Transportation Guide -- Barging: Steady as it Goes

Shipping a load of ferrous scrap in an economical and timely fashion is important. While rail and trucking companies battle over the benefits of their services in transporting recyclables, especially ferrous scrap, using barges through the inland waterways of North America has been growing steadily within the ferrous scrap and scrap substitute industry.

Far from only a niche opportunity for a handful of scrap processors, the opportunities are growing in popularity, at least as a way for steel mills to keep all their transportation options open.

Adding credence to this method of transportation, more steel mills are locating their operations on inland waterways. This strategy gives mini-mills an alternative to bringing in raw material via truck and rail.

Rick Badeuscz, in the traffic department for Cozzi Iron & Metal, Chicago, sees a number of key advantages to using barges to ship ferrous scrap. One of the biggest is the cost difference between moving material on barges and truck or rail. According to Badeuscz, barge rates can be as much as half that of rail movement, depending on where and when the material is being shipped.

Other scrap processors note that costs to ship ferrous scrap can add up to significant savings, with some figures bandied about as much as $6 to $8 a ton less using this method of transportation. This difference can add up quickly, and are especially meaningful as ferrous scrap prices have been softening as of late.

According to Greg Caldwell, manager of bulk and steel sales for American Commercial Barge Lines (ACBL), Jeffersonville, Ind., a division of CSX Railroad, roughly 1,400 tons of ferrous scrap can be loaded at one time, or about 16 rail cars. Dimensionally, the barges used to ship ferrous scrap are typically 195 feet by 35 feet. The size of the load far exceeds the amount that can be placed on a gondola car, which may average around 85 tons, and a truck carrier, which may weigh in at around 20 tons.

Factoring the weight differential and the per-ton savings can add to significant cost savings for shippers.

A second issue is the timeliness of the barge service. Mills need a steady flow of material coming through their door; scrap processors require a consistent method to move their material. With greater pressure on timeliness, are barges responding with better service?

"The barge industry has taken a bad rap about their service record," says Badeuscz. "Quite frankly, our barge service is better than our rail service." He adds that his company could call for a barge and have one the next day. This compares to ordering rail cars and possibly waiting up to several weeks to get the cars in some parts of the country.

For barge operators this is welcome news. Far from an antiquated method of moving material, this method takes full advantage of the inland waterways that run through the eastern half of the United States.

Caldwell sees steady increases in using barges to move ferrous scrap as well as within the scrap metal substitutes market.

According to Caldwell, ACBL is the largest barge shipper of ferrous scrap in the United States. Other barge lines, however, have a presence in shipping either raw material or finished steel products to and from steel mills.

According to a number of processors, the material can be shipped on a cheaper per-ton basis. Price advantages can particularly be gained when shipments are scheduled well in advance. "It’s ideal for back hauls," says Mickey Popplewell, terminal manager of Canal Barge, a Channahan, Ill. -based barge line, regarding scrap and scrap substitutes.

The perception from outside the barging industry is that material only moves up and down the Mississippi River. However, Caldwell is quick to point out that barge coverage can extend as far east as Pittsburgh to as far west as Sioux City, Iowa, with barges operating north-to-south from Minneapolis to New Orleans. A total of 15,000 miles of inland waterways are navigable by barge companies.

While there is wide coverage, there isn’t any possibility to extend the coverage, which puts barging at a disadvantage with rail or trucks, where added tracks and roads can extend their coverage. Caldwell also points out barges don’t have the luxury of using their own waterways to ship material.

Despite these problems, there is measurable growth in barge movement of ferrous scrap and scrap substitute on barges.

A rap against barge shippers is the time it may take to have the barge make the distance. However, several barge operators are quick to point out that movement is designed for steady movement, and is geared more toward contracted shipments, as opposed to spot orders. With around 3,400 barges in ACBL’s fleet, the company is able to quickly respond to requests for barges from shippers.

Other barge operators feel that the time it would take for a barge to move from point of origin to point of destination is not that long. One popular route, from Chicago to Hickman, Ark. (location of a Nucor plant), may take ten days right now. This compares favorably to a gondola car that may take several weeks to deliver its goods to the consumer, the barge operators point out. And, with the amount of scrap loaded on the barge, the overall performance is much better, they contend.

The advantages of barge shipments include higher volumes of material, as well as less expensive shipments. For shippers, the advantages focus on the cost benefits, especially if there isn’t an urgent need to have the material to the point of consumption in the near future.

The downside for those interested in using barges to move materials include the need for the scrap yard to be located on a waterway with direct access to barge traffic. For Cozzi Iron & Metal, this is one of the key strategies when looking to expand their operations.

While needing direct access to waterways is a precursor to barge traffic, ACBL, along with its parent company CSX, is working to develop a system whereby the rail system will work to penetrate past river-sited facilities to get to landlocked mills.

Another possible downside to barge shipping is the fluctuation in rates. Unlike railroads, barges have a wider ability to change their rates. When shipping via barge, rates can change. And, depending on the commodities being moved, the price of the ferrous scrap could climb. "Barges are more of a commodity. There are seasons," Badeuscz says.

For any method of transportation, a key is keeping the vessels from sitting idle at a facility for a prolonged length of time. Caldwell says this isn’t a great problem. "Places like Nucor don’t (hold onto barges)." This happens even when there may be dozens of barges that are lined up at the plant. Badeuscz also feels that barges sitting backed up at a source are not a major problem. "It’s pretty rare," he adds.

Popplewell says that while there are occasional backups at the steel mills, typically demurrage charges are not required to get the cargo unloaded.

The types of barges used are typically open hoppers or covered barges. While the loading and unloading of ferrous scrap takes its toll, Popplewell says the average barge can last around 25 years before being replaced.

Repositioning the barges is another issue that is constantly being examined. While many of the larger hubs have not had a problem moving cargo in and out of them, it may be more expensive to load and reposition at other locations further away from supply corridors.

With scrap shipping growth expected to continue as new steel mills fire up their plants, barge activity should grow for mills located throughout the South and Midwest. The success of the mini-mills, who are procuring more material from domestic sources, creates more opportunities for barge shipping.