22 | AREA REPORT Americas
Hurricanes impacted US towage market Storms helped the US towage sector, but it still remains a challenging market where operators are modernising their tug and ATB fleets
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urricanes and inland waterway delays have impacted North American towage companies, this year, initially leading to transportation issues, followed by improvements in demand and utilisation. This is seen as a temporary improvement for US tug operators as the sector is otherwise affected by too many tugs and barges with not enough demand. According to BRL Shipping Consultants, around 5,500 tugs and towage craft move 763M tonnes of cargo annually on US waterways. Articulated tug barge (ATB) units make up a large part of the domestic fleet, which serves the US mainland, Hawaii, Alaska, Puerto Rico and the US Virgin Islands. The current river fleet of barges pushed by tugs numbers 31,000. The tug and barge industry adds US$33Bn to US gross domestic product annually and the industry is protected by the Jones Act for US domestic trade. Growth is expected in
North American towage over the next five years, according to the consultant Global Market Insights. It forecasts annual growth of around 5% until 2024, mainly due to rising demand for petrochemical shipments in the region although the sector is not doing well at present. Kirby Corp is one of the largest US towage companies, with around 215 tugboats and 915 tank barges and, thus is a fair barometer for the whole of the industry. In July, Kirby president and chief executive David Grzebinski described US inland and coastal towage as being in “one of the most severe downturns the market has seen in the past 30 years”. On 2 November, he said the market had improved – partially due to the impacts of hurricanes Harvey and Irma. These resulted in more barge movements, especially those filled with liquid cargoes, helping to improve Kirby’s tug and barge utilisation and financial results since July.
Tug Technology & Business | 4th Quarter 2017
Kirby’s tugboat operations were affected by storms and delays on US inland waterways (credit: William Alden)
The tug operator reported Q3 revenues of US$541.3M this year, compared with US$434.7M in Q3 2016. “Although this increase in utilisation may be temporary, it has remained firm into Q4,” Mr Grzebinski said at the results presentation. Utilisation of Kirby’s inland tug and barges was in the mid-80% to mid-90% range in Q3. The operating conditions were physically challenging during the hurricanes. For Kirby, demand for inland tank barge transportation of petrochemicals and oil was higher compared to Q3 2016. However, demand for refined petroleum products transportation and term and spot contract pricing was lower. Kirby has also faced worsening market conditions in the coastal towage market, with utilisation between 62% and 66% in Q3 2017. Kirby said tug and barges continued to move from term contracts into the spot market and revenues from the transportation of refined
petroleum products and oil were lower than in Q3 2016. Mr Grzebinski said there was increased idle time in the coastal market as more barges operated in the spot market. “We remain focused on managing costs and optimising the equipment available for commercial use,” he added. It is therefore surprising that operators, including Kirby, continue to invest in tugs, barges and ATBs. BRL Consultants said ordering continued this year because tug and barge operators need to modernise their fleets to remain competitive and compliant with tightening environmental regulations from the US authorities and IMO. There are 40 tugs of more than 20 m long under construction in the US and five in Canada, according to BRL. In July, Kirby took delivery of a second ATB from Fincantieri Bay Shipbuilding. This consisted of Paul McLernan tug and the 155,000-barrel barge 155-
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