Moving It by Truck

Shipping scrap metal and other recyclables by rail, truck or barge – each has its benefits and drawbacks. But lately, lingering concerns over gondola car availability and increasing barge rates have many scrap processors turning more to delivery by truck to get their material where it has to go. Processors point to favorable trucking rates and increased delivery flexibility as the main reasons why the 18-wheeler is as popular as ever.

However, as spring approaches and construction picks up again, there could be a squeeze on trucking assets. Other concerns include a shortage of steel trailers and a deregulated climate that is straining trucking profitability and raising some questions about safety.

In the past, there have been trucking shortages, and there are concerns now that another trucking shortage is around the corner.

"Shortages of trucks go in cycles," says Carmen Mormino, vice president of Jack Gray Transport Inc., Gary, Ind. "Right now, it is not so bad for trucks because of the winter season, and construction is down. But in the spring, it will be up again. There is also a rail squeeze and barge rates are increasing, so trucking will be more in demand."

Mormino is concerned that scrap dealers don’t fully understand what is happening in the trucking industry with rates. With deregulation, he says, rates are hitting rock bottom, and as a result many truckers are forced to operate in a very lean fashion. Some are beginning to neglect regular maintenance of their rigs and are only carrying the most minimal insurance.

"This is a potential dangerous situation," says Mormino, "because not only do we expect more accidents, but recent interpretations of liability laws make the shipper involved with liability for damages if that shipper did not check the carrier’s rate, license status or equipment." While some may think them unreasonable, U.S. Department of Transportation safety ratings of carriers are now available by telephone, and should be checked on a regular basis, warns Mormino.

"If you go with the lowest rate," says Mormino, "you have to ask yourself, ‘why is one rate so much lower than the next?’ It could be that the low-rate carrier is deferring maintenance or using a cheaper fuel. So you should investigate and inquire."

Scrap dealers don’t want to be in the trucking business, and truckers don’t want to be in the scrap business, continues Mormino, but that doesn’t mean that one should be oblivious to the other. Overall, Mormino says that a trucker has to make about $550 a day in order to get paid and have enough left over for fuel costs and to maintain his rig properly.

Others in the industry don’t agree that safety has been compromised in trucking. Interstate deregulation, which has been in place since 1979, did bring rates down, but not safety, according to Gay Banks Olson, owner of Banks Traffic & Transportation, Seattle, a transportation and logistics consulting firm.

"We did a study on intrastate deregu-lation in the state of Washington concerning the transport of recyclables and found that there was some increase in recycling due to the trucking deregulation climate, but no increase in trucking accidents," she says. "The deregulation-safety issue is one that has been out there for some time now. But the reality is that truckers still have to maintain log books, check into weigh stations, and do all the things that they had to do before."

In fact, the national rate of accidents involving large trucks has decreased steadily since deregulation in 1979, according to the National Highway Traffic Safety Administration, Washington. During that first year of deregulation, there were 6,084 trucking accidents, 5.6 accidents per 100 million truck miles travelled, and 103 accidents per 100,000 registered trucks. In 1993, the last year that data was available, there were 4,328 trucking accidents, 2.7 accidents per 100 million truck miles travelled, and 69 accidents per 100,000 registered trucks.

As for the intrastate deregulation, the Washington intrastate trucking rate structure was recently abolished, but a few other states, such as California, are still trying to hold onto an intrastate trucking rate regulation, according to Olson. She says the federal government is trying to eliminate all such state-controlled trucking measures because they are unnecessary. "Trucking should be operating under a market-based structure, not a cost-plus one," she adds.

Other factors are also squeezing the trucking industry, among them weight and driver limitations. Currently, trucks are restricted to a 80,000 gross ton vehicle weight. Because of that, truckers have been switching to aluminum trailers to be able to carry more load. But that’s not so good for scrap dealers. Most rig owners won’t accept cut scrap for fear of damage to their trailers. Normally, only turnings and shred are acceptable.

There is also a shortage of steel trailers, according to Rick Badeusz, manager of distribution services for Cozzi Iron & Metal Inc., Chicago. He points to a time when the scrap market was soft and deliveries were down. "When that happened, many shippers found themselves with all these steel trailers and began selling them off," he says. "Now the capacity in steel trailers is not there."

Federal driver limitations also come into play. For instance, a truck driver can only be behind the wheel 10 hours a day, and at 55 mph, that means he can cover only about 550 miles a day. In addition, Mormino says that many drivers today push to be home at night as much as possible, so it is getting harder to find drivers willing to make the longer trips.

New commercial drivers license regulations also require more attention by the shipper. Truck drivers must now undergo routine drug tests, and Mormino says because of that his safety department has had to increase from five to 20 people to keep up, thus increasing his costs significantly.

There have also been rumblings about Mexican carriers moving in on business across the border under the North American Free Trade Agreement. Some point to rigs that are below standards and drivers that get paid about $5 an hour. However, according to the American Trucking Association, Washington, Mexican-based truckers are not allowed to ship domestically in the U.S. So far, Mexican truckers can only transport loads from Mexico into the U.S., or vice versa, and only in designated commercial zones located in Texas, California and Arizona.

