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THE BUSINESS OF TOWING
W e s t e r n G u l f C o a s t E d i t i o n – 2 0 1 3
Section 2 9/10/2013
1
The Business of Towing
Transportation Contribution to GDP
(GROSS DOMESTIC PRODUCT)
By any measure, the U.S. has the most
well-developed Freight Transport
Infra-Structure in the World and it is
a global competitive advantage
DRY CARGO, 970M
78%
TRANSPORTATION’S ROLE IN U.S. ECONOMY
10.2%
GDP $15.6 TRILLION
DATA TIMEFRAME: 2011
TRANSPORTATION’S ROLE IN U.S. ECONOMY
SOURCE: 2009 BUREAU OF TRANSPORTATION STATISTICS
WATER
4% AIR
4% OIL PIPELINE
1% MISC.
5%
RAILROAD
7%
HIGHWAY
78%
Annual U.S. Intercity Freight Bill Ton-Miles
WATER
11%
TRUCK
31%
OIL PIPELINE
21%
RAILROAD
37%
While water carriage requires just 4% of freight costs, it accounts for 11% of the ton-miles produced
TRANSPORTATION’S ROLE IN U.S. ECONOMY
SOURCE: 2012 AMERICAN WATERWAYS OPERATORS/ASSOCIATION OF AMERICAN RAILROADS
Comparison: Barge Industry versus Rail Industry
Barge Industry Class I Railroads
Miles of Right-of-Way 26,000 96,000
# of Barges/Freight Cars 28,000 364,000
# of Towboats/Locomotives 4,000 25,000
Annual Revenue $5 billion $68 billion
TRANSPORTATION’S ROLE IN U.S. ECONOMY
SOURCE: 2012 AMERICAN WATERWAYS OPERATORS/ASSOCIATION OF AMERICAN RAILROADS
Modal Comparison
Barge Rail Pipeline Truck
Geographic Coverage Limited to navigable
channels
Limits shipper
options
limited to build
network
ALL
Shipment size 1,500 ton minimum 100 ton minimum very large 40 ton minimum
Speed 5-10 MPH 25 MPH --- 50 MPH
Capital cost moderate high very high low
Operating cost low moderate very low very high
Environmental hospitability good poor good for existing
very bad for new
bad
Cargo Types bulk liquid or dry ALL bulk liquid ALL
TRANSPORTATION’S ROLE IN U.S. ECONOMY
The United States Navigable Waterways System is an essential part of the nation’s transportation infrastructure
Under the Jones Act, the right to serve this market is reserved to U.S. operators (owned, operated and built)
7
MARINE ASSETS
8
There is a large variation in:
• size
• power
• construction, and
• area of operation
A towboat is a manned vessel that transports/pushes barges.
Generally, there are four main types of towboats:
LOWER MISSISSIPPI
RIVERS
LOWER MISSISSIPPI OPERATIONS
LOCKING RIVER OPERATIONS
CANAL OPERATIONS
Towboats assigned to operating territories to achieve lowest possible unit towing cost
LINEHAUL TOWBOATS
Power: 4,000 hp to 11,000 hp
Towing Capacity: Up to 60,000 tons (25 to 40 loaded barges)
Cost: $10,000,000 to $25,000,000 depending on power and configuration
Useful Life: 35 years, extendable to 50 years with major rehab at mid-life
Crew Size: 8 - 10 person
Fuel Consumption: 1 gallon per horsepower per day
Area of Operation: Lower Mississippi and Lower Ohio Rivers
Power: 1,800 hp to 6,000 hp
Towing Capacity: 15,000 to 25,000 tons (9 to 16 loaded barges)
Cost: $5,000,000 to $15,000,000 depending on power and configuration
Useful Life: 35 years, extendable to 50 years with major rehab at mid-life
Crew Size: 7 - 10 person
Fuel Consumption: 3/4 gallon per horsepower per day
Area of Operation: Upper Ohio, Upper Mississippi, Tennessee and Illinois Rivers
LOCKING TOWBOATS
CANAL TOWBOATS
14
Power: 1,000 hp to 2,000 hp
