12 minute read
Cover Story: River Recovery
from WorkBoat July 2021
by WorkBoat
River Recovery
After a tough year, the barge industry is ready to rebound.
By Pamela Glass, Washington Correspondent
With the country’s economic recovery from Covid-19 well underway, spurred by rising vaccination rates, massive federal aid and renewed consumer con dence, the inland barge industry is seeing a welcome uptick in business.
After a gloomy year that forced a redirection of business plans, imposition of across-the-board safety and health protocols and for many sectors of barging a steep decline in demand for their services, the industry appears to be turning the corner.
As the U.S. economy gains steam, demand for export grains like corn and soybeans, which have remained relatively steady throughout the pandemic, continues to be strong, keeping dry cargo barges busy. In early May, the Department of Agriculture reported that total barged grain movements reached a record high of 14.5 million tons, 47% higher than last year and 33% above the ve-year average.
The increased rate of vaccinations and government relief payments has encouraged Americans to drive, y and spend in ways not seen for more than a year. This has put re neries and chemical manufacturing back into business, pushing oil prices up and helping the liquid barge sector get its eet back working on the rivers.
Meanwhile, imports through New Orleans during the rst quarter of 2021 increased across all industries, with improvements in steel and steel products, fertilizer, iron ore, aluminum, salt and bauxite, all of which are moved largely by barge to their nal destinations. Overall, rstquarter imports were up 28.4% from the previous year, according to River Transport News.
Ingram Barge’s Charlie C and its tow of covered hopper barges.
“In fact, rst quarter 2021 Lower Mississippi steel sector imports hit their highest quarterly level since the second quarter of 2019,” RNT said in its May 17 newsletter.
POST-PANDEMIC PUSH
“Our industry very quickly pivoted to the circumstances of the pandemic, just like we pivot to circumstances of high water, low water, ice or whatever. We tweaked policies and procedures to keep people safe and we were able to keep commerce moving without missing a beat,” said Jennifer Carpenter, president and CEO of the American Waterways Operators, Arlington, Va. “So, the safety situ-
KIRBY POSTS FIRST-QUARTER LOSS
Kirby Corp. reported a net loss of $3.4 million during the 2021 fi rst quarter, citing the severe winter storm that hit the Gulf region in February and a pandemicrelated drop in demand for barging services.
David Grzebinski, president and CEO of the Houston-based tank barge operator, said the loss wasn’t a surprise as the company was hit by declining volumes and pricing during the fi rst four months of the year, while an unprecedented winter storm that produced freezing temperatures forced prolonged shutdowns of many customers’ operations.
“These disruptions resulted in a signifi cant decline in liquids production and volumes for the quarter and in some cases extending into April,” he said in a statement announcing Kirby’s 2021 fi rstquarter results. The company’s inland tank barge fl eet transports bulk liquid products including petrochemicals, black oil, refi ned products and agricultural chemicals.
The company’s inland barge business was enjoying a steady improvement in demand, which pushed barge utilization to near 80% by mid-February as the U.S. began to recover from the economic fallout of the pandemic. But that progress was abruptly halted when Winter Storm Uri struck Texas and Louisiana, causing the collapse of the Texas electric grid and forcing refi neries and chemical plants to close, many not resuming full operations until April.
“During this time, refi nery utilization along the Gulf Coast plummeted to near 40 percent, and as much as 80 percent of the Gulf Coast petrochemical complex was taken offl ine,” Grzebinski said. “Overall, these disruptions signifi cantly reduced our volumes and operating effi ciencies during the quarter. When combined with the impact of lower pricing, seasonal winter weather, and high-water conditions on the Mississippi River, inland operating margins sharply declined.”
These factors pulled down inland revenues to $301 million compared to $403.3 million for the fi rst quarter of 2020, while operating income was $1.9 million, compared to $50.7 million for the 2020 fi rst quarter. Barge utilization, normally upwards of 85-90%, was in the mid-70% range for the quarter, after having plunged to the 60% range at the end of 2020.
Kirby’s various business lines are now seeing higher activity levels and improving market conditions, Grzebinski said. “We believe the second quarter will show a modest improvement as activity continues to build and we are optimistic there will be a meaningful improvement in pricing and utilization levels in the second half of the year.”
Barge utilization climbed to 85% in April and is expected to increase further to the
Doug Stewart
Kirby’s inland barge business is seeing steady improvement in demand.
ation and the operational situation were positives over the last year, but there’s no question that demand for cargoes moved by the industry took a real hit.”
