Signs of recovery are out there (somewhere)

Despite the sharp drop in commerce, many U.S. shipyards continue to produce new tugs and towboats because of prior contracts. Florida Marine, with new boats shown above, and Kirby Corp., with a new boat shown below, are two companies continuing to introduce newly-constructed towboats. (Brian Gauvin)

Amidst all the bad news, there is still reason for optimism. It’s just hard to find concrete justification for optimism that lasts for more than a day or two.

The reality is that the summer of 2009 is likely to be a bad one for many tug operators — those who depend on ship-assist work for revenue, those who work in the commodities industries, those in the spot market without contracts, those whose livelihood depends on healthy markets for consumer goods, container shipping, automobile production, steel production, exports and imports, and movements of fuels and many types of chemicals. Does that cover it all?

You don’t have to look very far to find news of hurting tugboat companies. The discouraging news is everywhere. And while optimism is absolutely necessary in order to remain in business and to motivate employees and customers, it’s not so easy to keep up that smile all day long.

In the end, optimism in the first half of 2009 has got to come from within — from the unending belief of most businessmen that the numbers are going to get better soon.

(Alan Haig-Brown)

“I am cautiously optimistic,” said Walter Kristiansen, a New Orleans tugboat operator, in late April. “I watch all the numbers and stay abreast of the news and I don’t see anything coming in today that is saying the bottom is still that far away. I almost think we have either reached the bottom or that we are darn close.”

For an example, Kristiansen, president of E.N. Bisso & Son, a century-old tug operator in New Orleans, cited the numbers describing entry of foreign-flag ships into the lower Mississippi River over a recent six-month period.

October ’08 450
November ’08 450
December ’08 453
January ’09 483
February ’09 396
March ’09 418

“See? That is not quite so discouraging,” said Kristiansen.

Still, as the head of one of four competing tugboat companies on the lower Mississippi River, Kristiansen said he was all too aware of the fact that ship arrivals of all types in February and March of this year were down 9.2 percent compared to the prior-year period.

Two new double-hull oil barges were introduced recently by Island Tug & Barge, Vancouver, B.C. The barges, built in China, were towed to Canada. (Courtesy Island Tug & Barge)

The Journal of Commerce reported in late April that hundreds of thousands of unemployed railroad cars were being stored on unused stretches of track around the nation. Meanwhile in harbors around the country, tug companies were tying up perfectly good tugboats, giving them (and sometimes their crews) a rest as they waited for business to pick up.

Down on the Gulf Coast, much of the region’s workboat commerce thrives on offshore rigs that drill and pump crude oil and natural gas. In normal times those thousands of offshore rigs provide a rich diversity of employment involving tugs, crew boats, barges and a variety of support businesses. But by late spring of this year the number of active rigs in the Gulf was down dramatically, and work for supply boats, crew boats and support tugs was diminished as well. Some companies had taken to tying up parts of their fleets and sending crews home.

Hardest hit may be the jack-up rigs that operate in relatively shallow water. The number of jack-up rigs being placed in temporary storage without contracts has been steadily increasing as the year progresses.

Lamar Golding is one of several new towboats built recently for Golding Barge Line, Vicksburg, Miss. (Jeff Yates)

For example, Hercules Offshore, an international operator with a sizable Gulf of Mexico business segment, reported recently that of its 20 jack-up rigs in the Gulf region, 14 were either available or working on short-term contracts, one was in a shipyard for maintenance, and five were “cold stacked” for storage — out of work and not being offered for work.

The situation on the Great Lakes has been particularly dire.

Imagine what employees at Great Lakes Towing, the region’s largest towing company, were thinking when the Corps of Engineers opened up the Soo Locks for the first time this season in mid-March and there was only one ship — a tanker — waiting to go through. In a normal season, ships are lined up almost as far as the eye can see on the opening day of the shipping season to pass through the locks that connect Lake Superior and Lake Huron.

The recession had depressed the demand for iron ore used by steel makers to the point that many Great Lakes shippers either delayed or cancelled initial sailings of their ships after the traditional period of winter lay-up.

The Port of Milwaukee had been feeling the pain long before the slow start of this year’s shipping season. Last year the port handled only 208 ships at its cargo terminals — that was down 23 percent from the year before. Typical cargoes handled by Great Lakes ports include iron ore, cement, construction materials and grain products.

“The situation on the Lakes is pretty bleak,” said Ron Rasmus, president of Cleveland-based Great Lakes Towing. “There is very little inbound steel coming in, and domestically most of the steel mills are temporarily shut down. So during this hiatus period there is very little ship assist business — nothing near the numbers that we would like to see. Also, there is very little tug and barge business around because essentially the tug and barge business is involved with the making of steel or the making of road or construction materials.”

Enter, once again, the optimist.

Young Brothers Ltd. of Hawaii continues to upgrade its fleet of cargo barges, all being built at the U.S. Barge shipyard in Oregon. (Courtesy Young Brothers)

“There are positive signs around and it may not be the end of the world,” continued Rasmus. “Our company is 110 years old, and we’ve been through these trends before. Plus, we will see the effects of federal stimulus money in many of our business areas and we are out looking for new business and new types of business. In the end we may have to eat this navigating season, but I certainly see it coming back.”

The Port of Tampa is feeling the pinch of a worldwide economic slowdown. Last year the port played host to only 205 ocean-going cargo ships (not including tugs, barges or cruise ships). That was down from 291 the year before.

Norman Atkins, operations director for Marine Towing of Tampa, sees the effect of this first hand every day, but he is convinced, or at least hopeful, that things are getting better.

“Since October 2008, business at Tampa has decreased anywhere from 20 to 30 percent, depending on whom you ask,” said Atkins. “We’ve had declines in almost every line of business that comes in here. But looking at the brighter side, we have the Mosaic Company that has recently sold quite a bit of product to buyers in Australia and even India. And that translates into three or four ships a month coming in to load phosphate products out of Tampa. That has everyone in the port encouraged. And because of that we have increased movements of anhydrous ammonia and sulfur, both of which are used to make different types of fertilizer. Plus, Tampa is always a big importer of gasoline for distribution throughout the state. That’s kind of keeping us alive as well. And there are always movements of containers and other cargoes. They may be in diminished amounts, but they are still moving. So I can’t help but feel that maybe we’ve seen the bottom and that things are going to be moving in a positive direction before long. I certainly hope so.”

Despite the downturn in business, Atkins says his company has thus far refused to lay off employees and crewmembers. “We thought we might have to lay up a boat or let some crewmembers go, but we’ve been holding on. That’s the last thing we want to do,” he said. “Even though the company is not doing quite so well the last several months, we•ve been able to hold on and not lay anyone off.

I’ve talked to a lot of people who have the same opinion about hitting the bottom and many of us feel that there are reasons for feeling optimistic.”

By Professional Mariner Staff