MANAGEMENT

Mr. SAUGSTAD. The plan is under the management of an organization known as the "Merchant Marine Improvement Association, a corporate, judicial entity jointly representative of the Japan Shipowners Association and the Japan Shipbuilders Association, with a board of directors and a chairman. Actual work of the association has been conducted through a committee.

PROGRESS OF THE PROJECT

Commitments which absorbed practically the entire subsidy and accounted for the total tonnage to be scrapped or built had been made by March 1934. The tonnage to be scrapped at that time showed that there were 94 vessels of 399,122 gross tons, and the tonnage to be built or contracted for at that time was in the following status: Contracts approved covered 29 vessels of 190,000 gross tons, for a total subsidy of 9,947,400 yen; contracts applied for, covered two vessels of 9,200 gross tons, at a total subsidy of 441,600 yen-leaving a margin for the whole program of 611,000 yen unaccounted for.

ANALYSIS OF SHIP-SCRAPPING PROJECT

Before shipowners could contract for new vessels under the subsidy plan, they were obliged to scrap twice as much old Japanese tonnage as tonnage to be built. Credit was given for old tonnage scrapped regardless of former ownership. Therefore, Japanese owners went into the market and purchased tonnage to be scrapped and received credit for the operation. This brought on competition between prospective builders of new tonnage, creating a demand which resulted in some purchasers paying premiums, ranging from 10 to 13.75 yen per gross ton for old tonnage to be scrapped. Owners of large fleets containing old vessels had the advantage of not paying such a premium. Market prices on tonnage for scrapping advanced and old vessels sold for prices ranging from 12 yen to 27 yen per gross ton, due partly, however, to the improvement in the iron and steel market.

TONNAGE TO BE SCRAPPED, BY TYPE GROUPS

There were 94 vessels scrapped; 74 were considered as tramp vessels. Of liner vessels, there were 4 passenger ships and 16 freightersa total of 20. Therefore, 78.7 percent of the number of vessels and 64.5 percent of the gross tonnage was tramp tonnage and 21.3 percent of the number of vessels and 35.5 percent of the gross tonnage comprised liner tonnage.

Mr. Chairman, I would like to submit that table for the record. The CHAIRMAN. Without objection, it is so ordered.

(The table referred to follows:)

Tonnage scrapped-Type groups (status as of Mar. 1934)

Mr. SAUGSTAD. The tonnage scrapped was made up of equal groups of vessels above and below 5,000 gross tons. While the tonnage of vessels below 5,000 gross tons made up only 50 percent of the total, their number was 70 percent of the total. In view of the fact that the smaller type of vessels was held largely responsible for the poor condition of the tonnage market, their removal is assumed to be largely responsible for better freight and charter rates, according to the reports we have.

Twenty-four percent of the tonnage scrapped comprised vessels between 5,000 and 6,000 gross tons, and, Mr. Chairman, I would like to submit an analytical table showing the tonnage scrapped by size groups.

The CHAIRMAN. Without objection, that may be incorporated. (The table referred to follows:)

Tonnage scrapped-size groups (status as of March 1934)

AGE OF VESSELS TO BE SCRAPPED

Mr. SAUGSTAD. Seventy-six vessels, or 81 percent of the total number of vessels, and 304,268 gross tons, or 76 percent of the total tonnage scrapped, was made up of tonnage more than 30 years of age, their disappearance meaning a substantial improvement in the quality of Japanese tonnage. It is significant that 30.3 percent of the tonnage scrapped was between 35 and 40 years old. Mr. Chairman, I would like to submit that table for the record.

The CHAIRMAN. Without objection, it may be incorporated. And I may say that any tables you think are illustrative of your remarks will be inserted in the record, without objection.

Mr. SAUGSTAD. I think I will just touch on the high spots in each table, and then submit the table for the record.

The CHAIRMAN. That will be entirely satisfactory. (The table referred to follows:)

ANALYSIS OF SHIPBUILDING PROJECT ON THE NEW VESSELS

Mr. SAUGSTAD. Twelve shipping companies availed themselves of replacement shipbuilding under the subsidy program. The Nippon Yusen Kaisha leads both in the number and tonnage of ships laid down, as well as in the amount of subsidy allotted. The important thing is that 22.7 percent of the subsidy of 2,365,200 yen was paid to the N. Y. K. for its six ships having a total of 43,800 gross tons. I will submit a table analyzing the tonnage held by all the companies. Tonnage built-Summary of Companies-tonnage and subsidies

The vessel replacement subsidy law of Japan limits new vessels to a minimum size of 4,000 gross tons. As a result of this provision, there are no small vessels in the building program to replace the small vessels scrapped as stated above, although 10 of the 31 vessels projected are of less than 5,000 gross tons. About one-half of the new tonnage is in the 7,000 gross-ton category. Forty-seven percent of the new tonnage built comes within the size group of 7,000 to 8,000 tons.

I submit a table for the record showing a complete analysis of the size groups.

Mr. SAUGSTAD. No characteristic of the vessel replacement program of Japan is more significant than the speed built into the new fleet. No vessel is less than 15 knots. Thirteen vessels are of 16 knots and 15 vessels are of 18 knots and over. This is a departure from the minimum speed of 13 knots required under the legislation. One Kokusai Kisen's Shikano Maru of 6,900 gross tons is designed for 18.75 knots and will probably be the fastest cargo vessel under Japanese registry.

Twenty-six of the thirty-one vessels are equipped with Diesel or internal combustion engines. The three vessels projected by the Osaka Shosen Kaisha and two vessels for the Nippon Yusen Kaisha's Kinkai Yusen subsidiary are all turbine-driven.

Mr. HAMLIN. If I do not interrupt you, may I ask do these vessels you are speaking of lend themselves to competition in fishing here, you might say?

Mr. SAUGSTAD. I should say not, sir. These are a group of very high class, high grade, fast cargo vessels for the liner services, mostly. Mr. HAMLIN. We have had a good deal of testimony here in regard to competition in fishing and I did not know whether those vessels competed at all in that industry, or not.

Mr. SAUGSTAD. The minimum size provision of the law, which requires vessels to be at least 4,000 gross tons, would prohibit them from being fishing vessels as such, as we understand fishing ships. Of course, that does not mean they cannot carry fishing products.

The significant thing about the speed group is that 13 of the vessels are of 16 knots. I will submit for the record an analytical table showing the tonnage to be built by speed groups.

DISTRIBUTION OF NEW TONNAGE BY SHIPYARDS

Among the shipyards building the new tonnage under the replacement program, the Mitsubishi shipyards at Nagasaki and Kobe are first, having obtained contracts for 13 vessels of 79,435 gross tons, or more than 40 percent of the total. I will submit a table for the record to show the tonnage to be built and the distribution by yards, number of vessels, size of vessels, and the owning companies.

Tonnage to be built-Distribution by shipyards

The price of new tonnage in Japan has increased. It has been reported that in 1932 the price of new tonnage ranged from 130 to 150 yen per ton-tonnage category not stated, but presumably deadweight-but has since advanced to more than 200 yen per ton. While the general improvement in the iron and steel markets of Japan has been credited with causing the upturn in tonnage prices, it is also generally considered that the vessel replacement program's time limitation of about 21⁄2 years effectively increased the cost of new tonnage. Completion of allotments under the law in 11⁄2 years indicates considerable additional stimulation to the Japanese shipbuilding industry.

Competition between Japanese and British shipyards on a French tender for two 9,000-deadweight-ton freighters indicates that Japanese costs are higher than British costs, since the Japanese

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