Adjusting to a new, more expensive freight world - AMM Daily/Freight_Nov2017.pdf · 2017-11-20 · Donald Trump and his administration follow through with the previous administration’s

Moving metal has suddenly became more costly and logistically confounding, following

the synchronized economic recovery in the United States, Europe and Asia. A swell in port

traffic has led to overcrowding on both US coasts, while rapidly aging rail and highway

infrastructure and new regulations are resulting in volatile spot rates and frustrating

bottlenecks. In this special edition, American Metal Market and Metal Bulletin reporters

discuss the major trends in the freight markets and what the future might hold.

Adjusting to a new, more expensive freight world

American Metal Market 2NOVEMBER 2017

Letter from the editorWhen I first started pricing commodities in the mid-2000s, conversations about freight costs were short, perfunctory and generally unexciting. High capacity throughout the system and the availability of low-cost transportation services allowed suppliers to easily build modest shipping costs into contracts while metal consumers were content to receive dependable just-in-time delivery.

But over the past year there has been a sea change. The freight market has been gripped by unprecedented volatility due to highway congestion, a massive trucker shortage, bottlenecks at major ports and rapidly deteriorating and aging infrastructure. The situation has been exacerbated by strong demand for metal and the disruptive destruction left behind by three major hurricanes.

One of the biggest squeezes is happening in the trucking market, where spot rates can fluctuate by 40% in any given month and the national driver shortage could reach 240,000 drivers by 2022.

“This is one of the highest periods of turbulence and volatility in supply we’ve ever experienced, and we don’t think it will abate any time soon,” according to trucking company J.B. Hunt, which advised customers in a letter to budget for transportation cost increases of 10% or more in 2018.

Reporter Dalton Barker explores on page 5 how the trucking industry is also worried about new regulations, particularly one requiring the installation of electronic logging devices that aims to clamp down on drivers working excess hours behind the wheel.

Meanwhile, US rail traffic volume hit an all-time record in October. But this is also an industry that is struggling with regulatory and political ambiguity, reporter Nat Rudarakanchana details on page 9.

And it’s not just inland transportation that’s tricky. The ports of Baltimore, New Orleans and Houston are all receiving record imports via larger container and breakbulk ships, which is leading to massive congestion and logistics issues as deliveries to consumers are delayed, Millicent Dent and Grace Lavigne report on pages 11 and 12, respectively.

All of these headaches and headwinds have already led to higher metals prices and structural changes to the metal supply chain. For example, following a sharp increase in trucking rates in September, the US P1020 aluminium premium rose by nearly 24% from September 1 to October 24, as reporter Kirk Maltais point out on page 6.

But perhaps the key takeaway is that transportation prices are volatile and rising, which will only make it more challenging than ever to move metal from point A to point B. Companies that are up to date on the latest trends will be poised to effectively manage their price risk, while those that are not may be in for a rude awakening.

Tom JennemannNorth American non-ferrous and non-ferrous scrap editor

In this issue

Turning up the heat on shippers’ freight costs

Truckload, intermodal costs on the rise

New trucking rules to impact US premiums

Trucking squeeze weighs on ali premium in 2017

New tool to uncover arbitrage opportunities

Railroads move record intermodal shipments

Rail reform still on hold for steel, scrap

Baltimore port working to keep up with growth

China warehousing trends could impact New Orleans

Funding to relieve congestion at Savannah

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The freight environment in North America took a significant hit in August, mainly because of short-term fuel cost increases caused by Hurricane Harvey disruptions, the Bloomington, Indiana-based research company said.

“Shippers are in a tough position right now,” FTR chief operating officer Jonathan Starks said in a statement. “We have known for some time that the trucking industry has been operating with very little excess capacity; however, the weak pricing environment masked that phenomenon for the last year.

Hurricanes Harvey and Irma exposed shippers to this new reality.”

The FTR Shippers Conditions Index, which analyzes variables that affect the cost and efficiency of shipping goods via all transportation modes in North America, dropped further into the red in August with a negative reading of 6.7, according to the latest data. Any reading below zero indicates an environment that is less than ideal for shippers, with readings in excess of negative 10 signaling near-critical levels.

