 54

' next page for footnotes)

,.Annex A (Conttd)

Tankers' flr Cargoaa/

Coastal HMaJor Coastal C1elihast Oountr, ^ P _ .Z , 4berty ItgUr C 2

China 8 10 3 121k7Pt

2India 9 2IranPaki stan Phllippine tzlands 3 6

Other Countries 11 23 9 23

TOTAL 13 2033 _5 601 100 157

Average sales $8B7,Ol9 $Jl,l41 $466O1 $BS44,50f; $92,U,OO $789,000price per ship

Dwt. per ship 44189 1S:Y60 2300 10,SQO 'l.8O0 6,259

0o2tnotes

a/ Following are official de-sigtations for each type of vesselreferred to i4a this annex;

TankersCoastal type Tl - N- BMajor type T2 - Sg - Al

Dry CargoCoastal type N3- S- A10 3!3-S-A2Liberty C - C-cViatiory VC2 S - AP2, S2 - S - AP30 IV 0 2, Z1, sC I A, GI - A<H), M - B, Cl - :B(M)

ci- ;(s), ci - Amt, c1 - S Ay1,3MW., zm., S - 31.

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ANi-EX 3

PRICING OF SURPLUS U.S. SHIPS PER MERChAkNTSELP KALF ACT

-in thousand dollars-

Type of Building Costs Basic Sples PriceVessel Hypothetical, Actual, Sta.tutory Price

Pre-War War-Time Formrala a/ Floor b/

Dry CargoC-1 - MT - J3U'1 1,063 1,397 553 489C-1 - M - AV-1 1,280 1,982 (640) .c/ 694C-1 1,940 2,608 970 913C-2 2,100 2,737 1,050 958C-3 t/ 2,460 3,659 (1,230) cl 1,281C-4 d/ 3,300 4,421 1,650 1,547VC-2 - S - AP-2 1,958 2,512 979 879VC-2 - S - AP-3 2,130 2,873 1,065 1,004EC-2 - SC-1 1,278 1,729 639 555X- 3 760 1,339 380 469

TankerT-1 M - BT 994 1,774 (870) _] 887T-2 - SE - A-1 2,316 2,011 2,027 1,505T-3 - S - A-1 d/ 2,175 2,970 1,903 1,485

a/ Unpdjusted for specific factors incident to individual shins.bf/ iay diverge from actual minimum as contingent on state of rezair, functional

depreciation, conversion costs, etc.c/ Inapplicable because lower than price floor as calculated by formula of

Merchant Ship Sales Act.t/ None offered for sale to foreign-flag onerntors.

Source: U.S. Hvazritime Commission data.

-8.- TABLE I

APPROVED SALES OF U.S. SURPLUS SEIPS TO FOREIGN FLAG OPERATORS

Thousand dwt.Aug. 1, 1946 - March 1, 194&a. Percent added to mid 1946 fleet. I

Dry Cargo Dry CargoPurchasing Country VesselsS/ Tankers Total Vessels Tankers Total Vessels

TOTAL: 8,737 3,455 12,192 31.2 36.5 32.5

Marshall Europe (Total) 6,439 2,045 8,484 27.0 26.1 26.8United Kingdom 1,540 855 2,395 10.7 21.5 13.0Belgium 151 17 168 71.3 \ 30.9 63.0Denmark 192 - 192 23.5 - 20.2Eire 18 - 18 34.4 - 34.4France 841 302 1,143 71.4 'h02.2 77.6Greece 1,080 117 1,197 130.4 427.0 139.9Iceland 5 5 63.3 - 63.3Italy 1,051 335 1,386 193.2 226.7 200.4Netherlands 710 113 823 47.3 22.9 41.3Norway 754 285 1,039 36.6 13.3 24.8Portugal 8 - 8 2.4 - 2.2Sweden 42 - 42 2.5 - 1.9Turkey 47 21 68 25.9 200.0 35.4

Eastern Murope (Total) 35 - 35 7,3 - 7.3Finland 24 - 24 6.5 - 6.5Poland 11 - 11 10.3 - 10.3

British Commonwealth (Except 93 167 260 6.0 77.5 14.7United Kingdom) (Total)

Canada 134 134 - 66.1 8.2New Zealand 17 - 17 15.0 - 14.8Union cf South Africa 76 33 109 441.9 282.1 377.2

For Footmotes see next page

TABLE I (contld) _g_

Thousand dwt.Aug. 1, 1946 - M%r c _ __ P_.-c;;t added to mid 1946 fleet,/

Dry Cargq Dry CargoPurchasing Country Vesselasu Tankers Total Vessels Tankers Total Vessels

Latin America (Total) 1,633 1,243 2,876 96.0 93.5 94.9Argentina 211 12 223 .os.6 5.1 51.9Brazil 61 - 61 9,8 - 9.2Chile 47 - 47 30.9 - 28.6Colombia 41 - 41 512.5 - 369.4Cuba 20 - 20 138.9 - 138.9Honduras 248 - 248 190.3 - 157.3Mexico 43 - 43 168.0 - 36.2Nicaragua 6 - 6 375.0 - 375.0Panama 876 1,194 2,070 180.2 145.8 158.6Peru 48 - 48 114.6 - 103.9Uruguay 32 33 65 169.3 - 343.9Venezuela - 4 4 - 4.4 4.1

Other Countries (Total) 537 - 537 116.341 - 97.941China 240 _ 240 133.1 - 106.1Egypt 18 - 18 61.9 - 61.9India 189 - 189 101.0 - 82.8Iran 32 - 32 i - ePakistan 11 - 11 e/ -Philippine Islands 47 _ 47 72.3 - 72.3

v Entire period per Merchant Ship 2ales Act, during which sales could be made to foreign operators.b/ Predominantly freighter but including some transports as well.cf Without allowance for withdrawal, scrapping, marine casualties, etc., since mid 1946/ Excludes Iran and Pakistan.ef This country had no Merchant Fleet as of mid 1946.

