Kirby CEO says oil will drive demand for US coastal barges in 2013

Kirby Corp., the largest US operator of both river and coastal tank barges, expects demand for surging oil supplies to keep the coastal barge market tight through 2013, according to CEO Joseph Pyne.
With fewer than 300 vessels, any single factor can tighten the coastal tank barge market, Pyne said at a BB&T transportation conference in Coral Gables, Florida, according to a webcast.
Pyne said Kirby started planning two major acquisitions -- which expanded its coastal fleet by 26 vessels to 81 -- before the US oil supply picture came into focus. He previously thought Kirby would patiently build that side of its business and gradually boost pricing power through 2014 and beyond, he said.
"As we envisioned that opportunity, we didn't factor in the liquids that needed to be moved out of shale formations," Pyne said. "In a relatively thin market -- 275 barges in this market -- it doesn't take that many barges being consumed by other volumes to tighten it up."
Barges traveling rivers and coasts across the US have been drawn into the shale story. They pick up the light crude from railcars and carry it to routes inaccessible to pipelines for various reasons: down the Mississippi and Ohio rivers, across the Gulf Coast and down the Atlantic seaboard.
The latest barge route to emerge is on the West Coast.
Bakken crude would travel by rail to Anacortes, Washington, where coastal barges would pick it up can carry it to refineries near San Francisco, according to Kirby.
Kirby has not said whether its customers have tested the West Coast route or when it expects those trades to start in earnest.
"What this new volume has done is just tighten the market," Pyne said. "It's allowed for better pricing and, at least in the offshore area, probably has moved into balance sooner than we had projected several years ago."
To illustrate the new demand for coastal barges, RBN Energy on Wednesday looked at the Port of Corpus Christi on the Texas Gulf Coast. Eagle Ford oil producers are pouring millions of barrels of light crude and condensates into pipelines headed about 70 miles south to the port.
"The port is reeling from a 19-fold increase in outbound crude traffic," Sandy Fielden wrote.
Six marine terminals were built or expanded at Corpus in the past year, but the outbound traffic remains snarled by slow loading of barges and the availability of Jones Act-qualified vessels.
"At the moment Eagle Ford production is lagging behind pipeline capacity, and that might turn out to be the only thing preventing supplies backing up at Corpus," Fielden said.
The US inland tank barge market is more than 10 times the size of the coastal fleet
Kirby owns 841 inland barges, about 27% of the market's 3,140 vessels. They all carry liquids, unlike the estimated 18,000 dry cargo barges operating in US waters.
The second-through-fourth largest inland fleets are owned by American Commercial Lines, with 316 tank barges; Canal Barge, 218; Marathon Oil, 177; and Ingram Barge, 176, according to Kirby's presentation.
When an analyst asked how much Kirby could expand without inviting regulatory scrutiny, Pyne said he sees no issue with ramping up to 40% of market share. He pointed to Kirby's customer base -- major industrial companies, not US consumers.
"We think we have more room," Pyne said. "As we look at the business concentration models, we still don't have market share that appears on anybody's radar screen. There are plenty of examples of businesses that sell to our customer base that have market shares well over 40%, and we don't see why we couldn't get there."
ExxonMobil is Kirby's largest customer.
Just over half of Kirby's 2012 revenue came from moving petrochemicals and chemicals, including benzene, styrene and methanol, Pyne said.
About 26% came from refined petroleum products, including gasoline, diesel, jet fuel, naphtha and ethanol; about 19% came from black oil products, including crude, asphalt, residual fuel oil and coker feedstock; and 4% came from agricultural chemicals.
Source: Platts