The August reading also reflected increased logistics costs for shippers that are expected to persist into 2018,

according to FTR. “When you couple the hurricane

impacts with increased freight demand and the fast approaching ELD (electronic logging device) implementation, there’s a real fear that loads won’t get delivered,” Starks continued. “This is already beginning to show up in the contract markets. Spot prices were the canary in the coal mine - contract pricing is likely to show significant gains through most of 2018.”

GRACE LAVIGNE

Turning up the heat on shippers’ freight costs

Pressure on North American shippers’ freight contract prices is expected to increase further by the end of 2017 and into 2018, following spikes in spot prices due to full capacity utilization, according to FTR Transportation Intelligence.

1.15

–2.4

1.9

–2.8

–4

–1.9

0.2

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

Aug. ’16 Sept. ’16 Oct. ’16 Nov. ’16 Dec. ’16 Jan. ’17 Feb. ’17 March ’17 April ’17 May ’17 June ’17 July ’17 Aug. ’17

SHIPPERS CONDITIONS INDEX

Source: FTR Assocaties Inc.

Greater than 0 = positive environment; less than 0 = negative environment

–0.53

–1.65

–3.6

–0.7

–1.7

–6.7


The Cass Truckload Linehaul Index - which measures market fluctuations in truckload pricing independent of additional costs such as fuel - was placed at a new all-time high of 128.2 in September, the latest data shows. That’s up 4.2% from the same month last year and marks the sixth consecutive month of year-on-year gains.

Pricing for trucking has been on the rise and gaining momentum, according to Donald Broughton, transportation analyst and founder of Broughton Capital, as well as commentator for the Cass Indexes. The current strength being reported in spot rates implies that contract pricing should remain in positive territory through the end of the year, he said in a statement.

Notably, the turnover rate at truckload carriers surged in the second

quarter of 2017, signaling that the market for drivers is quickly tightening, according to Robert Costello, chief economist and senior vice president at the American Trucking Associations.

“We saw double-digit gains in the annualized turnover rate for both small and large truckload fleets,” Costello said in a statement. “After a period of relatively low turnover, it appears the driver market is tightening again, which - coupled with increased demand for freight movement - could rapidly exacerbate the driver shortage.”

Meanwhile, in the intermodal market, pricing momentum appears to be accelerating finally as well, Cass reported.

The Cass Intermodal Index - which measures market fluctuations in US domestic intermodal costs - rose 4%

year-on-year to a reading of 129.1 in September, marking the 12th consecutive month of year-on-year increases, the latest data showed. That was primarily driven by the “hurricane refining crunch,” which pushed diesel prices up by roughly 12-14%, or from $2.50 up to nearly $2.80 per gallon, according to St Louis, Missouri-based Cass.

Indeed, total intermodal volumes climbed 6.3% year on year in the third quarter of 2017 - the strongest growth rate in more than three years, according to the Intermodal Association of North America’s Intermodal Market Trends and Statistics report.

GRACE LAVIGNE

Truckload, intermodal costs on the rise

US truckload and intermodal volumes and prices continued to be robust in September and are expected to continue to pick up steam, according to Cass Information Systems.

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Sept. ’16 Oct. ’16 Nov. ’16 Dec. ’16 Jan. ’17 Feb. ’17 March ’17 April ’17 May ’17 June ’17 July ’17 Aug. ’17 Sept. ’17

TRUCKLOAD, INTERMODAL PRICING

Trucking Intermodal

Source: Cass Information Systems Inc.

(in year-in-year percent change)


Starting in mid-December truck drivers will be required to report their hours under the new electronic logging device (ELD) trackers, which aim to limit drivers to 60-70 hours on duty over the course of seven or eight consecutive days. The devices connect to the truck’s engine and provide accurate information in the event of an accident or roadside inspection.

One of the primary goals of the new legislation is to prevent deadhead miles, a common practice in the trucking industry in which drivers travel with an empty trailer and drive a certain distance to pick up a load.

