Transportation Guide -- Riding the Rails

At some point in their histories, most large scrap processing facilities have taken the necessary steps to provide themselves access to the nation’s railroad network. Many located there initially, while others moved near a rail line at an early expansion stage.

In most cases, a general bulk or volume shipping level must be reached for rail to be a cost-effective means of shipping scrap materials. For that reason, ferrous scrap and recovered paper are two of the recyclable commodities most commonly shipped by rail.

Shipping by rail can require a number of ongoing expenses to meet, maintenance issues to address, and a certain amount of attention within the office to make sure that the scheduling and logistics run smoothly.

Railroads can be reluctant to offer a minimum recommended scrap tonnage volume, lest they scare off a potential customer. "As long as their volume is such that I can fill one car, I’ll schedule that car," says Jim Titsworth of Burlington Northern Santa Fe (BNSF), Fort Worth, Texas.

Kristen Davis, an assistant product manager with Norfolk Southern, Norfolk, Va., indicates that her company, too, will accommodate scrap paper shippers with just a one-boxcar load to be scheduled.

Deciding whether sufficient volume exists to re-activate a spur is considered by many the legitimate first question a shipper faces. "How much volume is currently being shipped and where is it going? Those are among the first things I want to know if I am going to help a potential new customer," says Titsworth.

"I think they also need to think, though, about how their business might change if rail is added," he notes. Adding rail capabilities can immediately let a facility ship to consumers who had previously been uninterested.

At the other end of the weight scale, shippers of scrap metal in particular have to be cognizant of federally-imposed weight limits. In most cases, the railroads themselves will conduct random spot-checks of cars to ensure that shippers are staying with the weight limits, which are imposed for safety reasons. "Ferrous scrap is a material that can push shippers over those upper limits," Titsworth remarks.

"We do monitor those weights," says the BNSF representative. "Number one it’s a question of safety," he says, noting that locomotive braking systems are designed with the weight limits in mind. "Number two, there is the damage that breaking those weight limits can cause to the cars," he adds.

"350,000-pound loads do occur," Titsworth continues. "You can see quite visibly the strain on a car with that kind of load." The railroad will randomly audit cars and will penalize violators, he adds.

While such loads can occur, they are not typical, according to Ted Frodyma, business manager-steel and ferrous scrap with Union Pacific Railroad (UP), Omaha, Neb. "The average weight of cars shipping ferrous scrap in 1997 was 85 tons," he notes.

RAIL SIDINGS: ON-RAMPS TO THE SYSTEM

While a processor located dozens of miles from the interstate highway system can still eventually reach an on-ramp, reaching the rail system can be more limiting.

As noted earlier, processors long ago understood the importance of rail access, and most facilities sited within the past 40 years have been located on parcels along the rail network.

A railroad spur or siding is a length of track that runs from railroad-owned tracks into the property of a given shipper. A siding does require some maintenance responsibilities to be met on the customer’s part. "Our crews conduct a visual inspection of a siding virtually every time they use one," says UP’s Frodyma.

While the crews are looking for debris or other obstructions, they also check the condition of rails and ties. "If they came through and thought that a length of rail or some ties needed to be replaced, the track is red-flagged and the problem must be corrected," says Frodyma.

While the nation’s city-to-city rail infrastructure was, for the most part, laid out years ago, there are still new spurs under construction throughout the U.S. As the geography of America’s manufacturing sector changes, the rail system has changed to mirror it. When a new manufacturing or assembly plant is built at a greenfield (often rural) site, having rail access and establishing terms with that railroad are often primary site selection criteria for the manufacturer.

Steel mini-mills are among those new plants that have spurred new rail traffic and new rail siding construction activity. Hungry electric arc furnaces operating around the clock are often fed by a steady stream of gondola cars containing ferrous scrap.

Processors who were already well-versed in rail shipping have been able to increase the amount of scrap they send by rail. Others have re-acquainted themselves with what may have been an inactive rail siding at their facility.

"Often a siding that has not been used for several years will require costly repairs and upgrades, such as a new switch," notes Titsworth. "But sometimes everything is in place, and all we need to do is send someone out to inspect their track."

A new processing yard—or one that is near a rail line but has never had a siding built—can take the necessary steps to join the rail network, but there are upfront construction costs involved. "Right now, one project we’re working on involves building 4,000 feet of track across land the scrap processor had to buy to connect to the main line," says Titsworth. "But a lot of people are discovering that the flow of material through their yards is enough to make it worthwhile."

Projects involving laying new track usually cost at least $100,000. "Laying the track itself is a relatively small portion of that cost," says Titsworth, who notes that other considerations can include purchasing additional property, conducting environmental tests, obtaining permits, working with an engineer to draw up plans, and possibly paying for a signal off the main line.

Sioux City Compressed Steel Co., Sioux City, Iowa, recently installed a 1,100-foot rail siding to serve the new scrap processing facility it has under construction in an industrial park near the city’s airport. The siding connects to a Union Pacific line that runs near the site. "We entered into an agreement for them to serve us, and agreed to pay for the installation of a switch, although it is their switch and they install it," says Michael Potash, an engineer employed by Sioux City Compressed Steel to oversee the construction of their new yard.

