US floods, river closures delay corn, metals barges; little oil impact

08.05.2017

Flooding in the US Midwest involving key waterways is having mixed impacts on commodities markets thus far, with some already facing delivery delays due to river closures and more potentially to come as the high water moves steadily downriver, while in others operations remain normal.

High water on the Mississippi River has prompted two closures on the upper channel from Cairo, Illinois, and further north. And flooding already occurring in St. Louis was expected to continue to expand along the Mississippi River throughout the month.

Other rivers are also affected, including the Illinois River, such that the Chicago Board of Trade has declared force majeure for corn and soybean shipping hubs due to flooding on that waterway, according to a Thursday notice.

Some metals shipments via barge are seeing or are expected to see impacts from the flooding, while the movement of crude oil, petroleum products and petrochemicals appeared largely unaffected thus far, according to sources across commodity markets.

Yet flooding and river-terminal closures have not necessarily impacted prices of affected commodities yet, according to sources, who also noted that flooding is a regular event, happening every few years.

For instance, corn market sources said that while the terminal closures will have some impact on physical deliveries, they are unlikely to affect prices as the market has largely already priced them in.

Flooding did delay scrap transactions in the St. Louis market that were still not completely finalized by late Friday. St. Louis is upriver on the Mississippi from major scrap-consuming electric-arc furnaces in the Southeast.

"We will definitely see some shipment delays due to flooding and navigation restrictions," a scrap supplier said. "Shippers using spot rates will get squeezed on freight rates for a period of time."

And a ferroalloys supplier who uses warehouses in Chicago said he was facing delays of barges to that city and cannot get arrival dates.

"We've been supplying a customer in the Midwest from Pittsburgh, but I can't do that for much longer," the supplier said. The Midwest customer would normally be supplied from Chicago.

An overseas ferroalloys producer who supplies the US said he had not had a problem yet, but was "watching it closely."

He expected the high waters and river closures would eventually have an impact, and said he had sold a truckload of ferrosilicon to a trader on Friday at 82 cents/lb, cash, in-warehouse Chicago, prompt release, up from prices of 78-80 cents earlier this week.

Traffic is restricted due to high water levels on the upper Mississippi River, with closures from mile markers 33 to 109.9, beginning near Cairo, Illinois, and working north to just south of Chester, Illinois, and at mile marker 535 in Clinton, Iowa, due to a bridge closure, according to Petty Officer Third Class Lora Ratliff of the Eighth US Coast Guard District.

"Beyond those closures there are no restrictions I am aware of," she said.

CRUDE, PRODUCTS MARKETS UNHAMPERED The movement of crude oil and petroleum products has seen little impact by the flooding, according to tanker market participants.

"There are some delays [on the barge market] associated with the flooding, but it has not had any affect on rates so far," a Jones Act shipowner said.

The flooding has occurred in an area where only barges have been affected, because tankers do not travel that far upriver, he said. The shipowner saw all traffic moving normally on the US Gulf Coast.

Under the Jones Act, vessels transporting goods between US ports must be US-flagged and -built, and US majority-owned.

There were no known issues affecting dirty tanker activity on the Mississippi River, according to a non-Jones Act shipowner.

"First I've heard of such a thing," he said about high water levels on the river. A ship from his fleet had recently called at New Orleans without any problems.

Participants in petrochemicals markets were likewise sanguine, as closures have yet to affect prices or logistics, and sources in key markets such as aromatics downplayed any concerns over potential impacts.

Spot benzene prices on a Lower Mississippi River delivery basis maintained their usual 2-cent/gal premium to US Gulf Coast indications to close the week. Toluene and mixed xylene markets were up nominally from Thursday's assessments, but sources attributed the increase to a rebound in the energy complex.

Chlor-alkali market participants said there were no issues related to flooding along the Mississippi River. The liquid caustic soda market has been talked tight in recent months, with any impact on barge activity more likely tied to supply shortages brought on by extended turnarounds and increased export activity rather than logistical constraints, sources have said.

US methanol pricing saw gains of 1.5 cents/lb ($33/mt) on the day that resulted from production issues along the US Gulf Coast region, source said. Any impact on barge business was expected to be minimal, as anyone that far up the river would likely be serviced by northern suppliers.

Pittsburgh-based phthalic anhydride maker Koppers, which has production in Stickney, Illinois, was not experiencing any logistical issues or delays for domestic deliveries, a company source said. The Mississippi River is an important waterway for US commerce, including the movement of crude oil, petroleum products, coal, agricultural products and metals.

Petroleum movements by barge and tanker between the Midwest and the US Gulf Coast averaged 115,000 b/d in 2016, and 56,000 b/d in the opposite direction, according to Energy Information Administration data.

The Mississippi River also is a key transport mode for coal being delivered to export terminals in New Orleans, according to the EIA.

One producer of Illinois Basin thermal coal, Knight Hawk Coal, idled its Lone Eagle loading dock on the Mississippi River near Chester, Illinois, on Monday evening due to halts to barge traffic, S&P Global Platts reported previously. At that time, it expected it could lose six to seven days of shipping on the river.

Navigation channel depth on the Mississippi River is maintained at 45 feet from Baton Rouge south and at 9 feet from Baton Rouge up, according to the US Army Corps of Engineers.


platts

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