Empty trailers weigh roughly half as much as full ones and as a result are more susceptible to accidents, especially in high winds that can tip tractor-trailers over.

The exact cost and how that will affect US premiums is unknown right now but market participants expect logistics costs to rise in 2018, and those costs will be passed to consumers.

One of the largest aspects of US-based premiums are the transportation costs from one location to the consumer, and that should prevent copper premiums from dipping compared with last year.

“With the higher logistical costs ... you should expect a hike [in US copper premiums],” one copper trader said.

Other premiums are expected to see a similar environment, with nationwide costs rising in 2018 and beyond.

The Midwest-delivered copper premium was at 5 to 5.5 cents per pound on Tuesday November 14, according to AMM’s assessment. Premiums have held at this level since May 23.

The other big change for the trucking industry is from the US Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration, which are introducing new greenhouse gas standards aimed at reducing carbon emissions and improving engine efficiency.

Through a three-phase process that finalizes in 2027, the two agencies are attempting to increase overall fuel economy and have those savings passed on to consumers. But those costs are expected to hurt profits in the short-term, and whether President Donald Trump and his administration follow through with the previous administration’s regulations is unknown at this point.

Still, the trucking industry has an unlikely ally in top EPA administrator Scott Pruitt, who has been a vocal critic on the US regulatory burden. Pruitt last month announced the agency’s plans to withdraw from the Clean Power Plan, a series of initiatives aimed at regulating greenhouse gas emissions nationwide.

“I’ve heard that there are some more stringent regulations coming into effect that could force some trucks out of the business. If the Trump admin[istration] gets wind of that, then we may see a rollback of the regulations to give the truckers some relief,” another trader said.

In the interim, trucking companies have roughly a month to become compliant, and those new changes will alter the landscape in negotiation sessions between suppliers and consumers along with the broader metals market.

DALTON BARKER

New trucking rules to impact US premiums

The trucking industry in the United States is set to implement a series of new regulations aimed at preventing excess driving and limiting greenhouse gas emissions, leading metals participants to predict higher logistical and transportation costs for domestic metals premiums.


Trucking rates shot up in September following catastrophic damage from hurricanes Irma and Harvey, and combined with a shortage in available truck drivers led freight rates to rise quickly. This jump in freight costs was immediately felt on the P1020 spot premium in the United States, which rocketed 23.5% between September 1 and October 24 – from 7.5-7.85 cents per pound to 9.25-9.7 cents per pound, a nearly-six month high, according to American Metal Market’s pricing archives.

Aluminium premiums have since settled down, with market participants noting that freight rates have stabilized.

According to data from DAT Solutions LLC, national average flatbed trucking rates dipped to $2.29 per mile on Saturday November 4, down by 5 cents from October 29.

However, premiums could continue to be squeezed by trucking rates due to the shortage of drivers as well as the implementation of electronic logging devices, which is being introduced by the US Department of Transportation in December with full compliance by carriers expected by April 2018.

Some experts believe that the new regulations will limit the amount of mileage drivers will be able to accomplish in a day, causing deliveries to take longer and make trucks less available. Trucking companies will thus have to raise rates to recover lost

revenue – which would certainly be added into the Midwest premium covering for trucks entering and leaving London Metal Exchange warehouses and plants in the Midwest region.

However, not all experts agree that trucking rates will necessarily rise as a result of the legislation.

“If there truly is a large amount of ‘cheating’ - that is, truckers working longer than legal hours - you would obviously expect that logging would lead to a cut to supply and a rise in prices,” Paul Robinson, an economist in the pricing and purchasing service at IHS Markit Ltd., told American Metal Market on November 8. “For our part, we think that cheating is not as great as some others, but also that the long tail of logging implementation will mean that we shouldn’t be seeing much, if any, impact now.”

As far as tightness related to the hurricane damage goes, London-based IHS Markit is skeptical that the bump in trucking costs is anything more than a temporary situation.