Barging “took an economic punch in the gut and we are now beginning to see improvements that we hope will continue as economic activity resumes nationwide,” said Carpenter, whose association will be holding its annual summer meetings in-person this year in Chicago after doing them virtually last year.
“We’re really seeing this (economic) marching trying to crank up,” said Ken Ericksen, senior vice president and head of client advisory development at IHS Markit, Memphis, Tenn. “The covered barge eet has done phenomenal with grain export growth and rising crude oil growth that will attract more production in the U.S. to reopen. There will be very good GDP growth during the rest of 2021 and
high 80% to low 90% range as the economy recovers and refi neries and chemical plants return to full operations. Such increased production bodes well for the inland market, and positive economic signs are everywhere as refi neries are now profi table, airlines are hiring pilots, consumer confi dence is up, cruise lines can start operating in July, and Kirby is hiring mariners, he said.
Meanwhile, costs will increase to put equipment back into operation, rehire charter boats, train new hires and maintain vessels as Kirby ramps up operations. “It’s going to take a while to get that up,” he said. “We’re going to have to expend some money.”
Grzebinski said he expects inland market conditions to continue improving through the rest of the year and into 2022. Since there has been little construction of new tank barges and few barge retirements occurring across the industry during the pandemic, an increase in spot market pricing and barge utilization is expected, he said. A robust infrastructure initiative approved by Congress will also help business by offering opportunities to move construction products like asphalt, he said.
“We all had a rough time through this pandemic,” Grzebinski said. “I would say that the mood music from all our customers is about as positive as we’ve seen in years.” — P. Glass
Doug Stewart
The Kirby Navigator and tow.
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into 2022.”
He said the worst month for cargo on the waterways was last June, when a slowdown in demand started to hit river transportation. “June was an in ection point for the inland river system,” Ericksen said. “After June, total volumes started to increase.”
Such positive economic indicators are encouraging barge operators to ramp up services, put towboats that were tied up back in operation, and hire and train new personnel.
At Kirby Corp., which was hit hard by a pandemic-related drop in demand from the oil patch coupled with a crippling winter storm in February, barge utilization climbed to 85% in April, and barge spot pricing is improving, CEO David Grzebinski said during the Houston company’s rst quarter earnings call in April.
“We’re extremely busy. There’s a lot of good news out there. Our customers across the board are returning to pro tability. You can see the re ners are making money now. The integrators are making money, now, the chemical companies are making
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Campbell Transportation Company
Coal movements on the Ohio River have showed slight improvement recently.
money, and even pressure pumpers are doing better. So, things are really improving. Our activity is really growing ... We’ve been hiring mariners.”
Grzebinski predicts more favorable market conditions and a return to pro tability in the second quarter of this year, when he expects barge utilization to be back in the 90% range and more nancial improvements in the subsequent quarters as the economy continues to recover.
Other operators are also seeing an upswing in business.
“Things are getting better. We’re seeing volumes slowly picking up across the board,” said Peter Stephaich, chairman and CEO of Campbell Transportation Co. Inc., a marine services and barge company in Houston, Pa. “We’re doing signi cantly better than last year, which had a
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signi cantly low baseline.”
Good weather created favorable operating conditions along the Ohio River, Stephaich said, adding that movements of coal slightly improved as well. “I’m cautiously optimistic that we’re going to have a pretty good year” in 2021, he said.
Campbell recently opened an of ce in Houma, La., in anticipation of a comeback in the oil and chemical industries. “We’re investing more and more in the liquid side, putting in signi cant capital,” Stephaich said. “The liquid markets have been in bad shape, but we think it will come back so we want to position ourselves.”
But some see a long slog ahead for the economy.
“So far demand is coming back at
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NEW CONGRESS, NEW OPPORTUNITIES
Beyond barging economics, the industry has a full plate of issues to deal with moving forward.
There are many new members of Congress to educate about the inland waterways and the importance of funding them well, and the industry wants to make sure it is included in any infrastructure plan that emerges from Congress. Although the Biden administration is a strong supporter of the Jones Act, pressure is expected from opponents to weaken it or permit waivers.
There will be new opportunities to participate in development of offshore wind farms, and compliance with Subchapter M towboat inspection regulations will continue to ramp up. The industry is working with other maritime stakeholders to secure $3.5 billion in federal funding for grants that would help ports and the maritime industry pay nancial costs associated with the pandemic. Meanwhile, experts predict that the coronavirus will be circulating for a long time in the future, so barge lines must continue protocols that assure the health and safety of their crews.