If increased safety guidelines are approved for Mexican carriers by the U.S. DOT, then Mexican truckers will be able to operate anywhere within the four border states. "But they still will not be able to deliver scrap or any other goods or material originating and terminating within the U.S.," says an ATA spokesperson.

The rule of thumb with scrap processors is that trucking makes sense for materials shipped within about 150 miles. For distances greater than that, it’s probably cheaper to go by rail. But other factors come into to play, such as time of delivery – rail or barge just might not get the scrap there when it is needed. Mormino concedes that rail is more advantageous beyond about 150 miles. "We really can’t compete beyond that with trucks," he says, "because of the rate structure on one-way or single-line hauls."

Jack Gray has 16 terminals in the U.S. and hauls all kinds of commodities, including scrap, which Mormino says constitutes about 28 percent of its overall business. Jack Gray owns about 200 trucks and contracts with between 900 and 1,100 independent truckers.

According to Mormino and others in the industry, the top two benefits of shipping scrap by truck are better quality control and on-time delivery. "I think quality control is the number one benefit simply because a 20-ton truck load can be inspected more easily than a 90-ton gondola load," he says. "And if the load is downgraded, the dealer loses less with the truck because only 20 tons is downgraded."

The on-time delivery and flexibility of trucking are other significant benefits that Mormino is quick to mention. "More and more we are seeing end users who do not want to maintain extensive inventories, so materials must be delivered on a constant basis," he says. "Trucks also have an advantage in extreme weather conditions, because rail cars freeze up and barges can’t move. Plus, a scrap dealer may be able to beat an impending price decrease if he can ship scrap out faster via truck."

Increasing rail rates and other rail concerns are also forcing scrap dealers to re-evaluate shipping by truck. "Right now, rail rates are going through the roof," claims John Brumskole, transportation supervisor for Columbia Iron & Metal, Cleveland. "Trucking rates, on the other hand, have seen only small, incremental increases during the past decade." Presently, 40 percent of Columbia’s scrap is shipped via truck.

Some scrap processors also prefer trucking materials because of concerns about railcars not being emptied completely. "The advantage with using a truck is that the shipment is inspected right away and the entire load is offloaded – you are assured of that," says Badeusz. "But with railcars, they can sit there for long time and when they are unloaded all of the scrap may not be taken off. That’s a big problem, and with the number of shipments we make, it can – and has – cost us thousands of dollars per week in lost revenues because material was not unloaded properly."

Another area to look into are back-haul opportunities – truckers that are transporting loads to your area and who need loads going back. For those opportunities a better rate can be negotiated, according to Olson.

"It is important to look at the entire transportation package," she says, "and find the best way to transport your material. Most of the time a recyclable material is not a material that is required right away, so there is time to negotiate with a shipper to get on his schedule and get the material transported."

The exception to this, of course, is if you have a dedicated customer that needs your material just-in-time, like a foundry or a small paper mill that does not have a lot of storage space. "In those cases," says Brumskole, "using a dedicated shipper, or even owning your own truck and making the delivery yourself, may be in order."

Still, what a scrap dealer uses, and when, may sometimes be out of his control, according to Badeusz. "Transportation is determined by the mill," he says. "They give you a weekly schedule and say ‘we want a certain number of gondolas and a certain number of trucks coming in.’ So many times the mill is dictating what type of transportation you use."

With favorable trucking rates, scrap processors are generally staying away from owning their own fleets. High truck maintenance costs, combined with the challenge of finding drivers and keeping them on payroll, are the primary reasons why scrap mainly moves via contracted carrier. Even when processors become a certain size, they are still staying away from truck ownership for outbound deliveries.

"We don’t own a fleet of trucks simply because of the capital outlay," says Tom Pellington, director of transportation for The David J. Joseph Co., Cincinnati. "We have decentralized our trucking transportation function to our individual yards. With gondola cars we do have our own because of the current situation in the rail industry."

Currently, The David J. Joseph Co. ships 53 percent of its scrap by rail, 26 percent by barge, 19 percent by truck and 2 percent by vessel.

When it comes to inbound traffic to the yard, however, most scrap dealers say it is best to have your own trucks. The reasons are many.

First, trucks can be used as traveling billboards promoting your scrap and recycling business in the area of operations, helping increase material flow and giving your business more of an identity. And second, you have more control over your trucks and more flexibility to assign them. The only drawback is that the maintenance of those trucks has to be considered.

"We have 75 trucks, consisting mainly of roll-offs and luggers, that we use for inbound transport of material," says Badeusz, "and we maintain our entire fleet here. We have our own garage and mechanics. I would say that if we only had a handful of trucks, then it would be more cost effective to have an independent repair shop handle our maintenance needs. But with the number of trucks we have, we can’t afford to rely on anyone else. If six or seven trucks go down, then we have to get them back up right away."

In addition, Cozzi’s drivers do more than just drive the truck, "they’re traveling salesmen," says Badeusz. "They are very important to our business."

Overall, it appears that the trucking of scrap will continue at a healthy pace. "Regardless of what you may hear, I think that the carriers like hauling scrap," says Badeusz. "It’s reliable business that is always going to be there. The carrier knows that the scrap will flow."

The author is managing editor of Recycling Today.