US rail agency to act on carrier switching plan
US railroad regulators are expected to finally say next month whether they will allow some rail customers to use alternate carriers due to poor service from their current carrier.
The US Surface Transportation Board (STB) has been evaluating a proposals to allow captive shippers to use alternate railroads in certain circumstances. The July 2016 proposal would allow switching when it is either "practicable and in the public interest" or needed to provide competitive rail service. A ruling will come in August, according to a 1 July report to Congress on pending regulatory proceedings.
Under the proposal, STB would need to consider a variety of factors before allowing for an alternative carrier, including the efficiency of the proposed new route, if the arrangement would allow access to new markets, the amount of traffic that would be moved and the impact on capital investment, quality of service and employees.
Shippers would not need to demonstrate there has been anticompetitive conduct, as required by existing regulations.
Reciprocal switching has been under discussion at STB in various forms since 2011 when the subject was brought before the board by prominent shipper group the National Industrial Transportation League.
STB was expected to act on the proposal in August 2022 but later delayed action, saying it needed to focus on the rail service crisis and the merger of Canadian Pacific and Kansas City Southern.
But STB chairman Martin Oberman last month told Argus that issuing a decision was a priority for him.
Under reciprocal switching, a shipper's original railroad hauls freight to an interchange point, where it switches the railcars to an alternate carrier. The alternate railroad pays the original railroad a switching fee for that action.
That fee is incorporated into the alternate railroad's total rate for the shipper, allowing it to offer a single-line transportation rate to compete with the original carrier's single-line rate.
Shippers have been eager for STB to approve reciprocal switching, hoping it would lead to cheaper transportation rates and better service.
But railroads say allowing switching would increase transportation times and drive congestion across the rail network. For example, handoffs between logistics companies — a key vulnerability of the supply chain — would be disrupted by increased switching, Union Pacific (UP) executive vice president of operations Eric Gehringer said during a March 2022 hearing on the proposal.
STB is also expected to act in September on proposed changes to its emergency service rules that were intended to speed its response to shipper problems. The April 2022 proposal was issued as the rail agency was focusing on last year's service crisis, but work was delayed.
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Texas barge collision shuts GIWW section: Correction
Texas barge collision shuts GIWW section: Correction
Corrects volume of oil carried by barge in fourth paragraph. Houston, 16 May (Argus) — Authorities closed a six-mile section of the Gulf Intracoastal Waterway (GIWW) near Galveston, Texas, because of an oil spill caused by a barge collision with the Pelican Island causeway bridge. The section between mile markers 351.5 and 357.5 along the waterway closed, according to the US Coast Guard. A barge broke away from the Philip George tugboat and hit the bridge between Pelican Island and Galveston around 11am ET today. Concrete from the bridge fell onto the barge and triggered an oil leak. The barge can hold up to 30,000 bl oil, but it was unknown how full the barge was before the crash, Galveston County county judge Mark Henry said. It was unclear when the waterway would reopen. An environmental cleanup crew was on the scene along with the US Coast Guard and Texas Department of Transportation to assess the damage. Multiple state agencies have debated the replacement of the 64-year-old bridge for several years, Henry said. The rail line alongside the bridge collapsed. Marine traffic does not pass under the bridge. By Meghan Yoyotte Intracoastal Waterway at Galveston Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Sinking crop values weigh on US farmer profits in 2024
Sinking crop values weigh on US farmer profits in 2024
Houston, 16 May (Argus) — The cycle of above-average profits that has defined the US agricultural economy in recent seasons is fraying this year as crop prices slacken against elevated expenses. The domestic agricultural sector is forecast to endure a 24pc drop in net cash income this season — the sharpest year-over-year decline in the last decade — underpinned by a 6pc slump in crop sales revenue and modest growth in projected expenses, according to the US Department of Agriculture's (USDA) latest industry income statement. This retraction, which kicked off in 2023, forced many growers in key agricultural districts this season to augment non-real estate loans, slow debt repayment and restructure existing loans to meet liquidity requirements thanks in part to sliding global grain and oilseed prices. Lenders within the seventh and 10th Federal Reserve districts, which represent farmers across major growing regions, reported stronger loan demand and tightened working capital during the first quarter — signaling deteriorating farm finances. Working capital is measured as the difference between the value of assets that can be easily converted to cash and debt due within the next 12 months. Lower working capital valuation signals the ability to pay down debt could