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Home Supply Chain Risk management

Steel market stymied by US logistics issues

by Team Logistics Asia
June 29, 2021
in Risk management, Supply Chain, Sustainability
Steel market stymied by US logistics issues
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Beyond the continued tightness throughout the steel supply chain in the US, logistics issues have been an ongoing market hindrance as well.

Market sources have reported tight conditions on all forms of transportation in all markets, from raw materials to finished steel.

“A lot of the problem is transportation issues. Trucking is a nightmare right now. I can’t get it at all then I’ve got to pay someone else more to do it. The demand is alright, but we’ve seen robust demand before where transportation’s been able to keep up,” said a broker.

“Trucking costs are getting out of control,” agreed a manufacturer.

“[We’re] seeing rail and truck issues. Rail just as bad,” said a trader.

“Buyers are not just competing for scrap, they’re competing for the scrap that can actually be shipped,” said a scrap buyer.

Logistics issues are not just affecting domestic material movements, deep sea freight is being impacted as well.

“Freight rates have gone out of control,” said one trader. Another trader agreed, saying his most recent quote had surged by more than 50% from the previous one.

“I can tell you that it extends to containers as well and it’s a very fluid situation. It’s a whole deal; I think it’s a problem. It’s going to be really interesting to see how this all manifests,” said a second broker.

Platts’ assessment of New Jersey to Aliaga dry bulk freight rates, a popular route for US scrap exports, hit $40/mt during the week of June 21, more than double its historical average of $19.83 and a record high since December 2014 when the assessment was launched.

Those with private logistics resources are finding themselves in a better position given current market conditions.

“Private cars are paying for themselves in markets like this. Truck rates are up, and the fuel surcharge associated with rail shipments is up,” said one scrap supplier.

“If you want to dig into my limited asset list and I only have so many trucks a month it’s going to cost you more. Transportation is limited, and thus it is more expensive,” said another supplier.

Some sources suggested that the Biden administration’s new infrastructure bill could begin to provide some logistics relief. The plan includes $621 billion allocated toward roads, bridges, public transit, rail, ports, waterways, airports and electric vehicles, and another $100 billion on workforce development which could go in part toward training new truck drivers.

“I think the trucks are there, it’s just the labor’s not. Trailers are sitting around right now; they just can’t get drivers,” said the first broker.

“I think this has got to be addressed as a part of this infrastructure package, if we’re going to be growing capacity and raw material consumption, we’ve got to improve our rail car availability,” added the second broker.

With all-time high sheet prices in the US, market sources said end-users were still willing to absorb higher freight rates to get the materials that they essentially needed but their overall costs were becoming a bigger issue as they started facing struggles in reflecting it in their end-product pricing.

US hot-rolled coil prices were standing at $1,740.25/st June 28, up by almost 300% since early August when prices bottomed out, according to S&P Global Platts pricing data. “Logistics are an issue. You get the sense this market would have even more upside if it wasn’t constrained by transportation issues,” said a broker.

Source: S&P Global
Tags: Freight TransportationLogisticsRail FreightSteelSupply ChainTransportTrucksUnited States

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