Towing Capacity: 3,000 to 8,000 tons (2 to 4 loaded barges)
Cost: $2,000,000 to $6,000,000 depending on power and configuration
Useful Life: 30 years, extendable to 45 years with major rehab at mid-life
Crew Size: 4 - 7 person
Fuel Consumption: 3/4 gallon per horsepower per day
Area of Operation: Gulf Intracoastal Waterways and Tributaries
CANAL TOWBOATS
Generally, there are three main types of barges:
Liquid Tank Barges
17
More diversity than hoppers; two main types:
• Clean petrochemical linehaul barges
• Oversized petrochemical barges
Liquid Tank Barges
18
Capacity:
Size:
Useful Life:
Hull Type:
Cost:
Mix of single hull and double hull
$950,000 to $2,000,000 depending on size and configuration
1,500 to 4,000 tons (10,000 bbls to 30,000 bbls) when loaded to a 9'
draft150’ to 300’ long, 35’ to 54’ wide, 10’ to 13’ deep
25 years, extendable to 40 years with major rehab at mid-life
The Lower Mississippi is an open
river with no lock structures,
allowing larger tows moving
more than 80,000 tons
¼ Mile 1,145’
280’
Maximum Tow Sizes BELOW CAIRO, IL TO NEW ORLEANS
¼ Mile 1,145’
105’
Maximum Tow Sizes ABOVE ST. LOUIS, ILLINOIS, OHIO, TENNESSEE
1,454′ Willis Tower
(formerly Sears Tower)
1,250′ Empire State
1,568′ Lower Mississippi Tow Length
1092′
¼ Mile
1,145’
35’
105’
200’
USS Abraham Lincoln
Why are barges such odd sizes?
Q :
The navigable channel is maintained by the
Army Corps of Engineers using Lock & Dam structures.
The standard lock chamber size limits the barge
length, width and depth.
A :
Lock Chamber – 600’
110
’
LINEHAUL TOW
UNIT TOW
HOW A LOCK WORKS
HOW A LOCK WORKS
HOW A LOCK WORKS
31 31
Advantages of Inland Barge Transportation
Transporting freight by water is also the most energy-efficient choice
For one ton of cargo per gallon of fuel…
• A barge moves 616 miles
• A rail car moves 478 miles
• A truck moves 150 miles
Ton-miles Traveled per Gallon of Fuel
Advantages of Inland Barge Transportation
Advantages of Inland Barge Transportation
Inland waterways transport generates fewer emissions than rail or truck per ton-mile.
Barge transportation generates the lowest emissions as measured in grams per ton-miles in four standards tracked by the EPA:
• PARTICULATE MATTER (PM)
• HYDROCARBONS (HC)
• CARBON MONOXIDE (CO) • NITROGEN OXIDES (NOX)
Today’s Barge Industry Economic Impact of Barge Transportation
36
33,000 PEOPLE EMPLOYED
ABOARD TUGS & TOWBOATS
MORE THAN
30,000 PEOPLE EMPLOYED
BY SHIPYARDS
500,000 WORKERS IN INDUSTRIES
THAT RELY ON RAW MATERIALS DELIVERED BY BARGE
ALMOST
$5 BILLION CONTRIBUTED BY INDUSTRY
EACH YEAR TO NATION’S ECONOMY
$750 MILLION COMBINED YEARLY TOTAL INDUSTRY PAYS IN
PAYROLL AND CORPORATE INCOME TAXES
Today’s Barge Industry Type and Number of Barges Operated (2012)
37
Open 7,274 35%
Cover 10,520 50%
Total Dry 17,794 85%
Total Liquid 3,188 15%
Total Barge Fleet 20,982 100%
Major Commodities
shipped on U.S. Waterways
(Tons)
Chemicals
37M
Coal
170M
Petroleum Products 145M
Crude Materials
108M
Farm Products
75M
Other
23M About 560 million tons of
cargo move each year on
the U.S. inland waterways,
most of it in bulk (2012)
38
Today’s Barge Industry Dry Cargo Barge Market (2012)
39
Other includes Alumina, Salt, Cement, Fertilizer, Forest Products, etc.
