Low Mississippi River Water Levels Impact Barge Traffic
RedStone Resource
October 2, 2023
Inside This Edition
Maritime Sector Tightening Capacity in October
Estimates suggest that a significant enough volume of capacity could be impacted that it could have a ripple effect on more than 20% of the sailings that touch the US east and west coasts.
Low Mississippi River Water Levels Impact Barge Traffic
Once again, water levels in the southern part of the Mississippi River are beginning to impact the movement of certain commodities. This has been an issue off and on for several years, but the El Nino weather patterns are affecting certain regions of the river, making it difficult for barges to run completely full.
Global Supply Chain Pressures Inch Up on Several Issues
The New York Fed’s Global Supply Chain Index (GSCI) has inched up over the past two months and has returned to levels that were seen prior to the pandemic. Over the past three years, the GSCI was very high because of global bottlenecks that developed during the pandemic. But those pressures have eased over the past 8 months, and the GSCI has hit some of its lowest levels in history.
ECONOMIC BRIEFING
Mexico Replaces China as Largest US Import Partner
Debates are taking place over data showing Mexico replacing China as the number one import partner for the United States. This is the first time in nearly two decades that the two trading partners have swapped places. Some analysts dispel the data suggesting that the current downturn in inbound retail trade is affecting Chinese imports while a surge in automotive, energy, and various commodities is boosting the US/Mexico trade.
Regardless of the details, the volume of US/Mexico cross border trade is increasing quickly. There is also data showing Mexico pulling record volumes of Foreign Direct Investment in 2023, surpassing a record set in 2022. This investment is being used to expand manufacturing capacity amid the global diversification of sourcing. If the US was not in an inventory overstock situation (which is reducing the volume of total inbound orders of finished, intermediary, and primary goods), China may still be leading. Many of the reshoring trends and a surge in US manufacturing construction activity (up 70% on more than $200 billion in annualized spending in the US) will begin to have an impact on import volumes in 2024 and 2025 once facilities have been completed and production has started.
Maritime Sector Tightening Capacity in October
Weaker demand for maritime capacity headed into the latter part of the peak season, a number of large maritime firms will use blank sailings in October to tighten capacity. Estimates suggest that a significant enough volume of capacity could be impacted that it could have a ripple effect on more than 20% of the sailings that touch the US east and west coasts. This will have a wide-spread impact on the sector, at a time when maritime rates are low. Carriers are issuing notes warning of changes in scheduled sailings, and shippers will need to pay attention to the use of blank sailings in the coming 30 days.
Evidence of the change in prices may be seen in some of the bulk sector. The Baltic Dry Index has risen to its highest level since September of 2022. Rates have risen 55% in the bulk sector in the past 30 days. The Baltic Dry Index is usually used to understand early-phase ordering of bulk materials used in the manufacturing process. In this case, it is also obvious to see some of the rapid changes in the use of blank sailings to trim capacity and tighten prices.
TRANSPORTATION BRIEFING
Low Mississippi River Water Levels Impact Barge Traffic
Once again, water levels in the southern part of the Mississippi River are beginning to impact the movement of certain commodities. This has been an issue off and on for several years, but the El Nino weather patterns are affecting certain regions of the river, making it difficult for barges to run completely full.
Water levels near St. Louis are 46% lower than the last three-year average and they are 24% lower than levels from a year ago. This is not making headline news at the moment because there is a lot of spare truckload capacity to help move products. But the cost of moving grains and heavy commodities that rely on barge traffic are suffering as a result.
Forecasters are not expecting a dramatic increase in water in this region and increases in water flows from snow melt of course won’t be available until next spring. With Canada still experiencing some drought conditions, there will be less water to flow down the Mississippi River, and if these trends continue, this could be a significant problem through large portions of 2024.
Global Supply Chain Pressures Inch Up on Several Issues
The New York Fed’s Global Supply Chain Index (GSCI) has inched up over the past two months and has returned to levels that were seen prior to the pandemic. Over the past three years, the GSCI was very high because of global bottlenecks that developed during the pandemic. But those pressures have eased over the past 8 months, and the GSCI has hit some of its lowest levels in history.
But there are some challenges that have emerged. The Rhine River in Germany is very low and water levels at the Kaub region are forcing some lower weights for barges. Approximately 80% of the goods moving inland into Germany move through the Rhine and many products used around the world in manufacturing supply chains flow through this region. This is also a key source for the movement of energy supplies that feed the German industrial complex.
There are also some continuing problems getting ships through the Panama Canal because of low water levels in the lock system. Although some of the congestion has been processed or diverted to other ports, there are still some transit delays taking place as a result.
Other situations are also developing, whether due to live fire exercises in the South China Sea, problems transiting the Black Sea, or continuing issues in areas around the Middle East. In addition, there are some mild challenges developing from low oil and petroleum inventories and rising fuel prices as a result. The point of all of this being: conditions remain fairly good globally for keeping freight moving, but there are some items to keep an eye on.
