Rolling Along

Demand for scrap materials remains strong. For transportation providers, the demand for vehicles to move this material from Point A to Point B also has grown. However, opinions vary widely on the overall health of the trucking and rail industries.

In discussions with a number of trucking and logistics firms, it becomes apparent that higher fuel costs and labor shortages are affecting the industry. However, there is a sizeable difference of opinion concerning the health of the trucking industry and its willingness to deal with the recycling industry.

Tom Shapiro, chief operating officer for SDS Recycling and Logistics Services, a Youngstown, Ohio-based trucking and logistics firm that specializes in transporting electronic scrap, says he is finding business to be very strong. The company has excelled at working with some of the large electronics companies, like Dell, that organize one-day collection events.

While SDS coordinates such collection programs and ensures that the material can be shipped to a reputable end source, Shapiro says that one of the biggest issues when servicing such events is the fact that truck reliability is vital. The trucks have to show up on time for the one-day events SDS works on, Shapiro says. If that fails to happen, it is tantamount to disaster. "That can’t happen," he says adamantly. Trucks breaking down or having insufficient equipment on hand can do a significant amount of damage to a company’s credibility.

THE GASOLINE BLUES. Gas prices have created quite a case of sticker shock for the transportation industry. Escalating fuel prices have forced trucking companies, which typically monitor their fuel costs closely, to implement fuel surcharges.

While this hasn’t been an easy choice for trucking companies to make, for the most part, they aren’t seeing much resistance to these surcharges. Everyone is aware of the higher fuel prices, so a fuel surcharge is expected, one trucking executive says.

However, the level of the surcharge has become an area of concern for some trucking companies.

Peter Hodge, president of Hodge Transport, a Canadian-based trucking company that performs cross-border business, says that some trucking companies are using the higher fuel prices to impose surcharges much higher than warranted. While not naming names, Hodge feels that, while surcharges are essential to stay in business, it shouldn’t be a way for trucking firms to push prices even higher.

Although the fuel issue continues to be a major factor in the market right now, most trucking companies say that business in the short term is fairly healthy. Demand for their services remains strong.

Carmen Mormeno with Jack Gray Transport, an Indiana-based trucking firm, also sees higher prices for fuel being passed along to customers. However, Mormeno says he is less upbeat about the business environment.

Reflecting on changing demand, Mormeno sees his company, which is national in scope, significantly reducing the amount of business it is doing in the scrap metal industry as an overall percentage of the business it is seeking.

Additionally, some trucking firms are questioning the attitudes of some scrap dealers. Everyone knows that prices are higher these days. However, in order to save a few cents, a scrap dealer may decide to use a different trucking company, effectively cutting off a major portion of a trucking company’s business.

Bruce O’Neil, president of Jupiter Transport, a Florida-based trucking firm, notes that while fuel costs are definitely higher, scrap dealers have recognized that fuel prices have gone up, and everyone is adjusting their prices accordingly.

The nature of the business has resulted in prices continually being pressured downward, making it more and more difficult to stay competitive.

However, a greater concern for O’Neil, as well as most of the truck companies contacted, is the driver shortage, which is not a new phenomenon.

Furthermore, the lack of available drivers, one of the over-arching concerns for the trucking industry, is continuing. While the issue has been a problem for years, many trucking executives now say that the issue is getting even worse rather than improving.

John Franssen with trucking logistics firm William Edwards Inc./Team Logistics, Richmond, Va., says that while getting and maintaining an adequate number of drivers is still a problem, he senses that it is starting to stabilize.

Adding to the overall trend, the rail industry has had some difficult issues throughout the past several months—from shortages of gondola cars to sharply higher shipping rates—which are allowing many of the trucking companies to extend their business into areas that typically were heavily focused on rail movement.

For starters, trucks in the Florida area are in scarce supply in light of demand from some of the produce growers in the area, adding additional stress to the overall shortage of drivers.

One large scrap recycler in the Midwest who uses truck, rail and barge to move material says that from late September through December is a difficult time. "We get priced out of the market then," he says. During this time many trucking companies gear their shipments to handle more holiday orders for which they are more likely getting higher rates.

While the challenge of maintaining an effective logistics arrangement becomes more difficult as supply of equipment remains tight, Hodge also sees a difficult situation with his trucking business, which is involved in trans-border shipments of material between the United States and Canada.

While agreeing that the driver shortage is a major problem, Hodge also says border delays when moving material from Canada to the United States affect many drivers. While security issues remain at the forefront of border crossings, Hodge points out that customs agents can impose significant fines for what he calls potential "paperwork screw ups."

These fines could be imposed immediately on the driver, making his trucking company even more challenged to land owner/operators willing to shuttle cargo between the two nations.

Another challenge for the Toronto-based Hodge Transport is the difference between the U.S. and Canadian dollar, which is putting the Canadian company at a major disadvantage.

Just-in-time (JIT) shipping is still a factor in today’s transportation market, offering the trucking industry a way to solidify its position as the most service-focused mode of transportation.

While JIT delivery is still a service that many companies are seeking, the changing dynamics of the transportation industry are making it more difficult to develop a consistent JIT approach, particularly in respect to rail service.

RAIL CHALLENGES. The rail industry seems to have always had a peculiar relationship with the scrap industry. While overall demand for gondola cars to ship scrap metals has increased througout the past several months, scrap dealers continue to complain about acute shortages of gondola cars available.