“It is certainly true [that] the logistics disruptions caused by [Hurricanes] Harvey and Irma justified a temporary bump up in trucking costs - but these appear to be resolving themselves,” according to John Mothersole, director of research, pricing and purchasing service at IHS Markit. “If the US oil and chemical industries can straighten things out two months after the fact,

can’t the trucking industry?”A permanent shift in trucking rates

related to elogging regulation is a “stretch,” he said, noting the possibility that aluminium market players are using the issue to push premiums higher.

“I am suspicious that these issues are suddenly coming to the fore after

the hurricanes. ... The secret category manager in me says this is an attempt by the industry to expand margins,” Mothersole said.

Average gasoline retail prices in the US, including taxes, is expected to slide going into 2018, according to an outlook from the US Energy Information Administration (EIA). Average gasoline prices are projected to be $2.31 per gallon by January 2018, down from $2.65 per gallon in September. However, prices are expected to rebound heading into next summer, approaching an average of $2.57 per gallon by June 2018.

KIRK MALTAIS

Trucking squeeze weighs on ali premium in 2017

Issues in trucking clearly played a role in pushing the US Midwest aluminium premium upward in the second half of 2017, but whether such strain will continue to affect the premium going into 2018 remains to be seen.

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With this profitable trade flow in mind, Metal Bulletin is launching a new tool that will allow the market to track the physical arbitrage between the two regions on a monthly basis.

Over the past year, Metal Bulletin has observed a number of occasions where traders have been securing aluminium units in Asia, with the intention to ship and deliver into the US Midwest and capture a growing arbitrage between the two markets.

The US Midwest premium was assessed by American Metal Market at 9.25-9.5 cents per lb on a delivered basis with 30-day payment terms on Tuesday November 7, up from 6.75-7.25 cents in early November 2016.

Meanwhile in Asia, London Metal Exchange aluminium warrants are available for between $5 and $15 per tonne, fob non-LME cargoes are around $80-90 per tonne in Singapore and Malaysia and units deemed widely accessible. Approximately 376,700 tonnes of available material are held in visible exchange stocks in Asian locations, many more are held in off-warrant storage facilities in similar ports.

In February and March, more than 600,000 tonnes of aluminium were canceled from Asian locations, a portion of which was shipped to the US where premiums had risen to their highest level since May 2015 at 10-10.25 cents per lb.

With the premium having been rising since July, cancellations are beginning to increase. Since the start of October, more than 100,000 tonnes have been canceled from LME-registered warehouses in Asia again – many of the T-bar variety, the preferred shape of the US market – and there is speculation that some of this material might have been US bound.

Thus, Metal Bulletin will launch a new arbitrage calculator tool for aluminium from LME warehouses in Asia to the US Midwest beginning in December.

The tool aims to provide a monthly indication of the differential between the all-in cost to deliver aluminium purchased via LME clearing from registered warehouses in Asia against the current US Midwest premium and LME cash cost of the metal.

To do this, Metal Bulletin will use a monthly average of the US Midwest P1020A assessment and the average LME cash cost for that particular month to derive the all-in Midwest P1020A price.

This will be compared with the all-in “cost and freight” (cfr) price in Owensboro, Kentucky, which is at the core of the US aluminium industry and represents a key reference price for the physical industry delivering into the Midwest.

The all-in cfr Owensboro price will be calculated based on analysis of all

the latest trends in the freight industry provided by an external consultant, the official LME outright cash aluminium price and its published free on truck (fot) rates.

The all-in cfr Owensboro number will take into account the purchase of warrants from LME clearing in Asian warehouses, the cancellation of the material and break-bulk delivery of 10,000-tonne clips into the port of New Orleans before being shipped via barge freight into Owensboro.

The cfr Owensboro price will then be compared with the all-in Midwest delivered price. It will not include the final delivery component from Owensboro to the customer or any storage charges due to the highly variable nature of these costs.

The “arbitrage” will then be published each month in a table accompanied by a short commentary on any changes to costs or to activity.

The first report is set to be published on December 6. Thereafter, it will be published on a monthly basis on the first Wednesday of every calendar month.

IAN WALKER

New tool to uncover arbitrage opportunities

For the foreseeable future, the United States will be fundamentally short of aluminium and will have to import metal to account for its substantial demand. Simultaneously, units are widely available and cheaper in Asian warehouses.


