All aboard: the ability to juggle moving material via rail and truck is becoming more complicated as new factors enter the market - Transportation Focus

Recycling Today, May, 2002 by Dan Sandoval

Transportation logistics is one of the often-forgotten aspects of the recycling industry. However, moving material from processing spot to consuming spot eats up a significant amount of money. And, despite the recent upward pricing trend for a host of recyclable materials, it is still imperative for recyclers to control shipping costs. With profit margins still razor thin at best, the difference between a profitable shipment and taking a loss could depend on the mode of transportation chosen.

What, has complicated matters on the transportation side has been the move by many consuming mills toward a just-in-time inventory process, which typically favors trucks. The ability of trucking firms to be more responsive to fighter deadlines has been one of the biggest advantages for trucking companies.

On the other side; the dosing of manufacturing sites close to recyclers, especially scrap steel consumers, has often forced scrap shipments to be sent further away. This typically favors the use of rail cars.

PROS AND CONS

Michael Collins, president of Metal Management-Ohio and national director of ferrous sales for Metal Management Inc., says of his company's shipping mix, "I would say there is a tremendous amount going by binge, and likewise a lot by rail, simply because there is displacement of scrap away from its regional markets. For example, the Nucor mills in the Carolinas and the new Chaparral mill in Virginia, they're having to buy scrap clear up here in Cleveland and in Connecticut, so there is some displacement."

Fluctuating fuel prices may also favor rail in the current environment. "The rail rates today are much more competitive with truck rates. I think it will continue to be that way until the oil situation gets better. The truckers are still charging fuel surcharges."

While both rail and truck companies feel they carry some strengths, the recycling industry is looking for the best method to ship material in a cost-effective method.

For Kansas City Southern, a Class I railroad headquartered in Kansas City, Mo., the use of rail cars to ship scrap metal has mirrored the overall problems with the steel industry. A spokewoman for the railroad notes that the most recent figures show the scrap shipments have declined significantly. While shipments have been declining, (he company "pursues every opportunity to increase its business in this sector."

Chad Donley, scale master with Annaco, an Akron, Ohio-based scrap processor, notes that when the steel industry was facing significant shutdowns rail became a much more lucrative endeavor. While acknowledging that rail is not as timely as shipping via trucks, it often is easier to load than a truck. Plus, a typical rail gondola car used to haul ferrous scrap can carry as much as four times as much ferrous scrap as a standard truck.

Seasonal restrictions some states have for truck weights can also be a factor. Marsha Peters, with Miller Compressing, Milwaukee, Wisc., says that when the ground is still defrosting, some states in the Midwest impose weight restrictions on trucks, mandating lighter shipments to be made. The result is a higher per-ton cost to use trucks.

SERVICE WITH A SMILE

In the past some processors have experienced major problems using rail to ship material. Over the past decade, several large acquisitions shrank the number of large, Class I railroads in operation in the U.S. Two of the most significant were the acquisition of Southern Pacific by Union Pacific (UP), Omaha, Neb., and the Norfolk Southern and CSX acquisition of Conrail.

Following these acquisitions, many processors reported horror stories as cars were delayed significantly, scrap shipments were sent to the wrong location, and the specialized cars used to carry scrap, called gondolas, were not available, or, in some cases, even lost.

Over the past several years, however, the railroads say they have taken great strides to improve their service to ensure a steady flow of material.

While many railroads have been able to slash the length of time it takes to move material via rail, they readily admit that on strictly a timing basis they can't compete with trucks. However, for scrap processors looking to move material a longer distance than several hundred miles, the advantage swings toward using more rail shipments.

Donley notes that the scrap industry is pretty price sensitive with freight. While the concerns in the past over service had some companies eliminating its use of rail, he says that over the past several years railroads have been very responsive.

Howard Labkon, General Iron Industries, Chicago, says that while the company moves all of its nonferrous by truck, it is using both railroad and trucks to move ferrous scrap. He also says that while rail problems in the past have scared some people, "We have seen it improve." He stresses that the relationship between General Iron and both trucking companies and railroads have been very good.

In addition to shipping via truck, Labkon says the company uses both the UP and the Canadian Pacific railroads to move material. "We have never had a problem using them," he adds.