High water disrupts river logistics, scrap flows

High water on the Mississippi River is disrupting dry bulk freight and raising costs for shipping ferrous scrap, metallics and other commodities.

Shippers loading from Mississippi river-based terminals will need to factor in higher-than-normal costs for tugs and pilots, as well as the potential for high demurrage costs if barges are delayed moving downriver or ships are delayed entering the river. More than 55 vessels were waiting outside the mouth of the Mississippi river as of today.

"The costs coming in and out of the river are astronomical," a ship agent said. A recent vessel wound up paying more than six times the normal port costs.

"We're having problems the entire river," another ship agent said. Both said they had never seen difficulties of this scale on the river before.

The river disruptions have mounted a week ahead of the US domestic ferrous scrap trade, supporting expectations for higher prices in March and likely increasing volumes sold by rail and truck in impacted markets.

"This will put river consumers in a pinch and more dependent on truck and rail suppliers, which will impact land locked consumers," a scrap market participant said. "With rail equipment shortages, this will exacerbate that issue further. Going to be interesting."

The high water has also flooded docks and slowed inland barge traffic further upstream, impacting shipments to steelmakers that receive ferrous scrap and other feedstocks by barges.

American Commercial Barge Line yesterday filed force majeure for all of its barges on the Ohio river, and said it will not be able to load barges from the Mississippi river after 3 March.

Flooding has closed the Cumberland river at the Cheatham lock likely until late March, cutting off barge shipments out Nashville, Tennessee. All locks on the Tennessee river are closed until at least the first week of March.

Flooding conditions have also closed locks on the waterway that links Mobile, Alabama, to the key steelmaking region of Birmingham.

For scrap dealers who can still load barges, freight rates have risen sharply over the past week on a lack of available equipment. One dealer received a rate quote nearly double normal levels this week for a typical route to northeast Arkansas.

High water on the Mississippi river is typically a spring phenomenon caused by runoff from snow melting in northern areas, but has been unusually early this year because of heavy rain in the central US. Several agents and market participants expect the high water to last at least a couple of months.

To alleviate the high water on the river and prevent flooding in New Orleans, the US Army Corps of Engineers will take the rare step of opening the Bonnet Carre spillway on 27 February. The spillway acts as a relief valve to the Mississippi river, releasing water into the US Gulf of Mexico through Lake Pontchartrain, the corps said.

This will be the 13th opening of the spillway since it was built in 1932, and the first time it has been opened two years in a row.

The high water has increased silting at the mouth of the Mississippi, resulting in draft restrictions that have prevented ships from loading full cargoes further upriver. Vessel drafts are restricted to 44ft, less than the usual draft of 47ft, with ship agents expecting this to drop in the coming month as the river approaches flood stage.

Loadings are currently limited to around 55,000t. At least one ship with a draft in excess of 45ft is unable to continue its journey.

Seven dredges are currently working in the river, but they have only managed to prevent the problem from worsening.

Persistent fog was also an issue last week, resulting in no anchorage space on the river and dredges unable to work.