Modernizing the North Pacific commercial fishing fleet, which plays a critical role in Alaska fisheries, is an increasingly important issue for Washington’s maritime industry, one that also represents significant economic opportunity for the Puget Sound area.
An economic analysis prepared by the McDowell Group in Juneau for the Washington Maritime Federation and Port of Seattle outlines developments that are behind the growing need to “recapitalize” in the case of many federally permitted vessels with an average age of 40 years.
The North Pacific fishing fleet consists of 414 federally permitted vessels of over 58 feet in length with an average of 40 years. They are among more than 5,000 vessels over 30 feet engaged in commercial fishing activity off the coast of Alaska.
Current average vessel replacement costs vary by fishery, ranging between $15 million and $130 million, the analysis said.
Since 2000, 19 of those North Pacific fishing vessels over 58 feet have been built or significantly modified. Nine of those vessels were either Amendment 80 or freezer longline vessels. About one-third of those construction projects happened in shipyards in Washington State.
To maintain safety, economic viability and a competitive edge in the global seafood market, modernization of the fleet must continue, in the face of factors that are difficult to control, global seafood prices, harvest volumes and interest rates, the analysis said.
The analysis also identified several key factors affecting fleet modernization, including the opportunity to add new, more sophisticated processing capacity, and to increase fuel efficiency, plus costs associated with safety regulations and general maintenance are typically lower for newer vessels. The added safety and amenities of new or modified vessels make it easier to attract and retain high quality crew, especially with an aging workforce, the analysis noted.
But fishing vessel construction represents a challenging lending environment for commercial lenders, who must assess the risks of such loans, and terms of commercially available financing may be an impediment for many vessel owners. The most common terms extended to a borrower interested in building a new vessel is a loan less than 12 years and an interest rate of between 5 percent and 7 percent, as of October. Some government programs or lending cooperatives may offer longer terms and lower interest rates, with some limitations.
The McDowell Group said results of its analysis indicate $1.6 billion in fishing vessel modernization projects will be completed within the next decade, assuming no significant changes in financing options. With it will come consolidation in every fleet, in some cases vessels will be retired without replacement, and in others two or more vessels will be replaced with a single larger or more efficient vessel.
To speed the pace of modernization, an approach to vessel construction other than the typical “one-off” approach may be required, with multiple purchasers agreeing on a single hull configuration so that builders can take advantage of efficiencies of scale,
they said. Meanwhile an average of three new vessels are expected each year between 2017 and 2021.
The analysis also estimated that an annual average of between $60 million and $90 million would be spent on fleet modernization in Washington between 2017 and 2026, for a total of approximately $785 million over that decade.
Beyond 2026, fleet modernization is anticipated to average between three and five vessels annually. Absent significant increases in seafood prices or total allowable catches, the number of vessels participating in various fisheries of the North Pacific is expected to shrink with some fisheries impacted more than others, the analysis said.
The primary driver of this consolidation will be transferable quota, which will tend to concentrate in the hands of the most successful companies, and therefore require fewer vessels to harvest, the analysis said.
