Storms helped the US towage sector but it still remains a challenging market where operators are modernising their tug and ATB fleets
Hurricanes 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 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 serve the US mainland, Hawaii, Alaska, Puerto Rico and 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.
There is expected to be growth 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 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. 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.
“Although this increase in utilisation may be temporary, it has remained firm into Q4”
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 Consultants.
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 155-02 to carry petroleum and chemical cargoes.
During Q3, Kirby spent US$133.5M, including US$84M on upgrading existing inland and coastal fleets, US$41M on construction of a new coastal ATB unit, two coastal tugboats that are rated at 3,650 kW and six 3,730 kW coastal ATB tugboats. It also included US8.5M on new inland tank barge and towboat construction. Additionally, Kirby has ordered five new inland tank barges.
Foss Maritime affiliate Young Brothers is also expanding its fleet. It is preparing to take delivery of the first of four tugs that were ordered for inter-island cargo transit in Hawaii. Damen Shipyards is scheduled to deliver the first of these 4,475 kW and 11 m wide tugs in Q1 2018. The other three tugs are due to be delivered in sequence and in three-month intervals, with the fourth tug in Q4 2018 or early in 2019.
These tugs will serve Young Brothers’ fleet of seven barges that have a combined capacity of more than 60,000 tonnes. They will also be more powerful than Young Brothers’ existing fleet of six tugs, which range from 2,460 kW to 3,050 kW. Young Brothers serves several ports in Hawaii with most routes serviced at least twice a week by overnight sailings.
Bisso Towboat Co took delivery of a new azimuthing stern drive tug in October for towage in the Mississippi River in Louisiana. Liz Healy is a tractor tug with 60 tonnes of bollard pull that comes from two Caterpillar 3156C engines.
This new addition is the final tug in a series of three identical 3,340 kW vessels built by Main Iron Works of Houma, Louisiana. It completed sea trials on 6 October and entered service, increasing Bisso Towboat’s fleet to 12.
It has two Rolls-Royce US205FP Z-drives and two 99 kW Marathon generators powered by two John Deere 4045AFM85 engines. It is also equipped with a JonRie Series 230 hydraulic bow winch and Simrad navigation and bridge electronics.
Waterfront Services Co started to renew its fleet of tugboats with the delivery of the first tug of a four newbuilding series in October. US shipbuilder Master Marine delivered 20 m tug Miss Deborah to the owner, which provides towing services in Illinois. Each of these four tugs will have a pair of Laborde Products-supplied Mitsubishi diesel marine engines that meet the US’s emissions standard Tier 3.
Harley Marine Services ordered two powerful tugs for ocean services from Conrad Shipyard in Morgan City, Louisiana. These 2,240 kW, 33 m tugs are designed by Entech Designs and scheduled to enter service during Q4 2018 and Q1 2019. They will each be powered by Caterpillar 3512C Tier 4 diesel marine engines and have two Caterpillar C4.4 99 kW generators that operate at 1,800 rpm.
Harley Marine Services provides marine transportation services in every major US West Coast port as well as in Alaska, New York and the Gulf of Mexico. Conrad has previously delivered 19 vessels to Harley Marine and currently has three under construction.
Tugs contracted in 2017 over 20 m in length
Data from BRL Consultants