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Midstream Loading—An Alternative Way of Loading Coal Vessels


Three land-based coal terminals on the Lower Mississippi River between Baton Rouge and Head of Passes handle barged coal: IC Rail Marine at Convent, La.; United Bulk Terminal at Davant, La.; and International Marine Terminal (IMT) at Myrtle Grove, La., which is now closed for repairs.

The closure of IMT has removed a significant ship-loading capacity from the coal market, perhaps as much as 8 million tons per year. Another alternative is the midstream stevedoring industry, which has the capability and facilities for loading Panamax and Capesize vessels.

In midstream loading an ocean-going vessel sails up the Mississippi River and is tied to five permanent buoys in the river, which are in turn anchored to steel piles driven deep into the river bed. Three buoy lines are fastened to the bow, which is always facing upstream. About 1,500-ft downstream, two more buoy lines are fastened to the stern. In the typical configuration of transferring cargo, a barge-mounted crane is stationed beside the vessel so its bucket can reach several ship holds. Then a tow boat moves a loaded barge beside the crane barge, and the coal barge is tied to the crane barge. A system of cable winches mounted on one side of the crane barge enables the crane to move along the side of the ship. Similarly, another system of winches on the opposite side of the crane barge enables the coal barge to move along the crane barge.

The operator of a typical Gottwald crane sits 73 ft above the deck of the crane barge, enabling him to see into the holds of the ship for accurate placement of the coal bucket. He begins the process by dropping the 44-cu-yd coal bucket into the barge. He then lifts a bucketful of coal high in the air and swings it over the deck of the ship, centering it over an open hold. To make sure the first coal loaded is not fractured into fine dust he will lower the bucket gently to the bottom of the hold before releasing the coal. This process will be repeated until the vessel is fully loaded. He will follow a loading plan provided by the vessel that requires moving between holds before each hold is completed, the purpose of which is to avoid over-stressing the vessel. To make sure the vessel is loaded most efficiently and within its laytime, the stevedoring company will often put four such cranes around a vessel, enabling four barges to be unloaded simultaneously. As each barge is emptied, it is returned to a designated fleeting (parking) area along the river bank. Since there are far more buoy sites than there are cranes, it is not unusual to find two or more vessels loading at nearby midstream anchor buoy sites. This fact makes midstream loading attractive to ship owners who are always interested in loading/ unloading their cargoes quickly.

Most midstream operators nowadays are not sitting around waiting for new business to show up. The ones that have survived the lean years of the 1990s are usually booked up for several months in advance. If a shipper can offer the combined characteristics of good reputation and proven financial stability, he will often find that midstream operators will compete for his business, a happy situation that does not always exist in the world of land-based terminals.

If shippers are successful in negotiating a contract for midstream loading services, they will have entered a world that may be much busier than the relatively simple world of shipping coal repeatedly to the same land-based coal terminal. At the simplest level they will find they have to think their way through the entire process and act carefully and wisely. They will have to make a deal with a barge company for hauling 40 barges of coal, and they will have to begin coordinating details with the midstream operator’s logistics department such as: name of the barge line, barge numbers, estimated times of arrival, ocean vessel, laydays, etc.

It sounds daunting, but about 34 million tons of cargo was moved in 2010 by this method, so many shippers have figured it out. At the vessel-loading end, the shipper does not need to stress too much; the midstream operators are professionals who will take them by the hand and lead them through the process. They want shippers to have a good experience with midstream loading. At least one of them, St. James Stevedoring, goes the extra mile in transparency: they have video cameras set up at all of their loading sites so shippers can monitor vessel loadings.

Where is Midstreaming Done?

The Mississippi River below Baton Rouge sometimes runs as deep as 200 ft. Legislation requires the river to be dredged to a minimum depth of 45 ft for ship movement. A total of 33 ship anchorages can be found in the 255-mile stretch between Baton Rouge and the Gulf Outlet of Southwest Pass. These are places where inbound ships may anchor in relative weather safety while awaiting their turn at an unloading or loading berth. Three major stevedoring companies operate midstream loading operations, mostly in the 54-mile section of the river covered by the Port of South Louisiana (Miles 115-169): Associated Terminals, St. James Stevedoring and Cooper/Consolidated. Associated has loading buoys at Chalmette and Meraux in St. Bernard Parish; IMT has a set of midstream anchor buoys near its terminal (Mile 57), and the Port of Baton Rouge has a set of loading buoys near its main cargo terminal. All three of the major stevedoring companies split their business between loading and off-loading cargoes, and the cargoes are a mixed bag: e.g., ores and minerals, coal, semi-finished steel, scrap, fertilizer and grain.

