Optimism returning to tugboat industry


For tugboat operators in 2012, there is every reason for optimism. America’s deepest economic recession in our lifetime appears to be fading behind us. The business buildup that should follow the official end of recession appears to be developing.

Sure there are always reasons for worry — conflict in the Middle East and rising fuel prices being among the most worrisome — but tugboat operators tend to look on the bright side. Otherwise they would not be what they are: survivors and maritime entrepreneurs.

A nation of 300 million people with the world's largest economy, a place where a hefty percentage of goods and materials travel by water, will always need the services of tugboats, barges and ships.

For five long years they have waited out the bad news — declining numbers and longer periods between jobs and sales contracts. They watched as opportunities slipped away and endured the sometimes difficult effort to keep paying employees. From time to time, tugs — sometimes the better part of a company fleet — have had to be tied to the wharf while waiting for business to get better. Expansion ideas, like maybe plans for a new workboat, have been put off. But other tugs and other companies have kept busy throughout the recession by virtue of the fact that most tugboat business simply does not go away. Plus, an operator learns to diversify and to work even harder in the struggle to survive. Things may slow down for a while, but most of the industries served by tugboats do not disappear when the economy goes bad. A nation of 300 million people with the world’s largest economy, a place where a hefty percentage of goods and materials travel by water, will always need the services of tugboats, barges and ships.

Brian Gauvin

A welder works on a hull at Eastern Shipbuilding’s yard in Allanton, Fla.

“I did not see anyone going out of business, so there must be plenty of work to go around,” said Ron Rasmus, president of the Great Lakes Group, one of the largest U.S. tugboat companies, with approximately 50 tugs servicing ships in 40 ports.

While the ship-assist business on the Great Lakes has been flat, according to Rasmus, his century-old company has still flourished, primarily through growth of its Cleveland shipyard, redeveloped with considerable investment. The shipyard, with inquiries coming in from maritime operators all over the world, has grown recently from 25 to more than 100 employees, according to Rasmus. Movements of commodities such as grain and steel on the lakes were unimpressive last year, and tug companies went without the traditional revenue from ice-breaking and from assisting sand and salt ships during this past warm winter. Still, Great Lakes Group has grown dramatically through diversification.

To be sure, some small companies outside of the Great Lakes region may have given up and sold their single tug or pair of tugs without making headlines. But for the most part, the same operators who were working the waterfront before the economy began to collapse in 2008 are still working today.

“It’s definitely been a couple of years of treading water, but we’ve been keeping our tugs busy by towing just about anything we can get our hands on,” said Rachel Smith, co-owner of TradeWinds Towing, a two-boat ocean towing service working out of New Orleans and Morgan City, La. “We keep doing what we have always done, but sometimes it has definitely been an uphill battle.”

But now everyone can anticipate the eventual full recovery of the U.S. economy. Already we see increases in both imports and exports by containers on all U.S. coasts, as consumers resume some of their old purchasing habits and as more U.S. businesses become adept at selling their goods in a global market.

Container volumes in major U.S. ports increased by 5 percent and sometimes more in 2011 over 2010. Similar, if not better, gains have been recorded in the first half of 2012. The size of containerships calling at the U.S. West Coast continues to grow, with the biggest ever to visit a U.S. port, the 12,500-TEU Fabiola, arriving at Los Angeles/Long Beach in March.

Brian Gauvin

Lifting the cargo control room structure onto a tank barge for Bouchard Transportation being built by Bollinger Marine Fabricators in Amelia, La.

Most large ships, with the exception of cruise ships, don’t move without tugboat assistance. Positive news about the comings and goings of container vessels is a positive indicator of the health of a big portion of the tugboat industry — that portion which pushes ships in and out of their berths.

Here is the encouraging news from the Port of Houston for 2011, according to the local port authority: a 1 percent increase in ship calls to 8,073, an 8 percent increase in barge traffic, containerized volume up 3 percent, plus increases in grain handling and overall revenue for the port.

A stream of ever-larger containerships is expected at ports on the Gulf and East coasts beginning in 2014 as work is completed on a massive expansion of the Panama Canal. That project, centered on creation of additional locks for ships on both the Atlantic and Pacific ends of the canal, will effectively double the capacity of the canal.

The canal expansion is expected to increase the flow of post-Panamax ships arriving at ports from Texas to New York. Many of those ports are engaged in dredging, bridge improvement and infrastructure expansion projects to be ready for the coming bonanza. The Port of Houston is investing $3 billion in infrastructure improvements, while New York, Miami, Savannah and Charleston are pouring in similar amounts, all anticipating their share of the redistribution of big-ship container traffic soon to come.

