Market participants kept an eye on transportation this week, as historically low water levels on the Mississippi River and a potential rail strike may impact deliveries of lubricants, base stocks and other raw materials. Meanwhile, base oil supplies continued to outpace demand, weighing on spot and posted prices, but postings appeared impervious to the downward pressure this week.
A severe drought in the Midwest caused the water levels in the Mississippi River and its tributaries to drop to record lows, causing issues to transportation on one of the nation’s most vital waterways. “The dwindling water levels have not only choked barge traffic but forced the vessels to significantly lighten their loads. The cost of barge shipping has surged,” The New York Times reported. The drought was beginning to ease as winter storms had brought some rain and snow, but it could be weeks before there is any marked improvement, local media reports said. Base oil suppliers often ship material in barges as it is an economical and effective means of transportation compared to rail and trucks.
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Additionally, the United States could face a paralyzing rail strike after members of the nation’s largest rail union representing the industry’s conductors rejected a tentative labor deal with freight railroads, CNN.com reported. While workers will remain on the job until at least early next month as negotiations continue, if no agreement is reached and the strike goes on for an indeterminate period, it could have devastating effects on supply chains and consumer prices.