By The barge industry faces a significant challenge due to low water levels along the Mississippi River. However, this situation presents an opportunity for railroads, as noted by Raymond James analyst Patrick Tyler Brown.
In November 2022, Raymond James drew attention to the problem of low water levels along the river, which serves as a crucial route for barges. Brown reemphasizes the ongoing transportation challenges caused by drought conditions.
Marine Log has also expressed concerns regarding the recurrence of last year’s low Mississippi River water levels and the impact on river shipping.
According to data from the U.S. Geological Survey, the gage height of the Mississippi at St. Louis has drastically fallen from 20.64 feet on May 16 to -3.25 feet on Friday. Gage height, also known as “stage,” refers to the height of water above a reference point.
While water levels can fluctuate rapidly, the 14-day weather forecast indicates that key areas along the lower Mississippi will continue to face challenges, with all 10 measuring points projected to experience further drops in stage levels.
Considering the situation, Raymond James’ Brown notes that any disruption to barge traffic could benefit railroads, particularly in terms of bulk traffic. However, he mentions that last year’s circumstances provide no relative advantage or disadvantage on a year-over-year basis. Nonetheless, compared to last year, rail service levels have significantly improved, which opens up additional conversion opportunities.
In summary, low water levels along the Mississippi River pose a headache for the barge industry but offer a competitive window for railroads. Despite the challenges posed by drought conditions, railroads can leverage this situation to their advantage, especially with improved service levels compared to the previous year.
Opinion: Record Low Water Levels on the Mississippi River in 2022 Highlight Climate Change’s Impact on Major Rivers
Last year, Raymond James acknowledged that Canadian National Railway Co. (CNI, +0.43%, CNR, +0.03%) serves as the primary rail operator along the Mississippi.
Given the ongoing decline in water levels, there is a possibility that shippers will opt for rail transportation more frequently and redirect their traffic towards West Coast ports. This maritime industry trend is worth monitoring, according to analyst Brown’s recent note.
Additionally, Brown mentioned the restrictions placed on the Panama Canal, emphasizing its significance as a crucial gateway into the United States. The weather-related challenges such as drought conditions and the El Niño weather phenomenon have severely limited canal operations. The current average transits per day have dropped to 32 vessels (compared to around 50 in June), and maximum ship drafts have been reduced to 44 feet from 50 feet, necessitating lighter cargo. As a result, average wait times have increased fivefold since June.
In light of these circumstances, it has been officially confirmed that this summer has been the hottest on record.
Considering this situation, Brown identifies potential opportunities for railways in the western United States. He anticipates that western rails will benefit in the short to medium term, especially if drought conditions persist. These railways are likely to capture a higher share of intermodal traffic redirected from the Panama Canal.
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