Backlog of New Ethanol Barge Orders

Monday, May 22, 2006
According to reports, the logistics problems in the U.S. ethanol industry are expected to spread to waterborne transportation in the near future, industry sources said. The industry is already facing a transport crunch due to limited rail time and dedicated pipeline capacity, and a lack of trucks and drivers as the country switched to ethanol, a gasoline additive recently adopted by the U.S. oil industry for use in anti-smog blends, from MTBE in early May. The reliance on inland barges for ethanol and corn transportation is expected to increase in the future, in line with the rising ethanol demand, they said. However, most shipyards in the United States are facing an order backlog up to 2008, industry sources said.

More new ethanol plants are expected to come onstream over the next year in order to cater to the strong demand. Ethanol prices in New York Harbor hit the record high earlier this week. Some shippers are considering the ethanol barge orders because they are weighing their options of building new ones or converting some gasoline barges to transport ethanol, he said.

Also, the source pointed out that the existing oil tank barge orders could be changed to accommodate ethanol specifications if needed. Besides an order backlog, barge owners and ethanol shippers will face high shipbuilding prices, owing to strong steel values. A 28,000-barrel capacity tank barge would cost about $2 million to build, and a dry cargo barge would cost about $500,000. Source: Reuters

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