Page 7: of Marine News Magazine (September 2026)

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With Fuel, Read the Fine Print

The dramatic increase in diesel prices during 2026 has also reminded lenders that revenue alone does not service debt. Margins do. Fuel exposure can vary radically accord- ing to contract structure. A dredging contractor that bid a two-year ? xed-price U.S. Army Corps of Engineers job based on signi? cantly lower fuel assumptions can watch its pro? t disappear as diesel rises.

Conversely, short-duration contracts allow operators to regularly reset fuel assumptions. And some ship-assist con- tracts include fuel surcharges that effectively pass higher costs through to customers.

Wells Fargo is therefore scrutinizing the cost side of borrowers’ income statements to determine whether ris- ing fuel prices are eroding — or, in certain cases, actually enhancing — pro? tability. It is another reminder that ma-

That does not mean Wells Fargo is unwilling to ? nance rine lending is about considerably more than calculating new technology. Quite the opposite. Hewitt said the bank loan-to-value ratios.

wants to become involved early and understand why the

The potentially larger story, thought, is what comes next.

technology ? ts an operator’s ? eet, how it will be deployed

Hewitt sees unprecedented political and industry en- and, importantly, whether customers are willing to pay for it.

thusiasm surrounding revitalization of U.S. maritime and shipbuilding. Foreign investment and expertise ? owing

Follow the Cargo into American shipyards could improve productivity, but

No discussion of vessel ? nance gets very far without ? nancing cannot overcome an inadequate business case.

eventually arriving at cargo.

“The optimism, the amount of discussion, the amount

The inland barge market illustrates why. Commodity of ideas being traded around both in industry and in the cycles can swing sharply from one year to another, but political realm is at an all-time high,” Hewitt said. “But at

Hewitt said Wells Fargo tries to smooth those ? uctuations some point the talk needs to convert to action.” and evaluate operators over longer periods.

For large commercial vessels, that means creating

On the dry side, grain remains cyclical, in? uenced by durable policy, tax and cargo incentives capable of sur- harvests, global competition and commodity prices. Hewitt viving election cycles. A U.S.-built vessel costing mul- particularly likes vertically integrated businesses that control tiples of its foreign-built competitor cannot simply be more of the transportation chain and operators with cus- dropped into the international market and expected to tomer relationships stretching 20, 30 or even 50 years.

compete economically.

Tank barges present a somewhat different picture. Hewitt

Hewitt believes the answer will require some combina- believes high construction prices have actually helped the tion of Jones Act cargo, government-preference cargo, tax sector by discouraging speculative overbuilding. “It feels policy, grants and other incentives — backed by a strategy like a good supply-demand balance as of today,” he said.

measured not in four-year political cycles, rather in de-

Ship-assist tugs are another bright spot. Large operators cades. For lenders, that long horizon is familiar territory.

still have 40-, 50- and even 60-year-old vessels that even-

Ultimately, ? nancing a Jones Act vessel comes down to tually must be replaced, while larger ships calling at U.S. a deceptively simple combination: the right asset, oper- ports require increasingly powerful, sophisticated tugs. ated by the right company, serving a defensible market

LNG export facilities are adding another demand driver, with suf? cient cash ? ow to support the debt. The vessel with Hewitt estimating that an export terminal will typi- may be the collateral, but the business behind it is what cally support two to four purpose-built tugs.

makes the deal bankable.

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