Why America’s Cargo Demand Is Building Maritime Capacity Everywhere but at Home I attended the Sea-Air-Space Conference at the Gaylord in Maryland last week, where I listened to discussions about American shipb...
Why America’s Cargo Demand Is Building Maritime Capacity Everywhere but at Home
I attended the Sea-Air-Space Conference at the Gaylord in Maryland last week, where I listened to discussions about American shipbuilding.
The main focus throughout the panels was on improving efficiency and output. McKinsey & Company released a report on shipbuilding during the event, emphasizing the need to get more from existing shipyards in terms of cost, output, and performance. Other discussions, like one led by Admiral Jamie Foggo, also highlighted partnerships and the importance of operating within a global framework.
These conversations clearly pointed toward one priority: making the current system more efficient, resilient, and better able to respond to government needs.
However, there was a key aspect missing.
The focus was mostly on how the system works once it’s already running, and it didn’t cover much about what drives the growth of that system in the first place. While efficiency can stretch existing capacity, it doesn’t determine how much capacity is available from the outset.
This difference is important because it highlights a different perspective—one that starts with decisions made earlier in the process rather than just trying to optimize what already exists.
Start with Commercial Demand
One panel on Wednesday morning, moderated by Sara Fuentas from the Transportation Institute, stood out as it shifted the focus away from performance and toward what really fuels the system.
Maritime Administrator Stephen Carmel and Robert Andrews from the National Security Council made an important but often overlooked point: before we think about shipyards, workforce pipelines, or industrial policies, we first need to consider demand.
Cargo represents that demand as it moves through the system, and most of it is generated by private companies making daily choices about how to handle their cargo.
The chain is clear: cargo demand influences carrier selection; carrier choice drives fleet investment; fleet investment leads to shipbuilding; and ultimately, shipbuilding determines where industrial capacity develops. Currently, this capacity is heavily focused in East Asia, where countries like China, South Korea, and Japan make up roughly 90 percent of global shipbuilding output.
In simple terms, when demand is steady, ships are actively used, companies invest, and more ships are constructed. This means shipbuilding isn’t the starting point; it’s the outcome of demand.
Is Demand Enough?
At this point in the discussion, a shipbuilding insider noted quietly that simply having demand for U.S.-flagged ships doesn’t mean carriers will build their vessels in the United States.
This observation cuts to the core of the issue. Demand capture does not equate to total economic demand, but rather involves where that demand is directed and how it gets translated into industrial capacity.
While commercial demand will lead to ship production, it doesn’t decide where those ships are built. A carrier can fulfill U.S.-flag demand for international trade by acquiring vessels built overseas more conveniently than by investing in domestic shipyards, due to the structural differences in the global shipbuilding industry.
This suggests that while demand starts the process, it doesn’t dictate where capacity accumulates. That depends on who carries the cargo and where that capacity comes from.
This leads to a clearer conclusion:
The U.S. does not lack demand; it lacks the mechanism to consistently channel that demand to develop domestic capacity.
Two Demand Systems—Only One Scales
The nature of the problem becomes clearer when we look at how demand is generated.
Government demand—driven by cargo preference regulations, initiatives like the Maritime Security Program, and naval shipbuilding budgets—is purposeful. This type of demand aims to achieve national security outcomes.
However, it operates on a smaller scale.
Government demand amounts to billions, while commercial demand from global shipping is in the trillions annually, representing a significantly larger scale. Although government demand can help sustain capacity, it is the broader global commercial demand that can truly scale the market.
Government tools can influence the margins, but they don’t change how commercial demand is allocated on a large scale. This results in a dual system: one geared toward national security and another that ultimately decides where maritime capacity gets built.
Both global and U.S.-specific commercial demand are distributed through decision-making at the firm level: contracts, carrier selection, routing, and sourcing. These decisions are based on economic logic, considering factors like cost, speed, and flexibility. Security, resilience, and control are not typically prioritized unless conditions worsen.
Consequently, cargo tends to move toward the most efficient option. Over time, such decisions shape where demand is captured and where fleets, shipbuilding, and workforce capacity are concentrated.
