There have been a few signs recently that the country is finally starting to emerge from the recession. That’s great news, but the marine industry won’t likely see any big improvement in business until 2011.
As a result, you would expect our annual inland waterways report (see page 36) to contain plenty of bad news. It does. But there are also several positive developments to report.
Predictably, barge companies have hunkered down during the recession by idling equipment, putting off construction plans, delaying vessel maintenance and freezing salaries. These are predictable reactions when barge traffic dips 8 percent, which is what happened in 2009, according to the Corps.
The decline in barge traffic hit companies hard. ACL reported a 27 percent drop in earnings in 2009, and Kirby saw revenues dip from $1.36 billion in 2008 to $1.08 billion in 2009. Kirby reacted by canceling towboat charters, cutting shore staff by over 20 percent and taking other measures to cut costs.
These big publicly traded barge companies should all survive the current business slowdown. Some smaller ones, however, will not. Western Kentucky Navigation was scheduled to cease operations in March, blaming the sour economy.
As you can see, there is no shortage of bad news from inland barge operators. But there is a bright side.
The recession has been an opportunity for barge companies to assess the markets they operate in and develop sound business strategies for the futures. Some companies are considering expansion or the purchase of other companies or even putting themselves up for sale. Kirby’s Joe Pyne said it is a good environment for consolidation. “Whether we or others do it, it will be healthy for the business in the long term.” He said Kirby is looking for possible acquisition opportunities.
Another positive for the industry during the slump is that it has encouraged fleet reduction and consolidation. On the inland tank barge side, Pyne said, there are about 300 to 400 barges that need to go from the U.S. fleet. Kirby has removed over 100 from its fleet.
With good cost cutting, cash preservation and fleet reduction strategies, the inland barge industry should be in good shape when business begins to take off.