Barge demand strengthening, but questions remain

During Kirby Corp.'s April 30 first-quarter earnings report, the company — the largest operator of inland tank barges in the United States — announced that the first three months of 2026 continued the positive momentum that characterized the close of 2025, with high utilization rates and price growth.

"In inland marine, market fundamentals improved during the quarter as customer demand strengthened and barge availability remained limited," said David Grzebinski, Kirby CEO.

According to Grzebinski, barge utilization for Kirby averaged in the "low-90% range for the quarter," with spot pricing up in the low-single digit range and contract renewals slightly up compared with the first quarter of 2025.

"The combination of improved pricing and disciplined execution helped drive operating margins to the high-teens range," Grzebinski said in his report.

In its coastal marine segment, Kirby Corp. reported barge utilization rates in the first quarter of the year in the mid- to high-90% range, with strong customer demand and limited availability of higher-capacity vessels.

Those forces pushed contract renewal rate increases to the 20% range compared with the first quarter of 2025.

"Overall, first quarter coastal revenues increased 23% year-over-year, and operating margins were in the high-teens range," Grzebinski said.

Overall, Kirby's marine transportation segment accounted for $497.2 million in revenues through the first three months of 2026 compared with $476.1 million in the first quarter of 2025. Operating income through the first quarter was $89.7 million, up slightly year-over-year. The operating margin for Kirby's marine transportation segment was 18% for the first quarter compared with 18.2% for the first quarter of 2025.

Kirby's inland marine business line accounted for about 79% of its marine transportation segment's revenues in the first quarter.

Kirby also reported the acquisition of 23 barges and a trio of "high-horsepower boats" from an undisclosed seller for $95.8 million.

Grzebinski pointed to geopolitics and supply chain dynamics as major factors contributing to the company's full-year earnings per share growth guidance of 5% to 15%.

"Kirby is off to a solid start to the year amid a global macro environment that has become more uncertain, driven in part by heightened geopolitical tensions and volatility across energy and industrial markets," Grzebinski said. "In marine transportation, underlying activity levels remain constructive, supported by strong refinery utilization and improving conditions in the petrochemical markets amid ongoing global supply chain disruptions."

Margin headwinds named in the report include inflation and an industry-wide mariner shortage.

Looking ahead at the inland barge market more broadly, Sandor Toth, president and founder of Criton Corp. and editor and publisher of River Transport News, said he sees choppiness affecting rates and the industry as a whole.

Regarding hopper barge rates, Toth said he expects the Environmental Protection Agency's (EPA) recently announced renewable fuel standard targets for 2026 and 2027 to have an indirect impact.

The Trump administration's trade policies, particularly as they relate to China, led to volatility in soybean exports, Toth said, with China hitting pause on U.S. soybean purchases for much of 2025.

"The Trump administration faced incredible pressure last year because China basically boycotted the U.S. in terms of its soybean purchases, and China is the world's largest soybean importer by far," Toth said. "They're our biggest market for soybean exports."

In the context of that soybean export volatility, the EPA upped its renewable fuel standard target for biomass-based diesel from 3.35 billion gals. in 2025 to 5.4 billion gals. in 2026 and 5.7 billion gals. in 2027.

"I think what Trump was trying to do was say, 'Hey, China, you're not going to control our politics and policies anymore. If you think that you can manipulate us by boycotting our soybeans, I'm just going to create a new market for the soybeans that you traditionally would have bought from us but have now decided to use as a lever against us,'" Toth said. "And if you take a look at the numbers [for the renewable fuel standard], they roughly correspond to what China historically has been buying from us, when you look at how much soybeans will be required to implement this new renewable fuel standard."

According to Toth, a larger domestic market for soybean oil likely will mean less demand for soybean-laden barges moving through the New Orleans export region. And yet, an increase in domestic soybean oil creates soymeal as a byproduct, both for domestic use and for export. In a recent report, the American Soybean Association found that U.S. demand for soymeal is rising as high beef prices drive up consumption of poultry and pork.

Besides demand for biomass diesel and soybeans, steel prices — also a result of trade policy — are affecting barge rates and replacement trends, Toth said. Steel prices have been elevated since the Covid-19 pandemic, and current trade policy has sought to further increase domestic steel production, with multiple effects on the barge industry.

"It's kind of a two-edged sword," Toth said. "Number one, I think it's helping drive up steel prices, which is increasing U.S. steel production and demand for raw materials, so we've got more demand for that traffic on the waterways. At the same time, these high steel prices are retarding the industry's willingness to build new equipment, so it's allowing rates to maintain an elevated status whereas they otherwise would soften due to fleet expansion from new barge construction."

In prior eras, when barge rates would rise, operators would "overbuild for an extended period," Toth said, which would eventually result in protracted rate softness.

"Right now, the rise in steel prices is dampening new hopper barge construction," Toth said. "In fact, new hopper prices this year, from what I'm seeing, are up about $75,000 per unit over last year."

That's led barge companies to take steps to extend the life of barges, like reskinning hulls, which pushes retirements into the future. Toth said there's a huge number of barges from the late 1990s that will have to be replaced. This replacement cycle is being pushed back.

"It's a big pig in a python, in terms of barge fleet demographics moving down the age pipeline," he said.

There are also operational costs, Toth said, including the price of diesel — up since the start of the war in Iran — and labor issues like recruitment and retention.