US railroads originated nearly 1.07 million carloads last month, down 0.1% from October 2016; as well as 1.14 million containers and trailers, up 6.4% in the same comparison. Combined US carload and intermodal originations in October were 2.21 million, up 3.1% year on year.

Twelve of the 20 carload commodities tracked by AAR registered carload gains in October versus the same month last year, including metallic ores (up 20.6%), crushed stone, sand and gravel (up 16.5%) and chemicals (up 6.4%). Meanwhile, declines were posted by motor vehicles and parts (down 7%), coal (down 4.9%) and grain (down 11.8%).

“Rail carloads, as well as record intermodal volume in October, support the view that the economy is doing somewhat better now than it has been in the past two years,” AAR senior vice president John T. Gray said in a statement on November 1.

US carload traffic rose 3.4% year on year to 11.17 million carloads in the first 10 months of 2017, and intermodal traffic gained 3.7% to 11.58 million units. Combined US traffic for the first 43 weeks of 2017 was 22.75 million carloads and intermodal units, up 3.6% from the same year-ago period..

GRACE LAVIGNE

Railroads move record intermodal shipments

Rail traffic in the United States rose 3.1% year on year in October, the best month for intermodal rail traffic in history, the Association of American Railroads (AAR) said on Wednesday November 1.

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US CARLOADS OF PRIMARY METAL PRODUCTS

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US AND CANADIAN CARLOADS OF METALLIC ORES(Carloads are weekly averages for the month)

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Since the 2016 elections, the US Surface Transportation Board (STB) has effectively “put the brakes” on all major policy actions, one observer said. That has put an unwelcome halt to reform that could benefit steel and scrap shippers, among other major rail policy items.

Progress has stalled partly because the agency’s five-member board now only has two sitting commissioners, one short of a quorum and far short of the fully staffed board that is ideally desired before big decisions are debated, sources said.

President Donald Trump’s administration hasn’t yet nominated appointees for the unfilled positions, and any nominees must undergo formal Senate nomination hearings, so there’s no quick fix in sight, lobbyists and lawyers said.

Only two board members remain after former STB chairman Daniel Elliott, who served under President Barack Obama’s tenure, resigned in late September. Traditionally, leadership of the board switches during major party transitions, which in themselves take some time.

“There are three open seats on the STB. The issue is when will the president nominate three individuals to sit on the board, and when will they go through Senate confirmation? ... At this point there are no nominations, although

we’re hearing there is some progress being made in that regard,” according to Karyn Booth, an attorney at Thompson Hine LLP and chair of the firm’s transportation practice, noting that some believe at least one nomination could be announced by the end of 2017.

It will be important that any nominees for the STB stay open-minded and willing to evaluate the policy issues from a neutral perspective, sources said. “Pro-rail” board commissioners could influence key decisions and wider policies in favor of railroads, for example.

One action item “in limbo” is a key proposal for steel and scrap shippers, according to Billy Johnson, chief lobbyist of the Washington-based Institute of Scrap Recycling Industries, a body representing scrap recyclers.

That proposal, first floated in March 2016, sought re-regulation of rail practices pertaining to coking coal, iron and steel products as well as ferrous scrap, wastes or tailings.

That docket, dubbed EP-704, sought to lift a longtime exemption enjoyed by US railroads that had been won in 1993. That exemption for steel and scrap kept rail carriers free from special oversight and regulation in relation to their steel and scrap customers, because special rules weren’t needed to prevent “abuses of market power” by railroads.

“There is no schedule as to when the board is expected to act in the EP-704

commodity exemption proceeding and some other significant proceedings relating to rail competition ... and rail rate reform,” according to Booth, who is counsel to the ISRI. “Right now, I think we’re all in a bit of a holding pattern.”

But the transportation landscape has changed in the decades since, according to the proposal.

Modern freight and manufacturing practices necessitate special oversight of rail rates and service for steel and scrap commodities, federal STB officials claimed in their March 2016 proposal as they voted to lift the exemption.

