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Mississippi coal barge rates to drop further after halving in past year: sources

The dramatic drop in US coal exports has seen barge freight rates for shipments down the Mississippi River to the Gulf Coast plummet this year, and rates are expected to drop even further, players say.

A survey of brokers and shippers showed coal barge freight rates from St. Louis, Missouri, to New Orleans at about $16/st, with spot deals almost nonexistent.

One St. Louis-based shipper said barge rates for the same trip at this time last year were up to almost $40/st.

"We"re feeling the malaise of commodity prices being in the tank," he said, adding that coal has become a "four-letter word" for barge companies.

US coal exports were down 20.1%, or about 10.5 million st, through the first half of 2015, compared with the year-ago period, according to US Energy Information Administration data.

A second shipping source said many of the longer-term export deals signed three to five years ago when coal prices were higher are set to end this year. The expiration of that business, coupled with a lack of spot deals, means shippers will have to drop their prices to get business, with rates fluctuating and falling further in the coming months and into 2016.

"It's a buyer's market," he said. "How bad does somebody really need to keep a unit or a boat running? What price is in second place? Is it worth it to ship at that price somebody is willing to pay? It's a sad situation ... but if they don't show up with coal, you're not moving."

The second source said many shippers have been hesitant to move coal at lower prices, but with so many empty coal barges not moving for so long, they are likely to take business at a reduced price.

"We have too much of everything," he said. "The shipping prices are lower and they are going to go lower."

Draft depth is also becoming a concern, some said. A third shipper said his company is loading for 11-foot drafts, but a dry spell in the north could soon mean a cut to 10-foot drafts.

The third shipper noted that drafts are usually cut in the fall, but wet weather last year kept water levels high and allowed heavier barges.

"Drafts are really going to come into play starting next week," the second shipping source said. "All these guys are going to try and figure out what they can do with this market. Running at 11 feet or 10 feet could mean a lot, a considerable difference in your margin."

source: http://www.platts.com