Low water levels along the Mississippi River can mean a headache for the barge industry, but present opportunities for railroads, according to Raymond James analyst Patrick Tyler Brown.
In November 2022 Raymond James highlighted the problem of low water levels along the river, which is an important route for barges. In a note released Friday Brown reiterated the ongoing transportation challenges posed by drought conditions.
“Mississippi water levels are approaching record low levels yet again,” the analyst wrote. “While water levels can change quickly, the 14 day outlook (based on weather forecast) at key areas along the lower Mississippi remain challenged with all 10 key measuring points projected to see stage levels drop further.”
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Marine Log has also reported concerns about a repeat of last year’s low Mississippi River water levels and their impact on river shipping.
The gage height of the Mississippi at St. Louis has fallen from 20.64 feet on May 16 to -3.25 feet on Friday, according to data from the U.S. Geological Survey. Gage height, which is also known as “stage” is the height of water above a reference point.
“All else equal, we note that any disruption to barge traffic that would benefit the rails (particularly bulk traffic) coincides with the benefit felt last year (hence no relative help or hurt on a y/y basis),” wrote Raymond James’ Brown. “That said, service levels at the rails are much better compared to last year, which could provide some additional conversion opportunities.”
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Last year Raymond James noted that Canadian National Railway Co.
CNI,
CNR,
is the primary rail operator along the Mississippi.
“We will continue to keep an eye on developments in the maritime industry, as shippers may opt to use more rail if low water levels persist, while also shifting more traffic to West Coast ports,” Brown wrote, in his note Friday.
The analyst also pointed to restrictions at the Panama canal. “Undoubtedly, Panama is a crucial gateway into the U.S. and recent/future weather issues (drought conditions and El Nino weather phenomenon) are currently limiting canal operations,” he wrote. “To this point, average transits per day are down to 32 vessels per day (vs. ~50 in June) and maximum ship drafts are down to 44 feet from 50 feet (ships have to be lighter), which has led to average wait times that are 5 times what they were in June.”
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Set against this backdrop, Brown sees potential opportunities for western U.S. railroads. “All in, we see western rails as near-to-medium term beneficiaries (particularly the longer drought conditions persist) as they likely capture greater intermodal traffic from diverted Panama traffic,” the analyst added.
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