More Stuff on Barge Fundamentals ($CNRD)

More useful information from the American Commercial Lines 10-K,

Another continuing driver of new barge demand is the requirement to replace all single-hull tank barges with double-hull tank barges. By federal law, single-hull tank barges will not be allowed to operate after 2015. All of our tank barges have double hulls. There are, however, still some single-hull barges in operation within the industry. The ultimate realization of the replacement activity and the timing of the replacement cycle will likely be impacted by overall tank barge demand as during the recent recession many such barges were retired without current need for replacement.

The price we have been able to charge for manufacturing production has fluctuated historically based on a variety of factors including the cost of raw materials, the cost of labor and the demand for new barge builds compared to the barge manufacturing capacity within the industry at the time. During the period from the beginning of 2007 through 2008, we were able to maintain or improve the pricing on new barge orders, net of steel costs, in response to continued demand for new barge construction. Pricing strength decreased during the recession but has recently been improving and over the longer term, as we re-enter a period of strong demand for replacement barges, we plan to continue improving the pricing on our barges, net of steel, although we expect that our manufacturing segment will not be a major EBITDAR contributor over the next few years because of use of much of the production capacity by the transportation segment. [...]

According to Informa, the Inland Waterways fleet peaked at 23,092 barges at the end of 1998. From 1999 to 2005, the Inland Waterways fleet size was reduced by 2,407 dry cargo barges and 54 liquid tank barges for a total reduction of 2,461 barges, or 10.7%. From that date through the end of 2010, the industry fleet, net of barges scrapped, increased by 125 dry cargo barges and increased by 171 tank barges, ending 2010 at 17,914 dry and 3,013 liquid barges, for a total fleet size of 20,927, 9.4% below the 1998 level. This decline in the industry fleet size has resulted in a more favorable supply-demand dynamic for Inland Waterway freight transportation.

During 2010 the industry placed 757 new dry cargo barges into service while retiring 341 dry cargo barges and expanded the liquid cargo barge fleet by four barges. The life expectancy of a dry cargo barge in our fleet is up to 35 years and a liquid barge in our fleet is up to 40 years, with the age of retirement depending on the physical condition of a barge and amount of reinvestment and repair. We also believe that approximately 25% of the industry’s existing dry cargo barge fleet will need to be retired or refurbished due to their age over the next three to six years. [...]

Due to the relatively long life of barges and the manufacturing boom of the late 1970s and early 1980s, older barges are reaching the end of their life expectancy and single-hulled liquid barges are retiring ahead of U.S. Coast Guard requirements for liquid tank barges to be double-hulled by 2015. Since its peak in 1998, the overall industry dry fleet has declined 11.3%, with over 18% of the current dry fleet at least 26 years old at December 31, 2010. According to Informa’s estimate at December 31, 2011, 4,535 new hoppers were expected to be built in 2011 through 2015, with almost all going towards replacement of the aging fleet. Per Criton, 997 new hoppers were built in 2011. We also believe that approximately 25% of the industry’s existing dry cargo barge fleet will need to be retired or refurbished due to their age over the next three to seven years.