Low water on US rivers disrupts coke shipments

Historically low water levels on the Mississippi river have slowed petroleum coke shipments by barge and may delay export shipments and calcined coke movements as carriers load less tonnage on barges and limit barge tow sizes to avoid groundings.

The lower Mississippi river, a key waterway to ship coke from refineries in the midcontinent as well as the Louisiana Gulf, was closed for multiple days over the past week as barge groundings blocked traffic and required dredging. This resulted in thousands of barges getting backed up near Memphis, Tennessee, and Stack Island, Mississippi, in what was "the largest closure ever recorded," according to major carrier American Commercial Barge Line. The closure lasted from 4-9 October. Then, on 10 October, the Ohio river was forced to close until early 11 October because of multiple barge groundings in the Mound City, Illinois, area, just north of where the Ohio meets the Mississippi near Cairo, Illinois. The upper Mississippi also had to close for dredging at Cape Girardeau, Missouri, between Cairo and St Louis, on the afternoon of 10 October and was expected to reopen 11 October.

Even with traffic resuming on these waterways, the low water levels will delay coke shipments. The US Coast Guard has limited vessel drafts to a maximum of 9.5ft and tow sizes to five barges along some stretches of the lower Mississippi river since late September in response to the lower water conditions. Drafts have been reduced to 9ft for the Ohio, Tennessee and Cumberland Rivers.

This has curbed the amount of petroleum coke that can be loaded on each barge. One coke buyer said its recent barges were loaded 300-400t lighter than typical, at about 1,600t. This increases the number of barges needed to transport the same volume of coke along the river, while also keeping spot barge rates elevated.

Argus spot rate assessments for northbound fertilizer barges from New Orleans to terminals between Old River, Arkansas, and Cairo, Illinois, rose to a record high of $32.25/short ton on 25 August and have held steady at this level since then. This is more than 25pc higher than their previous spike between August and September last year.

"Most of the petcoke business is booked on an annual basis so I don't expect an increase in the petcoke rates, but I do believe [the lower water levels] will slow down petcoke deliveries to New Orleans," a dry bulk carrier said.

But shippers' demurrage costs are also likely to increase as the low water leads to delays, such as last week's barge backup, and other longer term problems.

Hundreds of barges are waiting to have tonnage removed in order to be light enough to continue to move down the river. Labour shortages in the industry are also slowing down barges as there are fewer towboat crewmembers. And there is a shortage of barges themselves as the fleet was reduced after Hurricane Ida destroyed many vessels in late August last year. This tightness is increasing as the US is in its grain season.

"If the low water continues to persist, it's not unreasonable that some carriers may be forced to declare force majeure," the carrier said.

An average of 1.6mn st/yr of coke moved on the Ohio river system in 2016-2020, while an average of 2.3mn st/yr moved on the Mississippi river between Baton Rouge and New Orleans, Louisiana, during the same five-year period, according to the US Army Corps of Engineers.

Low water affects anode green and calcined coke

While the bulk of coke shipped downriver on the lower Mississippi river is fuel-grade coke, the anode-grade coke market could face shipping challenges as well.

Rain Calcining, Oxbow Carbon, and Alcoa each operate calcining units in the US Gulf and midcontinent and receive a significant portion of their anode-grade green petroleum coke (GPC) feedstock via barges, both from domestic and international refineries, as seaborne coke vessels are often unloaded into barges for further shipment to calciners.

The need for more barges and the potential for higher demurrage is likely to add to calciner's total GPC costs, a market participant said.

The low water on the Ohio river could affect calcined coke shipments upriver to smelters in this region as well.

"It could limit supply of calcined coke if the situation doesn't improve soon," one calciner said.

By Delaney Ramirez and Lauren Masterson