Vulnerable Infrastructure Equals Economic Risk

Sept. 1, 2008
The US inland waterways are the most efficient and environmentally friendly means for transporting bulk goods across domestic markets for consumption or for export

The Mississippi River tanker-barge collision offers a reminder of the sometime, though rare, vulnerability of transportation life on this important corridor for US commerce. Just how much potential economic impact could result from the closure of this key trade artery?

The US inland waterways are the most efficient and environmentally friendly means for transporting bulk goods across domestic markets for consumption or for export. However, a disruption to the services operated on the waterways due to infrastructure incapacity would have significant and undesirable domino effects.

Global Insight evaluated inland waterway freight moving by barge through the Mississippi and Illinois Rivers during the period October-December 2005, and modeled a 90-day closure of the water routes. Global Insight analysts utilized the company's proprietary TRANSEARCH database of freight information to establish the volume of freight by commodity type moving on the waterways during the subject period. Most waterborne freight in the region was grain (corn and soybeans). Other types of freight, such as coal, minerals, waste materials, chemicals and petroleum also moved. Global Insight's Cost Models were employed to calculate the costs of movement by barge, as well as alternative costs of moving freight in the same origin-destination corridors by rail and by truck. Different commodities required different equipment types (tank, covered hopper, open, deck, etc.) and various modes involved variety in length of haul evaluations due to route circuity.

Global Insight analyses showed that in the period under review, the volume of freight in the study area was approximately 14.9 million tons, with a product value of $6.7 billion, and the number of loaded barges of around 9,300.

The cost of moving all of this freight via waterway was estimated at $118.6 million for the quarterly period. Our estimate for modal shift from the waterways — if the correct equipment was even available — via alternative modes amounted to a significantly more expensive $482.8 million via rail and $1.50 billion via highway in terms of the carriers' costs.

Using estimates of typical market rates for rail and truck movements, the charges to the shipping/receiving public would raise the transport price component (from the Waterway base) by $579.3 million via rail or $1.62 billion via highway.

Interest in the inland waterway system has been piqued by this summer's Midwest flooding and closing of river locks, such as Lock #27 in Alton IL. The analytical framework used to evaluate the fourth quarter of 2005 focused only on the Upper Mississippi and Illinois Rivers. The impact would be significantly greater if the Ohio River and other portions of the inland waterway network were considered.

Across regions and communities, particular industries and commodities depend on inland marine transportation. Lock closures on the inland waterways are not well understood by general audiences. Voters as taxpayers, politicians, and community leaders will pay little attention to the importance of the continuous flow of commerce upon the inland waterway system — until that system is disturbed. Natural linkages connect others in the economy to those interest groups, so better communication of the implications for, and risks to the system apply to the whole national economy. The vessels that ply the national waterways are so often an afterthought — until a headline grabber arises.

A lock closed to barges, towboats, pushboats, and the cargo and equipment that they carry grinds the system to a halt. Adverse impacts would be numerous and extensive. For example, food supplies, export sales (which are driven by agricultural sector farm production), and most importantly, electrical service that depends on coal movement to support industrial production in other sectors would be disrupted. Risk management and forward planning must be based on future projected impacts, predicated on facts for public and private interests. Evaluation of the inland waterways capacities, capabilities, and the importance to overall freight flows needs to be better understood. The economic effect of a lock closure to an industry or to a jurisdiction, whether scheduled or unscheduled, is critical and necessary information. Recall that the lock chambers and mechanisms built in the 1930s were designed for 50 years of operations; another 25 years have passed. They aren't getting any younger.

Scott Sigman is a trade and transportation analyst with Global Insight.

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