Saturday, December 1, 2012

" Good Year for the Barges" ($CNRD)

A correspondent just posted a link to this article in the comments section,

"Coastal tank barges [are] also subject to the Oil Pollution Act (OPA) that requires all seaborne vessels be double hulled by the end of 2014. Eight percent of the current fleet is single hull barges that must be decommissioned by the end of 2014. The size of the coastal tank barge fleet is further constrained by limited shipbuilding capacity that means the lead-time for new vessel order is over 12 months. Most new vessels replace retiring existing barges.

All of which adds up to a tight market for chartering coastal tank barges. The cost to charter a coastal tank barge is between $16 and $18 K/day (source: Kirby, Hornbeck Offshore). Kirby reports that 60 percent of its coastal business is under term contracts and 90 percent under time charters with recent utilization rates running above 80 percent..."
Good year for the barges! It's nice that the shipbuilding capacity is going to replace retiring barges, and not for a speculative buildup of capacity. Speculative buildups are what lead to busts. We will have a homerun if Conrad just chugs away at its current pace for a few years.

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