Source: Data made available by Large Vessel Sales Division, U.S. Maritime Commission.

-1C-

?I ,.A7'CIFG7 OF AF?O2V_T SAT" OF U.S. SKICIS T0 FOJI'r: :,At OPEtATORS

(in thiouL , - cr_-

&>1'es Valved/ Cash FPaiment.i Crod t._/urchr^sin- Country Dry C.nrgo Tankers Total Dry Carvo Tamkners Tc.tal Drv Cargo Tanlkers Tot1

TOTA.L 575,800 375,132 950,932 379,532 309,987 ., 5i', 196,268 65,145 ?61,413-:'1rsh?.fl ro e (Total) 401,992 2-,°33 62E,025 2LQ,471 159,57k 10,045 161,521 62,459 2?3,980Unite(! Xingdom c4L,8 7 91,?L? 186,235 9L:, 87 91,34P 16,235 - - -P.oel -iu.r 11, 900 1,791 13, 601 11,900 1,7C1 13,691 -

Dern^rk 1r',547 54 14,547 -5 1 1,5Lt7',ire 1,226 _ 1,826 1, 26 _ 1,826 - _Fre.nce 44,158 3 ,24!0 76,398 11,039 8,060 19,099 33,119 74,180 57,299C-reece 55,294 12,,3° 67,832 13,824 12,536 26,362 41,470 - 41,47oIceland 604 - 694 694 - 694 - -

Italy 55, 947 35,823 91,770 13,987 8,956 22,943 41,960 26,867 68,827Netherlpnds 53,776 15,165 68-, 941 37,871 9,791 47,662 15,905 5,374 21,979:orway 58,170 3o,450 88,650 33,?44 26,420 59,664 24,926 4,030 28,956-Portugal 1,407 - 1, 407 1,4l 7 - 1,407 - - -Sueden 3,865 - 3,865 3,5 65 - 3,865 - - -Turkey 5,521 2,678 8,199 1,380 670 2,050 4,141 2,008 6,149

Eastern Europe (Total) 2,576 - 2,576 1,408 - 1,408 1,168 - 1,168Finland 1,558 _ 1,558 33" - 390 1,168 _ 1,168Polknd 1,018 - 1,018 1 .ii8 - 1,018 - -

British Comr-onvzealth (_.xcent 6,716 17,911 24,627 6,716 17,911 24,627United Xindomn)(Total)

Canada - 14,3293 14,329 1329 14,329 - -"'ew Zealanmd 1,826 - 1, 826 1,826 - l'8P_25Union of South Africa 4,890 3,582 8,472 4,890 3,582 8,4',2 -_

For Footnotes see next pa,e

TA.,LZ II (cont1d)(in thousnrd dollars)

Soles Valu.ffi/ Cash Pa L2'. If Creit,C

urc1;asin, Countr-, DIly Cargo Thn:. nrs "otal I'ry Car-,o Ten'7 :rs Total Ir,.r Ccr]o Tankers Total

latin ALrierica (Tot,-l 118,525 135,188 253,7'3 104'64? 132,502 237. 149 13,678 2,686 16,564

Argentina 318304 2,661 20,965 18 ,04 2,661 2L965 - _

Brazil 8.326 - 8,326 2,081 - 2,081 6,245 - 6,245

Chile 5,255 - 5,255 5,255 _ 5,255 - -

Colombia 5,551 - 5,551 5-551 - 5,551 - _

Cuba 2,775 - 2,775 2,775 - 2,775

Honduras 13,367 - 13,367 13,367 - 13, 367 - --

Mexico 2,178 - 2,178 544 - 544 1,634 - 1,634

Nicaragua 938 - 938 938 - 938 - -

Panama 53,833 128,058 181,891 53,833 128,058 181,891 - -

Peru 5,521 - 5,521 1,380 - 1,380 4,141 - 4,141

Uruguay 2,477 3,582 6,059 619 896 1 ,5 1,858 2,686 4,544

Venezuela 887 887 - 887 -887 - -

Other Countries (Total) 45,991 - 45,991 26,290 - ?6,290 19,701 - 19,701

China 21,358 - 21,858 5,464 - 5,4(4 16,394 - 16,394

Egypt 2,200 - 2,200 2,200 - 2,200 - -

India 13,746 - 13,746 13,746 - 13,746 -

Iran 1,634 - 1,634 409 - 4o9 1,225 - 1,225

Pakistan 545 - 545 545 - 545

Philippine Islands 6,008 - 6,008 3,926 - 3,926 2,082 - 2,082

af Rough estimate from basic sales prices per USMC schedules.b/ Sales price of all vessels sold for cash plus 25 percent of those sold for credit.

c/ 75 percent of sales price of all vessels sold on credit.

Source: Data made available by Large Vessel Sales Division, U.S. Maritime Com-mission.