Amid Trade Turbulence, Some Positive Signs For Barging
Amid continued news cycle alarms and market turmoil from the tariff wars between the U.S. and China, a number of signs bring somewhat positive news for barging.
Those threatened Chinese soybean tariffs have not yet taken effect and negotiations might still forestall them. But if the worst happens and China slaps punitive tariffs on American soybeans, what would “the worst” mean?
Some commodity analysts point to strong global demand overall for American soybeans and corn. The tariffs, they say, might cause a reshuffling in which American corn and beans might go other places instead of China. But in the end, they would still move downriver to the Gulf.
The U.S. Department of Agriculture reported that exporters have announced export sales of 120,000 metric tons (4.4 million bushels) of soybeans to Argentina and 141,518 metric tons of soybeans to Mexico, both during the 2018/2019 marketing year. Argentina is the world’s largest exporter of soy products, but following a severe drought, it needs product to keep its crushing plants operating, according to Farm Futures—which also reported that the Buenos Aires Grain Exchange slashed its production forecast 110 million bushels below USDA’s earlier reductions.
“Though Chinese buying is mostly on hold, other countries are stepping in to secure supplies,” Farm Futures reported.
In the liquids market, Kirby Corporation reported stronger financial results at the end of 2017 than the previous year, helped by what it said was strong utilization and demand in the inland market. Its equipment utilization was in the low-to-mid-90 percent range during the fourth quarter of 2017, compared to the mid-80 percent in the previous year. Kirby said the rate reflected improved demand in liquids markets, but also from a reduction in Kirby’s tank barge fleet. At the end of 2017, it had 841 barges with 17.4 million barrels of aggregate capacity, compared to 876 active barges a year earlier.
In related news, the scrap metal market is strong, possibly helped along by Trump’s tariffs on aluminum and steel imports. This is good news for a barge industry that is rebalancing its fleet profile. Advanced Remarketing Services, which serves the metals and scrap recycling industry, recently reported, “So far in 2018, the scrap metal market is off to a strong start in comparison to average scrap prices of the last few years. … In January 2017, the market was up over 14 percent compared to the previous month. … Compared to the same month last year, the 2018 market is over 19 percent higher than 2017.”
Despite the general decline of coal, the U.S. Energy Information Administration (EIA) reported in its April 2 energy report that coal exports for the fourth quarter of 2017 were up by 14.5 percent from the third quarter. Steam coal exports for the same quarter were 36.9 percent higher than the third quarter. Much of the export surge comes, ironically, from demand in China, which is temporarily importing American coal as it closes inefficient coal plants and tries to ease a switch to more natural gas.
Along with the spring high water, which usually provides a bump, these factors may help explain why barge rates have held relatively strong this spring.
While free trade remains important, all is not gloom and doom for the barge industry.