be challenged. Domestic agricultural working capital this year is estimated 17pc lower from 2023 and 6pc lower than the five-year average, according to USDA data. "Conditions in the US farm economy have tightened alongside lower prices for many key products and higher financing costs," the Federal Reserve Bank of Kansas City reported in its quarterly Ag Credit Survey . "Many lenders highlighted growing concerns about deterioration in working capital as a result of low prices, particularly for crop producers." US row-crop growers are expected to endure another season of price deterioration as global markets adjust to supply shocks stemming from the ongoing war in Ukraine that rattled wheat values and key input prices for corn and soybeans. Domestic corn, soybean and wheat farm cash prices are projected to slump for a second consecutive season by 5pc, 11pc and 15pc, respectively, according to the latest projections from the USDA's World Agricultural Supply and Demand (WASDE) report. Corn growers, specifically, face losses this season amid a 4.6mn-acre cut in planted area from last season in tandem with sinking crop values. Margins are estimated -$65.75/acre, based on the latest new-crop contract close and early-season production volume estimates, after benefiting from peak earnings at $242.33/acre in 2022. Corn is a fertilizer-intensive crop, and changes in farmer profitability can erode input prices. Urea, the most widely traded fertilizer globally, is strongly tied to front-month corn futures and domestic barge prices have sunk to levels last seen in January 2021, tracking lower front-month corn futures since the start of the 2023-24 fertilizer season. Fertilizer expenses account for nearly 40pc of annual operating costs for domestic corn growers on a per-acre basis, with seed costs comprising an average 25pc, according to Argus analysis of USDA data. Plant nutrition expenses, though, surged in 2022 and remained above average in 2023 — reflecting historically elevated fertilizer prices during the same period. The USDA forecasts a 15pc dip in fertilizer costs in 2024 for corn growers, providing some reprieve compared with the last two years despite higher seed and various overhead expenses. "Factors like the rising costs of seeds, fertilizers and other inputs as well as more strict environmental regulations, specifically on water usage, have added to the financial and administrative burden for farmers," said Donnie Taylor, Agricultural Retailers Association senior vice-president of membership and corporate relations. By Connor Hyde Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Low-carbon methanol costly EU bunker option
Low-carbon methanol costly EU bunker option
New York, 16 May (Argus) — Ship owners are ordering new vessels equipped with methanol-burning capabilities, largely in response to tightening carbon emissions regulations in Europe. But despite the greenhouse gas (GHG) emissions savings that low-carbon methanol provides, it cannot currently compete on price with grey methanol or conventional marine fuels. Ship owners operate 33 methanol-fueled vessels today and have another 29 on order through the end of the year, according to vessel classification society DNV. All 62 vessels are oil and chemical tankers. DNV expects a total of 281 methanol-fueled vessels by 2028, of which 165 will be container ships, 19 bulk carrier and 14 car carrier vessels. Argus Consulting expects an even bigger build-out, with more than 300 methanol-fueled vessels by 2028. A methanol configured dual-fuel vessel has the option to burn conventional marine fuel or any type of methanol: grey or low-carbon. Grey methanol is made from natural gas or coal. Low-carbon methanol includes biomethanol, made of sustainable biomass, and e-methanol, produced by combining green hydrogen and captured carbon dioxide. The fuel-switching capabilities of the dual-fuel vessels provide ship owners with a natural price hedge. When methanol prices are lower than conventional bunkers the ship owner can burn methanol, and vice versa. Methanol, with its zero-sulphur emissions, is advantageous in emission control areas (ECAs), such as the US and Canadian territorial waters. In ECAs, the marine fuel sulphur content is capped at 0.1pc, and ship owners can burn methanol instead of 0.1pc sulphur maximum marine gasoil (MGO). In the US Gulf coast, the grey methanol discount to MGO was $23/t MGO-equivalent average in the first half of May. The grey methanol discount averaged $162/t MGOe for all of 2023. Starting this year, ship owners travelling within, in and out of European territorial waters are required to pay for 40pc of their CO2 emissions through the EU emissions trading system. Next year, ship owners will be required to pay for 70pc of their CO2 emissions. Separately, ship owners will have to reduce their vessels' lifecycle GHG intensities, starting in 2025 with a 2pc reduction and gradually increasing to 80pc by 2050, from a 2020 baseline. The penalty for exceeding the GHG emission intensity is set by the EU at €2,400/t ($2,596/t) of very low-sulplhur fuel oil equivalent. Even though these regulations apply to EU territorial waters, they affect ship owners travelling between the US and Europe. Despite the lack of sulphur emissions, grey methanol generates CO2. With CO2 marine fuel shipping regulations tightening, ship owners have turned their sights to low-carbon methanol. But US Gulf coast low-carbon methanol was priced at $2,317/t MGOe in the first half of May, nearly triple the outright price of MGO at $785/t. Factoring