"A private contractor hired by us built the spur on our property out to the ‘point of clearance,’ which is the point where you can push or park cars without interfering with traffic on the main line," adds Potash.

The company ships by rail at its current site, which is located in a gentrifying neighborhood in central Sioux City. Potash estimates that about 50% of outbound scrap is shipped by rail at the current site. He anticipates that the percentage of rail shipping will increase at the new site. "As we stretch out to new markets, rail starts becoming more cost-effective to reach those more distant consumers," Potash remarks.

Potash says the process of installing the new siding went smoothly, especially compared to some of the permitting and zoning processes that Sioux City Compressed Steel went through in siting their new facility. "I’d say we were a little surprised at the cost, but after doing some checking we found that by comparison it was a reasonable price to pay," he remarks.

"It went smoothly because we had plenty of time," Potash adds. "But plan on at least six to nine months to get something like this implemented, if not longer," he advises other processors in the same situation. "It takes some time for the railroad company to generate approvals and contracts."

Scrap metal—in almost any form—is a material that is tough on containers. In the world of rail shipping, the beast of burden that can handle this heavy and abrasive load is the gondola car.

While some gondolas can be covered to offer protection from the elements, ferrous scrap is most often shipped in open gondolas. The thick steel walls of gondola cars can hold up to the heavy, often sharp loads of scrap dropped from overhead by scrap handling cranes.

Gondola cars come in a variety of lengths and weight capacities, though there are some informal "industry-standard" sizes often referred to by rail shippers and railroad companies.

Two of the most commonly referred to sizes include 70-ton gondolas and 100-ton gondolas. The terms are used to cover a variety of cars that fall close to that figure, however. In a description of its rolling stock, Union Pacific Railroad, lists gondolas with 104-ton capacities and 108-ton capacities as well as 100-ton capacities.

Equipment manufacturers and railroads have begun to offer larger gondola cars to shippers. Norfolk Southern, BNSF and Wisconsin Central Transportation are among the railroads currently offering gondolas with a 286,000-pound (143-ton) capacity.

Wisconsin Central, Rosemont, Ill., recently added 300 of the 286,000-pound cars to its fleet. The regional railroad bought the 52-foot gondola cars from Johnstown America Corp., Chicago. The cars, built in Johnstown, Pa., are fabricated from 6-inch-thick steel and weigh 71,200 pounds each.

Shippers of scrap paper, who need to keep their commodity dry, typically ship in boxcars. Boxcars also come in varying sizes and configurations, with common lengths including 50 feet, 60 feet and 70 feet. Figures supplied by one Georgia-based scrap paper shipper show ranges of from 70 to 84 bales loaded per boxcar, with shipment weights ranging from 100,000 pounds to 121,000 pounds.

The timely arrival and clean condition of cars to serve shippers—especially in the case of gondola cars—has at times been a thorny issue between scrap processors and railroad companies. "Normally, what we ask for is seven to ten days notice," says Frodyma of the Union Pacific. "Larger shippers will give us a monthly order and then update us weekly," he adds.

"Sorry, but you don’t FedEx a railcar," quips BNSF’s Titsworth. "It certainly benefits a shipper to get an order in as early as possible and communicate it clearly," he adds. BNSF also maintains regular schedules for larger shippers, Titsworth notes.

Some of the largest scrap shippers and brokers possess their own fleets of gondolas, and may lease these out to shippers.

Complaints of gondolas with significant amounts of dirt on the bottom—enough to cut into the weight of the shipment—have also arisen this decade. "Car cleaning is a large and continuing issue that costs the industry literally millions a year," says Titsworth.

Says Kim Picking, a steel and ferrous scrap business manager with UP, "We just spent $1 million cleaning gondola cars." She notes, too, that it is an ongoing task to keep the UP’s fleet of 13,000 gondola cars clean. (7,000 of those are in the steel and scrap service area, according to Picking.)

Railroad freight shipping rates have traditionally been published in the form of a circular that is distributed to customers. While the word circular might denote something resembling a pamphlet or two-page document, the iron and steel scrap circulars published by the large Class I railroads can exceed 100 pages. (Class I railroads are defined as those earning more than $255 million in revenues. There are fewer than ten in the U.S. and Canada)

The rates published in the circulars provide price information based on the commodity being shipped, the weight of the shipment and number of cars, and, of course, the origin, destination and route traveled. All of these factors are considerations when rate formulas are devised, says BNSF’s Titsworth.

"There is no such thing as a general rate," he remarks. "There are switching charges, trackage right fees, operating charges—a number of factors that you might expect and others you might not. Using a stretch of track that goes over a mountain will probably cost more," Titsworth adds, noting that more fuel is consumed by the locomotive on such routes. "Of course, shipping to and from competitive locations can bring a price down."

"If we have empty gondolas in the area, that can help keep a price down," says the UP’s Picking. "If there is another carrier or a short line involved, that can bring the fee up," she adds.

The circulars are reprinted every two or three years, which can be considered a reflection of recent rate stability. There are weekly updates published, however, which may involve a rate increase or decrease along a given route or the addition of a new origin or destination.