The boost in business should be especially beneficial for large tugboat companies such as Moran Towing and McAllister Towing & Transportation that have operations in numerous East Coast and Gulf Coast ports, many of which are already enjoying the effects of post-recession recovery.

John Snyder

James A. Moran is a stern-drive docking tug built for Moran Towing by Washburn & Doughty Associates in East Boothbay, Maine. The tug is 93 feet and 6,000 hp.

The Port of Norfolk, for example, serviced primarily by tugs of both Moran and McAllister, has seen increases in container shipping, coal exports, break-bulk and other commodities. Tug companies there are said to sometimes be working flat out, at least during busy periods, keeping up with the flow of ships. Smaller tug and barge companies — those involved in local construction and dredging projects — have benefited from the rush to get ports ready for completion of the canal project.

Brian Gauvin

The bow section of an ocean towing tug also under construction at the Amelia yard.

Another strong reason for optimism is the looming prospect of recovering energy exploration and drilling activity in the Gulf of Mexico. Despite what we might hear from campaigning politicians, drilling activity in the Gulf of Mexico is not dead.
Oil exploration in the Gulf has been picking up since the dampening effect of the Deepwater Horizon disaster of 2010 followed by a government moratorium on drilling activity. The number of rigs drilling in the Gulf has increased and is forecast to continue increasing.

Although numerous large offshore rigs are reported to have left the Gulf for more friendly waters to the south, a more welcoming attitude by federal regulators is expected to further increase deepwater drilling activity in the near future. In addition, offshore drilling is expected to begin off the coast of Cuba and Mexico and that, too, may spell business opportunities for U.S. tug and offshore support vessel operators.

For a small company like TradeWinds Towing, however, the waiting for a full recovery seems to go on forever.

“Government permits may get issued, but it takes a long time for that to get down to the reality of a tug getting dispatched offshore,” said Smith, who founded TradeWinds Towing with her brother less than a decade ago. “We are hoping that next year or the year after things will be getting back to what they used to be like for those of us working the Gulf Coast.”

Meanwhile, TradeWinds, like many other small companies, has kept busy fulfilling alternative towing assignments, including towing dead naval vessels from the West Coast and Gulf Coast to scrapping facilities in Brownsville, Texas. “There’s a bigger imperative from the government to clear out some of the reserve fleets, and that has been helping to keep us busy during the down times,” said Smith.

As if taking a cue from Great Lakes Towing, far to the north, TradeWinds has also been investing for the future by acquiring a second tugboat in 2011, making improvements to both of its vessels, and expanding staff slightly to handle administration of the second boat and to facilitate sales and contracting.

Rising oil prices usually help to trigger expansion of energy-related activity in the Gulf of Mexico and elsewhere, but the increase in diesel prices is the double-edged sword which becomes painful for most tugboat operators. When you purchase fuel by the truckload, every penny increase in price causes management headaches.

John Snyder

Mark Moran is a stern-drive docking tug built for Moran Towing by Washburn & Doughty Associates in East Boothbay, Maine. The tug is 86 feet and 5,100 hp, driven by twin Schottel z-drives.

The cost of fuel is especially serious for tugboats because their engines (and tanks) are disproportionately large, compared to many other types of workboats. A typical tugboat design includes tankage for 10,000 to 30,000 gallons if designed for local ship-assist work, and up to 100,000 gallons or more if intended for coastwise or offshore towing.

Many tug operators are able to pass along fuel price increases to customers in the form of contracted surcharges.

Brian Gauvin

The Crowley ATB tug Liberty under construction at Dakota Creek Industries in Anacortes, Wash. It belongs to the largest class of ATBs ever built.

“It’s simple enough,” said Rasmus of Great Lakes Group. “When our fuel prices go up from the agreed-upon base level, the customer pays a little more. When they go down, he gets a credit. That way it’s fair and everyone is OK with it.”

Not all operators are in a position to pass along fuel price increases in the form of surcharges.

“It depends on the type of towing you are doing at any given time,” said Smith of TradeWinds. “But regardless of the customer, we are definitely cutting back on the rpm’s on our long-distance tows. Right now the daily cost of fuel is typically higher than the daily operating costs for personnel, insurance and things like that. The fuel costs are higher than the tug’s day rate. We have to be very careful in managing this.”

Nevertheless, signs of the U.S. recovery are everywhere. Consumer spending is up. The economy is forecast to expand at about 2.5 percent this year. Iron ore shipments have increased on the Great Lakes. U.S. coal exports are projected to double in the next few years. Automobile production is increasing, as are orders to U.S. factories. Shipyards are constructing increasing numbers of barges for both dry and liquid bulk commodity shipments. The U.S. unemployment rate is slowly coming down.

“I am extremely hopeful for this year, and from my perspective, I definitely see the economy turning around,” Rasmus said.

By Professional Mariner Staff