London Houston Washington New York Portland Calgary Santiago Bogota Rio de Janeiro Singapore Beijing Tokyo Sydney Dubai Moscow Astana Kiev Porto Johannesburg Riga Market Reporting Consulting Events Challenges and opportunities for the inland waterways Inland Ports and Terminals Annual Conference, Shreveport, Louisiana Todd Tranausky, North American Transportation Editor 30 April 2015

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Market Reporting Consulting Events Issues and opportunity on the inland waterways

Copyright © 2015 Argus Media Ltd. All rights reserved. State of the inland waterway system Potential opportunities in changing traffic mix Weather and lock and dam issues Necessary investments in infrastructure Where the industry can focus its attention

Significant delays to movements ◦ High water ◦ Lock closures Extra equipment needed to cope with conditions, volumes Demand increasing ◦ Dry bulk and liquids Uncertainty about the future Copyright © 2015 Argus Media Ltd. All rights reserved. Conditions facing shippers and operators

Rates respond to pressure Copyright © 2015 Argus Media Ltd. All rights reserved. Coal rates up from early 2014 levels Rate gains are expected to continue as capacity is allocated among commodities Lock delays contribute to increases Source: Argus

Crude shippers paying more Inland moves more sensitive to crude price Volumes could bounce back quickly, create equipment shortfall ◦ Industry’s crystal ball on crude pricing is cloudy Not just dry bulk Copyright © 2015 Argus Media Ltd. All rights reserved. Source: Argus

Market Reporting Consulting Events Future traffic mix changes

Demand outpaced supply in 2013, early 2014 ◦ Created a need for shippers to find rail alternative Potential reduced dramatically by drilling slowdown ◦ Barge is the swing mode for this traffic Will give railroads ability to catch up, create potential oversupply ◦ Eliminating the sense of crisis shippers felt last year Sand’s growth potential Copyright © 2015 Argus Media Ltd. All rights reserved.

Demand strong along the coast Shorter haul than inland moves; requires fewer barges Weakening crude traffic raises questions ◦ Potential for large overbuild Crude more responsive to market forces Copyright © 2015 Argus Media Ltd. All rights reserved. Source: Argus

Fertilizer moves as dry bulk or liquid, from domestic and imported sources Domestic production barged, railed; plenty from FL, TX Vessel imports via US Gulf coast move up the Mississippi to its tributaries ◦ 55,000t = est 37 barges ◦ 30,000t = est 20 barges Fertilizer traffic growth competes for space Copyright © 2015 Argus Media Ltd. All rights reserved.

Market Reporting Consulting Events Conditions set stage for growth, challenges

Increasing amounts of salt, fertilizer on barges Grain seeks barge backup for rail, but volumes could decline ◦ Currency issues dent exports ◦ More domestic traffic handled by trucks, rail Barge operators are likely to hold capacity for committed contract shippers Dry bulk commodities increase waterway reliance Copyright © 2015 Argus Media Ltd. All rights reserved.

Fertilizer rates increase or fall sharply in response to the demand Rate gains cause changes in shipper behavior ◦ Seeking to get in front of spikes ◦ Increased reliance on contracts Rates increase in response to changes Copyright © 2015 Argus Media Ltd. All rights reserved.

Ice and high water slowed or stalled barges ◦ Loading delayed by flooding at docks ◦ High waters slow transits, lower tonnages Adverse conditions forced at least one barge company to halt shipments on the Big Sandy river this month Additional tug requirements and slower transits create reliability issues Weather complicates shipments in 2015 Copyright © 2015 Argus Media Ltd. All rights reserved.

Declines in coal allow open barges to be repurposed Frees up horsepower to move other commodities ◦ Salt, fertilizer could benefit Reduced grain likely in 2015, freeing up covered barges Operators move equipment around to cope Copyright © 2015 Argus Media Ltd. All rights reserved.

Lock work planned across the river system later this year ◦ Ohio River Lock and dam 52 and 53 could cause delays Inola/Catoosa could be completely shut off by lock closures later this year ◦ But high water levels could allow lock to be bypassed High water is postponing some work, making the summer and early fall even more prone to delays Maintenance will present further disruptions Copyright © 2015 Argus Media Ltd. All rights reserved.

Advocating for Congress to fund improvements Not appearing to customers that the system is failure prone and that shipments might face delays Reliability underpins pricing power of operators, creating a balancing act Industry faces conundrum over disruptions Copyright © 2015 Argus Media Ltd. All rights reserved.

Market Reporting Consulting Events Financing upgrades

Inland Waterway Trust Fund monies not being fully used Industry volunteered to shoulder additional diesel fuel tax Desire for money to go toward intended purpose Taxes and government intervention Copyright © 2015 Argus Media Ltd. All rights reserved.

Industry waiting on Corps and Congress to set direction, funding levels New bill allows $100mn/yr for waterways projects Proposed FY 2016 budget down 13pc, “not adequate” for dredging and maintaining existing network Congress, Army Corps hold the cards Copyright © 2015 Argus Media Ltd. All rights reserved.

Dealing with lower federal investment at a time of increasing needs Making sure Army Corps prioritizes those projects most necessary to navigation Spending money on needed areas, especially in the Gulf where crude traffic is expanding Industry faces crossroads Copyright © 2015 Argus Media Ltd. All rights reserved. Petroleum tonnage on the inland waterways

Market Reporting Consulting Events Final thoughts

Rates are likely to rise as capacity tightens Delays have the potential to get worse Lock and dam infrastructure is cause for concern Industry needs to take lead to ensure financing is adequate Key takeaways for operators, shippers Copyright © 2015 Argus Media Ltd. All rights reserved.

Copyright notice Copyright © 2015 Argus Media Ltd. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus. Trademark notice ARGUS, the ARGUS logo, ARGUS MEDIA, ARGUS DIRECT, ARGUS OPEN MARKETS, AOM, FMB, DEWITT, JIM JORDAN & ASSOCIATES, JJ&A, FUNDALYTICS, METAL-PAGES, METALPRICES.COM, Argus publication titles and Argus index names are trademarks of Argus Media Limited. Disclaimer All data and other information presented (the “Data”) are provided on an “as is” basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any particular purpose. Argus shall not be liable for any loss or damage arising from any party’s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law. Todd Tranausky North American Transportation Editor Houston