46%
21%
22%
7% 5%
Coal
Agriculture
Construction
Steel
Other
Presently, Ingram is the largest dry cargo carrier
40
Source: Informa Economics, March 2012 Barge Fleet Profile & Public Financial Filings Ingram’s numbers are YTD and reflect the May 2012 acquisition of U.S. United Barge Line, LLC
Ingram 4,459 25%
AEP 3,199 18%
ACBL 1,961 11%
ARTCO 1,786 10%
Cargo Carriers 1,278 7%
SCF 1,167 6%
Crounse 1,035 6%
Subtotal 14,885 83%
Total Industry 17,996 100%
Industry dry cargo fleet has been stable since 2000
0
500
1,000
1,500
2,000
2,500
3,000
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
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87
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88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
Construction Retirements
Ill-considered legislation incents barge construction boom that results in gross over-capacity
Strong rate environment of early 90s results in a second, less-pronounced bubble
10-year
Construction 6,345
10-Year
Retirements 7,213
Source: Informa Economics
42
GRAIN EXPORTS
• Nearly 100M tons annually
• 72% of soybean and 61% of corn exports by barge
COAL FOR POWER PLANTS
• 227M tons annually – inland, lakes, coastal
• 20% of utility coal supplied by waterway
44
Today’s Barge Industry is challenged by several issues…
117 out of 240
Locks are over
50 years old
46
0 10 20 30 40 50 60
Age in 2012 (Years)
47
0-9
10-19
20-29
30-39
40-49
50-59
60-69
70-79
80+
3
9
16
17
53
31
19
55
39 60% > 50
AGING LOCK INVENTORY (242 CHAMBERS) Includes all operational deep and shallow draft Corps and TVA navigation locks and control structures
McAlpine
Emsworth
John Day
L&D 15 Lockport
Bayou Sorrel
Belleville
Lock and/or Dam Requiring
Major Emergency Maintenance
Major Closure – Industry Accident *
Hannibal
Holt
* Montgomery
Braddock
Barkley
*
Inner Harbor
48
Major Locks and Dams Requiring Emergency Repairs November 2002 through Feb 2012
Price Aux * Greenup
Cheatham
Markland L&D 27
* Wilson
Dwindling Resources
1977-2011 Current $ and 1996 Constant $ *
Inland Waterways O&M Funding
* Fuel-Taxed Waterways Only
Dwindling Resources
AGING INFRASTRUCTURE + DWINDLING RESOURCES = INCREASING “DOWNTIME” AT LOCKS
0
50,000
100,000
150,000
200,000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Unscheduled Mechanical Breakdown Unscheduled Scheduled
Although service interruptions have been manageable so far, O&M related outages continue to concern the Barge Industry and its customers
51
CRUMBLING LOCK WALL, LOWER MON 3, OPENED IN 1907
CONCRETE DETERIORATION AT CHICKAMAUGA LEAKING SPARE MITER GATES, UPPER MISS LOCK 19
Fertilizer
Aggregate
Grain
Cement
Agriculture Support Oilseed
Farming
Petroleum
Chemical
Steel Manufacturing
Coal
Waterborne Transportation
Power Generation
INDUSTRIES AT RISK
Regulatory Challenge
• Jones Act
• Safety Management Systems
• Federal authorities may change release flows on the Missouri River, which could negatively impact barge transportation on the Upper Mississippi
• Various states have imposed their own regulations on the federal waterways system. Their goals and regulatory enforcement can be inconsistent, making compliance difficult [VGP & NPDES]
54
Safety Challenge
Ingram is actively involved with several public and private initiatives to further improve safety along the inland waterways:
Safety Partnerships
Responsible Carrier
Simulator Training
56
57
MARGIN DRIVERS
What are the Major Variables for Direct Cost?
What are the major variables for direct cost? • Labor
• Fuel
• External Services (e.g., cleaning, shifting, etc.)
• River operating conditions
• Ratability of shipments
• Equipment utilization level
Other Variables
• Strategic – Vessel Construction
• Tactical – Insurance Operator/Terminal Vetting (SIRB, TMSA)
59
How are Barge Rates Calculated?
Contract of Affreightment (Voyage); Term/Time Charter; Bareboat
• Most spot rates are market driven, with a floor near carrier’s variable operating costs
• Long-term contract rates are also market driven, but set at a level which generates a satisfactory return on investment
• For both spot and term contract bids, a distinction is made between fronthaul and backhaul movements, to optimize round-trip revenues and earnings
60
Keys to Improved Equipment Productivity
What are keys to improved equipment productivity?
1) Faster loadings and unloadings
2) Heavier loads per barge; bigger barges
3) Complete removal of cargo to avoid cleaning expense & time
4) Reliable schedules and forecasts
5) Ratable shipments; less seasonality
6) Balanced traffic flows
61
Section 2 The Business of Towing
62
9/10/2013
The Business of Towing
Coming up: Stakeholder Partnerships
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