Nearly 10 million tons of coal was loaded in 2010 using the midstream method. In the 15 years that have passed since Ryan-Walsh, one of the largest midstream operators sold out to SSA, a west coast stevedoring company, the industry has slowly climbed out of an economic depression, enabled by four essential factors: a good supply of barges (10,400 covered, 7,100 open), superior equipment (Gottwald cranes), energetic management, and a close relationship with grain shipping companies. Cooper/Consolidated, the oldest surviving midstream loading company and one of the largest in terms of equipment and midstream loading sites, is a consolidation of old-line stevedore Cooper/T. Smith and Consolidated Grain and Barge. St. James Stevedoring Partners has a joint venture agreement with ADM that provides additional loading buoys and equipment. Associated Terminals positioned itself well in the grain business when in December 2005 it purchased Cargill’s “K-2” floating grain transfer facility. It is used to transfer commodities such as corn, rice, wheat and animal feeds from river barges to ocean-going ships. Product diversification has been an essential factor in the growth of Associated Terminals.

How Midstream Loading Differs

The full complement of four cranes working a vessel provides loading speeds that approach those of a land-based terminal. Land-based loading provides some advantages that are difficult to obtain with midstream loading, such as more accurate sampling of the coal stream, precise blending of two or more coals, and protection from rail or barge demurrage. However, if blending is not an issue, the issues that often concern most shippers are coal sampling and demurrage. If a single type of coal is being shipped, sampling should not be a problem, as there are now ASTM standards. It only becomes a problem when layer-loading (loading a high quality coal on top of a poor quality coal) is used. In such cases it is almost mandatory for the shipper to have a good field man observe barge loadings.

Coal shippers rarely worry about rail or barge demurrage when shipping coal to a land-based terminal because the coal is usually unloaded upon arrival. Midstream loading, however, requires careful attention be paid to coordinating the shipment of barges with the arrival of the vessel. Ideally, all of the loaded barges should be fleeted (parked) at the midstream loading site and ready to load on the first day of the vessel’s laydays. Midstream loading requires more shipper attention than land-based terminals, but the health of the midstream business shows it is still a viable, and in some cases, a preferable alternative to land-based loading.

One essential difference between midstream and land-based loading is the relative ease by which a midstream loading company can expand capacity. For an investment of roughly $10 million, a midstream operator can buy a new barge-mounted Gottwald pedestal crane, and can expect that crane/barge to be fully operational within six to nine months. It will give him an additional capacity of 2 to 2.5 million tpy, and he need not worry about building a new wharf to dock additional vessels. Existing buoy sites far out-number cranes. Moreover, the new equipment can be considered a fungible asset, readily saleable on the used crane market. It is not nearly so easy to liquidate land-based terminals because the equipment is not so easily resold. The new wharf necessary to accommodate one additional ship may not be resalable at all.

Demurrage

Some portion of the transfer fee paid to a land-based terminal is for ground storage, but it is never separated out as a line item, so it is never an issue. On the other hand, barge demurrage is usually viewed as a penalty precisely because it is visible. One can calculate it and fear it, but should not. More accurately, it is a daily rental payment for using a company’s barges for private storage. Daily use of a barge is factored into the barge shipping rate, and is based on the time the barge fleet is expected to be in use from the time it is loaded until it is unloaded.

The same concept applies to ocean vessels. Suppose your vessel arrives at anchorage on schedule, the coal barges have not arrived, and the vessel demurrage clock starts ticking. Chances are your coal supply agreement holds you responsible for vessel demurrage if your coal is not at the loading site when the vessel arrives. Most stevedores will protect the shipper from paying vessel demurrage if the time delay is clearly their fault, but if the coal has not arrived when the vessel and the stevedore are ready, demurrage will be the shipper’s problem. Midstream loading can be a good alternative, but it clearly requires diligence and careful planning on the part of the shipper. In the case of ocean vessels being loaded before laytime is used up, the vessel owner pays the shipper a premium called despatch, which usually runs about half the demurrage amount. If a stevedore is willing to take the demurrage risk, he will require any despatch monies be paid to him.

Barge demurrage could run $250/day or more, meaning demurrage on a fleet of 40 barges could cost $10,000/day. The anxiety of paying a demurrage “penalty” could be relieved by including a demurrage component in every quotation of a delivered coal price. It could be thought of as the midstream analog equivalent of ground storage. To the extent the shipper did not have to pay demurrage, he would in effect be paying himself despatch. In reality, barge demurrage is probably inevitable. The shipper may have to weigh the economic benefit of paying some demurrage against the financial impact of shipping nothing at all.

Gambrel is the president of Logisticon, a coal transportation consultancy. He was senior transportation executive of a major mining company for 15 years, and has overseen loading of some of its coal vessels by the midstream loading method.  As a private consultant he has advised barge operators on such matters as meeting and loading ocean vessels directly from barges. He may be reached at or at .