US coastal and inland towage is seeing an improvement in activity and utilisation after business was hit by the global Covid-19 pandemic
Owners of tugs, towboats and barges lost business from the dramatic economic slowdown that impacted US maritime transportation during Q2 2020.
Now there are indications of an improvement in demand and tug utilisation.
Kirby Corp has seen an uptick in requirements for its inland and coastal tugs and barges. This followed “unprecedented declines in demand as a result of the Covid-19 pandemic” said Kirby president and chief executive David Grzebinski.
“Recently, we have seen slight increases in demand across the company, which we believe represents an initial recovery and a bottom to our activity and utilisation levels,” he said.
Mr Grzebinski added a note of caution to this outlook. “However, given the risk of future spikes in virus cases and governments issuing new restrictions, the timing and magnitude of a material recovery remains unclear,” he said.
These potential risks to business mean Kirby will continue to seek ways to reduce costs and bolster business.
Kirby has cut its capital spending by 40% to US$150M for the whole of 2020. But it remains committed to regulatory and recurring maintenance on the marine transportation fleet.
“Until we see a significant improvement in demand, we will continue to aggressively manage our costs, restrain capital spending, and focus on cash generation,” said Mr Grzebinski.
“Kirby has ample liquidity, and we continue to expect strong free cash flow in 2020 which will be used to repay debt, increase liquidity, and strengthen the balance sheet,” he continued.
Some positive trends for inland marine transportation come from the slow return to productivity of refinery and petrochemical plants.
“Kirby expects a slow recovery going forward until economic activity rebounds more significantly,” said Mr Grzebinski.
Kirby’s barge utilisation started Q3 2020 in the “mid-70% range”, but it anticipates lower average barge utilisation for the quarter, which will have adverse impacts on revenues and operating margins.
Kirby’s coastal transportation business is more insulated from the impact of Covid-19, as 85% of its revenues are under term contracts.
This means Mr Grzebinski expects this business to remain stable through to the end of 2020.
However, spot market rates remain challenging, which affects other tug and barge operators that do not have significant amounts of term contracts.
Kirby’s revenues were significantly impacted in Q2 2020 as liquid products marine transportation was down as refiners scaled back their production to the high 60% range.
Kirby reported net earnings of US$25M in Q2 2020, compared with US$47.3M in the same period in 2019.
There was an almost 30% decline in consolidated revenues to US$541M in Q2 2020, compared with US$771M in Q2 2019.
“To offset the impact of these activity declines, we aggressively implemented additional cost reductions across the business, significantly reducing horsepower, operating costs, and general and administrative expenses,” said Mr Grzebinski.
Seacor Holdings also saw a downturn in revenues and business during Q2 2020. However, Seacor executive chairman Charles Fabrikant said there were improvements in marine transportation.
“We have begun to see an uptick in activity in some of our businesses that were adversely impacted,” he said.
Towage operations and tug technology will be discussed in depth during Riviera’s Tug Technology Webinar Week, starting 1 September 2020; use this link for more details and to register for the webinars
© 2023 Riviera Maritime Media Ltd.