The board’s review of confidential waybill data showed that primary iron and steel products, plus scrap, “appears to be increasingly potentially captive to railroads,” STB officials wrote as they devised a proposed rule. “This data suggests that railroads may be exerting increased market power over shippers of these commodities.”

The proposed rule is still in the formal rule-making process, with little progress made thus far and no clear time line for a resolution. A spokesman for the STB declined to discuss the matter, noting that the agency does not comment on pending or active proposals in the rulemaking process.

The last official filing in the case came in November 2016.

“We support the exemption [and

Rail reform still on hold for steel, scrap

US rail regulatory reform has been held up due to an unusually slow, uncertain and potentially political transition process at a key regulatory body, according to industry sources.

continued ❯


re-regulation]” at ISRI, Johnson told American Metal Market.

“Times have changed in the decades since the Staggers [Rail] Act and since the railroads got the exemption. ... We don’t have any remedies available to us when rail service deteriorates, or the price [of rail rates] gets very high,” he said, noting that rail reliability topics have come under the national spotlight following big snafus at CSX Corp that caused widespread upset among rail customers.

Declining service is sometimes an issue for scrap shippers, and creates a “love-hate relationship” between shippers and their rail service providers, Johnson noted.

“With the change in operations and management at CSX, we’ve had a lot of ISRI members very upset, with the lack of cars and service, and the timing of getting cars to market,” he said.

“Some of the switching between CSX and the other railroads is a bit shaky as well,” Johnson added, noting that shippers can “switch” rail providers in certain situations.

Indeed, shippers from across heavy industry - from chemicals to agriculture - testified at an informal “listening session” on October 11, at which aggrieved customers from Cargill Inc

and Dow Chemical Co criticized CSX for poor service.

“You hear about Cargill having trouble: imagine the guy who only moves two cars a week,” Johnson said. “And Cargill even owns their own cars.”

Scrap dealers may suffer twice, he noted, in that they require reliable freight to receive inbound scrap but also to ship outbound scrap to steel mills.

Still, CSX remains committed to “excellent, highly reliable service” for its metal customers, a CSX spokesman said via email on November 8.

The metals business is “an important market segment for CSX,” he said.

“CSX continues to report improved transit times and train speeds, while car-handling, terminal fluidity and overall operations become more efficient as transitional issues have been resolved. ... In a year-over-year comparison, volume levels for CSX’s primary metals market are higher, while quarter-to-date performance shows that our share of the metals market is stable,” the spokesman said.

”We look forward to the many opportunities that Precision Scheduled Railroading will provide the metals market moving forward,” he said, referring to a major technical and

operational program at CSX. Still, steel and scrap companies

don’t have direct access to formal STB remedies due to the exemptions and the way in which the system is now set up. That would change if the exemption is revoked.

“Based on legislative reforms and substantial market consolidation that has occurred since the exemptions were granted over 25 years ago, it seems to me that for steel and scrap companies to be placed on equal footing with non-exempted commodities, makes sense,” Booth told American Metal Market.

Booth’s law firm is “very much involved” in a separate STB proceeding concerning reciprocal switching. That proposal would amend rules for shippers who are “captive” to a single railroad, allowing them to switch traffic to a second railroad if the second carrier is within a “reasonable distance” of the captive facility and if other conditions are met, she said.

Revoking the steel and scrap exemptions would allow shippers of such commodities to benefit directly from expanded reciprocal switching arrangements that may be adopted by the board.

Not surprisingly, railroads have at times aggressively opposed such reforms.

The board was reauthorized in early 2016 after legislation passed the previous year, and its structure has improved. But there just hasn’t been the right time or opportunity for the STB to take major action, Johnson noted.

“The law set up a better structure. ... Though they have very good people there, they haven’t had much time to ramp up to do anything really. Which is a shame,” he said.

NAT RUDARAKANCHANA


“As volume grows, we have to grow as an industry. If the business is growing at 10%, we have to figure out how to do things 10% better,” Bayard Hogan said.