In summary, markets allocate demand globally, while capacity tends to cluster where consistent demand is captured.
The Illusion of Advantage
From this perspective, the imbalance becomes clearer.
The U.S. is the largest marketplace globally. A notable portion of international trade is driven by American consumption, yet this demand largely moves on foreign-flag ships built in shipyards outside the U.S.
Under normal circumstances, the strength of America’s consumer market allows it to exert influence through its market size and financial capabilities. Capital can be deployed to access shipping when necessary.
However, access doesn’t equate to control. Everything may seem to be working; goods are moving, and capacity is available. This creates an illusion.
The Illusion Breaks Under Pressure
That illusion becomes apparent when the system faces challenges.
Recent disruptions—from the pandemic to attacks in the Red Sea to bottlenecks in the Suez and Panama Canals—show a clear pattern. The system keeps running, but with less flexibility, tighter margins, and greater fluctuations.
Cargo continues to flow, but it gets rerouted, delayed, or repriced. Access becomes conditional. In these moments, demand alone doesn’t dictate the system’s operation—it’s governed by control over capacity. Under stress, the system doesn’t collapse; it reveals its underlying hierarchy.
While having capacity doesn't guarantee control, lacking it limits outcomes to access negotiated on others' terms. Since much of this capacity is located outside the United States, control shifts accordingly.
Exporting Demand, Importing Dependence
This vulnerability is not just a temporary issue; it develops over time based on how demand is managed.
Every day, American companies move vast amounts of cargo through international shipping networks. These flows result from deliberate decisions—contracts, carrier choices, established routes, and selected fleets.
These choices are logical, as they optimize for cost, speed, and reliability within the existing system. However, on a larger scale, they influence where capacity grows and who retains control.
For instance, if a large U.S. retailer or manufacturer enters a long-term contract with a global carrier, it seems reasonable because that carrier offers lower costs and reliable global service. But this contract does more than just transport goods.
It supports that carrier's fleet expansion and, indirectly, the shipyards supplying the ships. When these decisions are made repeatedly across industries, they effectively channel U.S. demand into foreign maritime systems, enhancing their scale and cost advantages. Individual rational procurement decisions collectively shape the concentration of capacity at a system level.
In this context, cargo represents more than mere movement; it signals where economic and industrial impacts accumulate.
Currently, much of this American demand is being directed outside the United States.
America’s Grand Maritime Bargain
This has led to an unofficial maritime arrangement. The U.S. provides both the demand that keeps the system alive and much of the security needed for its operations. In return, it enjoys the benefits of efficiency, scale, and low-cost shipping.
However, this system doesn't guarantee that demand, security provisions, and capacity growth remain aligned. It rewards efficiency but doesn’t maintain control.
Dependence as a Strategic Constraint
The issue isn’t a series of disruptions; it’s a structural dependence. Markets connect economic decisions with strategic outcomes.
Firms make logical choices based on cost and efficiency, but on a larger scale, these choices influence the structure of the maritime system itself.
The end result is a national risk that isn't priced in.
Markets usually respond to disruptions only after they occur, not beforehand. Over time, this creates a cycle where U.S. demand continues to bolster maritime capacity beyond its own borders, increasing reliance on external systems for access and control.
Aligning Demand and Capacity
The U.S. doesn't lack demand; it just lacks the means to direct that demand in ways that enhance domestic maritime capacity. America can keep letting its demand build capacity elsewhere, or it can start capturing some of that demand within its maritime infrastructure. This doesn't mean withdrawing from global markets; rather, it involves understanding how demand distribution shapes capacity development.
Practically, this means closer collaboration between government and industry on where a part of U.S. commercial cargo demand should be routed—via long-term contracts, designated shipping lanes, or purposeful use of U.S.-flagged, U.S.-built, and U.S.-linked carriers.
This year’s Sea-Air-Space Conference made me realize an important truth: shipbuilding capacity follows utilization, and that utilization depends on where long-term cargo commitments are made. The market operates, but on its own, it doesn’t guarantee that demand and control will remain aligned.