Floods Raising Shipper Costs, Analyst Says

Floods Raising Shipper Costs, Analyst Says

Bulk shipper costs are escalating for the second quarter, an industry analyst said, because of heavy flooding on major U.S. rivers. Barge traffic has been disrupted, pushing more heavy freight loads to railroads.

“Our recent conversations with shipping and supply chain contacts, as well as transportation providers in the rail and barge sectors, indicate that supply chain disruption has already begun in earnest,” said Matthew Troy of Susquehanna Financial Group.

High water and fast river velocity either cause barge traffic to halt or force tows to move much more slowly and often with fewer barges. Troy said the heavily used Ohio River system will not return to normal for barging until late May, and the Mississippi River until sometime in June.

Some railroads have also seen disruptions. Major rail lines have kept operating, however, while freight has been detoured from flooded areas. Flooding is one reason for weak growth in bulk railcar traffic over the past five weeks at a time when intermodal has kept growing.

The waterway interruptions could get worse soon, Troy said, as the Coast Guard has warned “that when certain conditions are met, it will close the critical Gulf Intracoastal Waterway.”

He said the geographic area affected by the Mississippi River flooding handles 95 percent of all U.S. inland waterborne freight, so “supply chains will clearly be impacted.”

Some loads will shift to other modes, he said, mainly rail but also trucking.

The cost differences of diverting large bulk cargoes to other modes can be sharp. Truck transport is most expensive, but Troy said rail is typically three times the cost of barging. For dry cargoes such as coal or grain, he said it takes 16 railcars or 70 trucks to haul a single barge load. But one tank barge of liquid bulk shipments such as chemicals or oil products can fill up 46 railcars or 144 trucks, he said.

Troy estimates railroads dominating the eastern and central U.S. lanes — CSX Transportation, Norfolk Southern Railway, Kansas City Southern Railway and Canadian National Railway — will benefit most from barge diversions.

However, he said, their benefits from modal share shifts will be somewhat offset by an overall decrease in the normal flow of their freight networks, and as some customer sites also shut down from the flooding.

-- Contact John D. Boyd at jboyd@joc.com. Follow him on Twitter @jboydjoc.