The port has been receiving an increasing number of supersize container ships over the past year. Year to date through August 1, the port had already received 10% more containers than its record number for the full-year 2016, according to the director of communications at the port of Baltimore.

Yet the larger container ships were causing massive congestion at the port, which was putting a crimp on logistics and delaying deliveries. The port has since been working on ways to better handle its growth by implementing new systems and investing in new infrastructure.

Many market participants now agree that the congestion has abated and that delays are shortening, though the issue isn’t fully resolved.

Louis Campion, president of the Maryland Motor Truck Association, said that “it has been improving certainly. It’s still fragile, but generally speaking we feel like things are changing.”

“I am having no problems in Baltimore at this time,” one metals trader said, who had been experiencing issues in the past.

“If I’m bringing in material (from Baltimore), it may take an extra day or so,” a second said. “It’s definitely an issue. I think it’s gotten better, but it’s still a headache. It’s gotten better over the last

couple months.” A third trader said that while

delays used to last more than a week a couple months ago, now they last about five days.

“We don’t get much of anything in (or) out of Baltimore, but I have heard that things tend to slow down once it hits the port there for some reason or another,” a fourth trader said.

A few key steps that the port has taken to manage the larger ships include additional container handling equipment to support the port’s yard, new inbound and outbound lanes and gate development, Hogan said. The port is also working on automating some of the port’s manual processes to speed things up.

In order to improve trucker turn times, Ports America Chesapeake has launched a system on its website that shows current turn times at the Seagirt Marine Terminal, which is the port’s primary container terminal, Hogan said.

Campion said that he recently spoke to one trucking company that operates on the port that “absolutely acknowledged that things were improving. Not to the point where we’re hoping, but they were quick to recognize the improvement.”

The port has “very aggressive infrastructure plans in the future to stay ahead of the curve. (We’re) about staying ahead of capacity to maintain service

levels that we’ve known for,” Hogan said. One such project is the addition of

more inbound and outbound lanes, as well as another gate expansion, according to Hogan. Six new rubber tyred gantry (RTG) cranes have also been purchased and will be delivered in January. There is also talk about lengthening the hours that the port’s gate is open.

Hogan said that Ports American Chesapeake is also working with the International Longshoremen’s Association “to continue to improve our training programs and continue to make sure that we have plenty of labor resources available to meet the demand of the future.”

Although congestion still remains an issue, Campion said that the port “is taking a multi-faceted approach to restore service levels to the level we all want to see. They’re adding gates, adding equipment, looking for additional workers, and more.”

One hurdle for the port, though, is the upcoming holiday season. “We’ve got a major challenge ahead of us with the holiday season. It tends to result in a lot of port activity. We are hopeful we can see that through positively,” Campion said.

The third trader said that he expected the delays “to pick up over the holidays,” despite the recent improvements the port has made.

MILLICENT DENT

Baltimore port working to keep up with growth

The Port of Baltimore has taken steps to improve operations and develop infrastructure to meet the demands of the growing port, according to Bayard Hogans, general manager of Ports America Chesapeake, which operates the port’s primary container terminal.


“When Alcoa decided to close smelters here in the US, it opened the door for foreign manufacturers to come into the marketplace,” Robert Landry, the port’s vice president of commercial, told American Metal Market. “[The importers] bring metals here and put them in warehouses, and then we see them get exported to China. It’s great business to handle it in and out ... to handle it twice.”

Non-ferrous metals imports at the

Port of New Orleans hovered around 400,000 short tons in 2015, 2014 and 2013, according to Landry.

However, non-ferrous imports reached 824,000 tons in 2016, of which more than 600,000 tons was aluminium, he said, noting that figures for 2017 are not yet available but are expected to be in line with last year.

Exports of these metals are increasing too. More than 100,000 tons of zinc were shipped out in 2016, double the level in 2015, according to Landry.

“That trend is also continuing,” he said, noting that in the past six weeks the Port of New Orleans handled two zinc shipments of 15,000 tons and 20,000 tons.

“China is a huge consumer of a lot of these metals, but they have no LME warehouses in China,” Landry said. “The question mark for us is, what is the impact?”

