World Bunkering > News > Winter 2009 > Tough times

With the notable exception of Mobile, Alabama, ports on the East and Gulf Coasts of USA are mostly seeing a continuing downturn in bunker trade since the Wall Street wizards visited their magic on the world economy. I’ll return to Mobile later. First, we’ll take a brief look at a range of ports from the mid Atlantic coast to the Western US Gulf. In general, the fall-off in bunker volumes is evident in several ways:

• Fewer ships arriving;
• Fewer arrivals requiring bunkers;
• Smaller quantities being purchased.

Impact of the cargo downturn

Less cargo means ships are riding higher in the water. They therefore consume less fuel in overcoming the inertia of progress through the oceans. Smaller cargoes generate less revenue. Overall bunker cost therefore becomes a significant issue. With full cargoes generating high revenues, ships were previously likely to bunker for each leg of a voyage, looking only for best value in each port and balancing bunker cost against potential freight income. Now, round-trip bunker stems in cheaper ports outside the US are contributing significantly to the reduction in US bunker volumes.

Most bunker supplies in the US are made by barge and barge charges here are very high by world standards. Many barge operators had taken advantage of the high incidence of bunker deliveries and consequent levels of income before the down turn to further modernise and augment their fleets. Several are now challenged to keep their equipment fully employed in bunkers and are either seeking alternative employment or looking to extend their normal geographical range.

Along the Intracoastal Waterway

The Intracoastal Waterway is an extensive system of inter-connected canals, rivers and, in places, marked channels in open waters. It begins in Norfolk, Virginia, proceeds around Florida and extends finally to Brownsville, Texas. The system is maintained by the US Corps of Engineers. At the northern extremity is Chesapeake Bay. Here, the frequency of bunker deliveries is estimated to be down by 25% to 35% from the highs seen up to mid 2008. For several months, there were no ships riding at anchor at Sewell’s Point close to Norfolk and at the entrance to Chesapeake Bay. For some time, the various large containerships that ply the US East Coast have been arriving with far fewer containers than we are used to seeing; container traffic is down between 11% and 15%. Container shippers are consolidating routes. Imports of fertilizer, oil and chemicals are now often arriving as part cargos only. Export cargos of coal are also substantially down.

The Norfolk Southern Railroad, which feeds coal exports from Norfolk, reports movements from West Virginia down by around 30%. However, there is a possibility that coal exports to China may increase during 2010. Barge movements through the Intracoastal Waterway are very obviously fewer. This system is key in the coastwise distribution of goods. Delays at locks in the system had, for several years, been 12 to 18 hours. Presently, they rarely exceed six hours.

Cruise keeps Miami afloat

The most significant bunker port in Florida is Miami, the cruise capital of the world and hub of the cruiseship industry in the United States. The port advises that cruiseship and passenger traffic has remained fairly constant, a testament perhaps to the incredible ‘deals’ offered by cruise operators and a tribute to Rudyard Kipling: If you can keep your head when all about you are losing theirs ... take a cruise and lose it later. Container traffic is also up in both numbers of vessels and numbers of containers; however, recent moves from Fort Lauderdale to Miami by substantial containership operators have facilitated this. Bunker volumes are presently reported to be stable.

Mobile keeps market moving

Mobile, Alabama, is the jewel in an otherwise rather tarnished crown. Where many other ports have lost traffic, Mobile has seen significant increases. This is due in part to a transfer of operations by some shipoperators from New Orleans and Houston following the severe hurricane activity in 2005 (Katrina, Rita and Wilma). It also owes its continuing success to excellent road, rail and waterborne distribution facilities. The adjacent McDuffie Coal Terminal, unlike Norfolk, has seen an increase in shipping.

There are even rumours of barges, previously employed elsewhere on the US Gulf Coast, moving to the area to service ships bunkering in nearby Pascagoula. By comparison with both Houston and New Orleans, its main rivals, access to and egress from Mobile harbour are easy. There is significant cruiseship traffic in the port. The volumes of bunkers being supplied show a respectable increase in spite of the economy in general.

Mississippi activity slows

The Mississippi River was doing a fine job recovering from the ravages of Katrina when the wizards wrought their economic woes. The closure of the Mississippi River Gulf Outlet had occasioned an increase in containership traffic in the river. Few had required bunkers at the previous facilities behind the locks due to short turnaround times and bunker barges experiencing extensive and unpredictable lock congestion and delays.

Now, there was an opportunity to bunker these ships in New Orleans. The cruise terminal was in regular use and bulkers and tankers were to be seen at anchor in the port awaiting berths. However, bunker supplies have reportedly decreased by 22% in volume since their peak, and overall ship traffic is down almost 10%. Whereas 46% of visiting vessels had previously taken bunkers, only 32% are presently doing so. This large reduction in bunkering activity is forcing local bunker barge operators to seek other work for their barges.

This may involve non-bunker products and line-haul of small cargo lots from refineries upriver to diverse storage terminals. Line-haul quantities may require two or more barges in train. This, in turn, can put strain on the availability of barges for normal bunker operations.

Houston sees drop in demand

The economic situation means stormy weather on the intracoastal waterway

In August 2009, the Houston area ports (Galveston, Houston, Texas City and Freeport) were showing a reduction of 11% in total ship calls over the 12 months prior to August 2008. The main barge operators report a significant drop in those vessels requiring bunkers and, as others have observed, much smaller bunker orders. In former times, it could be a challenge to “borrow” a barge from the busy Houston bunker market and supply a ship in, say, Beaumont, Port Arthur or Lake Charles. Presently, the attitude is, “Bring ‘em on!”

This in spite of competition from suppliers with facilities on the doorstep. Even in places like Point Comfort with no in-port bunker facilities, Intracoastal Waterway locks to negotiate and normally a bunker no-no, bunkers are being supplied with both oil and equipment from Houston. I even heard that cars which had arrived from overseas and been offloaded in the Houston area had not been selling, so they were reloaded and shipped off to South America! The only other port with significant ship traffic and bunker availability in Texas is Corpus Christi and here, ship traffic is down almost 25%.

All in all, this does not paint a pretty picture of the American economy. I hear that more trouble may be in store. Apparently, a staggering amount of “sub-prime” mortgages will be due for interest rate adjustments in 2010 and 2011. Should these rates adjust significantly upwards, look for even less money to be available for consumer goods, translating perhaps into fewer ships calls and still lower bunker demand.