in the cost of 70pc of CO2 emissions and the GHG intensity penalty, the US Gulf coast MGO would rise to about $857/t. At this MGO level, the US Gulf coast low-carbon methanol would be 2.7 times the price of MGO. By comparison, grey methanol with added CO2 emissions cost would be around $962/t, or 1.1 times the price of MGO. To mitigate the high low-carbon methanol costs, some ship owners have been eyeing long-term agreements with suppliers to lock in product availabilities and cheaper prices available on the spot market. Danish container ship owner Maersk has lead the way, entering in low-carbon methanol production agreements in the US with Proman, Orsted, Carbon Sink, and SunGaas Renewables. These are slated to come on line in 2025-27. Global upcoming low-carbon methanol projects are expected to produce 16mn t by 2027, according to industry trade association the Methanol Institute, up from two years ago when the institute was tracking projects with total capacity of 8mn t by 2027. By Stefka Wechsler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Biomethanol market slows, but shipowners eye offtakes
Biomethanol market slows, but shipowners eye offtakes
London, 16 May (Argus) — The UK's biomethanol consumption fell by 37pc last year as competition from alternative renewable fuel compliance options weighed on demand. The UK consumed 40mn litres of biomethanol in 2023, down from 63mn l in 2022, 53mn l in 2021 and 48mn l in 2020, according to provisional data from the country's Department for Transport. Biomethanol is used as a blending component for gasoline in the UK. Market participants attribute the decline in demand to ample supply of competitively priced alternatives to meet the UK's mandate for the use of renewable fuels in the transport sector. Fob ARA range biodiesel prices fell to a 19-month low towards the end of 2023 , following an unusually large influx of supply to Europe from China since the start of the year. EU biodiesel imports from China reached a record 1.06mn t in 2023 , up from 557,000t in 2022, according to GTT data. The increase in imports contributed to lower renewable fuel ticket prices in key European markets, including the UK. Companies supplying biofuels for transport in the UK can generate renewable transport fuel certificates (RTFCs), which are tradeable and can help obligated parties meet the UK's renewables' mandate. The Argus UK non-crop RTFC reduction obligation price averaged 21.79 pence/RTFC in 2023, compared with 36.35p in 2022. The price has averaged 16.79p so far this year, compared with 26.40p and 37.39p in the same period in 2023 and 2022, respectively. The drop in demand for biomethanol from the UK transport sector is weighing on domestic prices. The Argus cif UK biomethanol price has averaged $1,081.43/t so far in May, having been on a consistent downward trend since late October when the price peaked at $1,205/t. The price averaged $1,212.75/t in May 2023. The slowdown in demand has put biomethanol production margins under pressure, prompting some producers to cut output. Silver lining Demand for renewable methanol, in the form of both biomethanol and e-methanol, could be supported by growing interest from the maritime sector in the coming years as shipowners seek to reduce their emssions. The EU's FuelEU maritime regulation is due to come into effect at the start of next year. It aims to reduce the greenhouse gas (GHG) intensity of marine fuels by 2pc in 2025 and by 80pc by 2050. Shipping companies can choose from a wide range of alternative marine fuels to reduce their emissions, but several are betting on methanol and renewable methanol. Danish shipping giant Maersk has ordered 24 methanol-powered container ships for delivery and commissioning during 2024-25, and Japanese classification society ClassNK said in a recent report that it expects a total of 77 methanol-ready ships to be ordered by 2026, up from 27 methanol newbuilds expected to be ordered this year. Offtake agreements for renewable methanol are also on the rise. Maersk has signed several letters of intent for the procurement of biometanol and e-methanol from producers such as Equinor , Proman and OCI Global . The company also said it has secured an agreement with Danish shipping and logistics company Goldwind for the offtake of 500,000 t/yr from 2024. Meanwhile, Singaporean container shipping group X-Press Feeders said last year that it will offtake biomethanol from OCI's Texas plant starting this year. Another spanner in the works? Although the outlook on renewable methanol demand from the shipping sector appears bright, the recognition of biomethane and biomethane-based fuels produced through mass balancing in non-EU grids is uncertain. More than 40 energy companies and institutes have sent joint letters to the European Commission asking for these products to be included in the Union Database , which aims to prevent the relabelling of biofuels' sustainability declaration. The UDB was launched in January 2024 for liquid fuels and will include gaseous fuels in November, but the commission plans to exclude automatic certification of biomethane and biomethane-based fuels if it is transported through gas grids outside of the EU. The measure "is likely to reduce the availability and increase the cost of low- and zero-carbon bunker fuels for shipping" and may also impact hydrogen and hydrogen-derived fuels, one of the letters sent to the commission said. By Evelina Lungu Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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