Like the offshore industry, inland towboat and barge operators are working through a deep trough of soft demand, an overbuilt fleet and changing energy markets.
With the forthcoming July issue of WorkBoat, we are reporting on where the inland industry is today, how it got there, and where it’s going as companies look to an uncertain future.
In her cover story, our Washington correspondent Pamela Glass recounts the self-inflicted aspect of the downturn: too many barges built in anticipation of continued growth.
The big grain harvests came as forecast, but with too many bottoms chasing the business during near-perfect river conditions, dry cargo rates hit three-year lows, analysts with Informa Economics told audiences at the Inland Marine Expo at St. Louis in May. Senior editor Ken Hocke has the details in the July barges report.
Rapidly changing energy markets are a big outside factor weighing on the barge market. Coal saw a small bump in 2016, but experts are clearly warning that coal’s long-term economic prospects in the public utility sector are not at all favorable. Regardless of the Trump administration’s move to exit the Paris climate accords, natural gas is just too competitive.
While domestic oil production remains high, barges are seeing less of it. “For every pipeline you hear about being protested, there are 30 or 40 projects that have been built,” said Informa consultant Alan Barrett.
That means less crude for tank barges. But analysts and operators are looking to future opportunities from some $100 million in petrochemical and refinery investments — another effect of high U.S. oil production — and ethanol producers looking to expand their export markets via the rivers to the Gulf coast.
President Trump’s campaign talking point of $1 trillion in new infrastructure conjured hopes of waterway improvements, perhaps even a new boom in barging steel and aggregate for highways and bridges. But it appears now any actual plan is still far in the future. “It’s a work in progress,” says Mike Toohey, president and CEO of the Waterways Council Inc.
Meanwhile, the barge oversupply could take five to six years to work itself out, Barrett cautioned at IMX. But as Pamela Glass writes, “barge companies are used to the cyclical nature of their business."
“Good companies plan and weather the down cycle,” Tom Allegretti, president and CEO of American Waterways Operators, told Glass. “This is a very resilient industry with resilient companies.”