It remains to be seen whether shippers will place their metal in

LME warehouses, trusting that the warehouses will be run as they should be, he added.

“It’s nothing against China,” Landry said. “Just whenever you open warehouses in new markets, (shippers) are always leery about who’s running it and who has control.”

Last year, the LME launched LMEshield in China to provide a shot in the arm to metal-backed financing business in the nation, which dropped significantly after the Qingdao fraud scandal.

However, the Port of New Orleans isn’t worried about metal trade flows dwindling, regardless of warehousing trends in China, according to Landry.

“If the US economy is bumping along the way it is, we’re going to see more of these metals coming in. ... Usually we see the metals when the economy slows down and companies are looking to store them for a while until the price goes back up. But record flows of aluminum are coming in, and the economy seems to be chewing it all up,” he said.

“Based on what I’m hearing from warehouse operators, there is some room for cargo if it’s needed,” Landry added.

Next month, Metal Bulletin will introduce a new arbitrage calculator tool for shipments of aluminium from LME-bonded warehouses in Asia to the US Midwest.

LOGISTICS TRENDSAlthough metal cargoes are typically transported in breakbulk ships, the Port of New Orleans has seen more imports and exports of metals by container, according to Landry.

“The biggest factor is the container market still has more than adequate capacity,” he said. Plus, container carriers typically visit ports more frequently, arriving every week versus

China warehousing trends could impact New Orleans

The prospect of London Metal Exchange-registered warehousing in China is possibly the “biggest looming change” that could impact non-ferrous metals trade flows at the Port of New Orleans, a top port executive said.

“Ten years ago, the idea of metals in containers was something that made you scratch your head. More so in the last five years it’s picked up steam.”

–Robert Landry, Port of New Orleans

continued ❯


The authority’s board earmarked $42.27 million to help fund a $128-million Mason Mega Rail Terminal project to expand the port’s on-dock rail capacity by 100% and to increase service to inland markets. Construction is scheduled to begin in December and be completed by the end of 2020.

The board also approved $13.2 million to expand the existing Gate 8 at the port’s Garden City Terminal, which will boost the terminal’s gate infrastructure to a total of 54 truck lanes.

“The new pre-check lanes will reduce truck congestion and the Mega Rail Terminal will significantly reduce or eliminate rail crossings,” according to Griff Lynch, executive director of the authority. “A strong Southeast US economy, on-terminal expansion and investment by private logistics firms throughout the region have resulted in phenomenal growth for Georgia.”

The total tonnage handled by all of the authority’s terminals rose by 25.2% year on year to about 3.28 million tons in October vs. the same month last year, he said.

Import iron and steel moved via Ocean Terminal in Savannah totaled

41,378 tons in October, up 8% year on year from 38,384 tons, a port spokesman told AMM. The same terminal also moved 3,608 units of cars, trucks and tractors last month, up 13% in the same comparison, he said.GRACE LAVIGNE

Funding to relieve congestion at Savannah

The Georgia Ports Authority in the United States has approved an investment of $55.47 million for rail and gate expansion projects to relieve congestion at the Port of Savannah.

breakbulk ships that might visit every two weeks.

“It may be a timing issue as well as a cost issue,” Landry said. “Ten years ago, the idea of metals in containers was something that made you scratch your head. More so in the last five years it’s picked up steam.”

Still, as much as 90% of metals imports and 80% of metals exports at

the Port of New Orleans are still moved by breakbulk ships, he said. “It’s really going to come down to pricing and timing.”

Container-on-barge services have also gained popularity, and are expected to continue to grow, Landry said. “There are different ways of using rail and barge to augment trucking, while recognizing that trucking will

always be the last mile. ... There’s no doubt that a lot of shippers are concerned about where the trucking industry is going.”

Indeed, the domestic trucking industry could be short 50,000 drivers by the end of 2017, according to an October report by the American Trucking Associations.

GRACE LAVIGNE

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Adjusting to a new, more expensive freight world - AMM Daily/Freight_Nov2017.pdf · 2017-11-20 · Donald Trump and his administration follow through with the previous administration’s