The ferrous-scrap-in-container segment of the
scrap metals export market has run into some rough seas in
"It's getting harder and harder to get a
container aboard a ship," one West Coast scrap executive said.
Grain, fertilizer and other products that bring better revenue
and cause less damage to the sidewalls of containers are
getting priority spots on container ships these days.
Both the big export yards and the smaller
yards are having the same problem, and many of the smaller
shippers are particularly anxious to sell because they fear
they might be left sitting on expensive scrap if prices start
The West Coast executive said his yard is
booked through June on bulk cargoes of ferrous scrap to
steelmakers in Asia, largely because worldwide demand for
ferrous scrap is strong and freight rate increases for
containers have added a little flexibility to the market. It is
still more expensive on a per-tonne basis to use, say, a
30,000- to 35,000-tonne handy-sized vessel, which has a freight
rate to an Asian port of $70 to $80 a tonne while container
rates are about $50 a tonne. The equalization is on the
destination end, where containers often have to be off-loaded
onto trucks and railroad cars to be delivered to a mill that is
far away from a port. That can add as much as $20 a tonne to
But one West Coast container scrap shipper
said he and other smaller yards aren't without a few advantages
over their larger rivals. One is that they can sell less scrap
to some of the new steel mills in emerging economies like
Vietnam and Bangladesh, especially now that worldwide ferrous
scrap prices have topped $700 a tonne delivered. A small steel
mill might need as much as $25 million to $30 million to buy a
handy-sized cargo of shredded scrap, whereas 20 to 25 tonnes of
the same metal in a container might cost less than $20,000.
The Westbound Transpacific Stabilization
Agreement (WTSA) shipping consortium, made up of 10 major
container shipping lines that ply sea routes between the United
States and Asia, sets the rates for both 40-foot equivalent
units (FEUs) and their small brothers, 20-foot equivalent unit
The recent rate increases for containers and
drayage-the cost to haul a loaded container to the docks-has
helped bring about a freight cost parity between the big export
yards and their smaller rivals, some scrap industry members
said. The major yards would prefer to load and ship by bulk
cargo, but steel mills in emerging economies might lack the
port facilities as well as the credit or financing to handle a
bulk cargo of No. 1 heavy melt or shredded scrap.
Most of the major steel mills in Asia buy
bulk shipments of raw materials like scrap, iron ore and coal.
They are located close to deep water and have their own docks.
Nevertheless, smaller U.S. scrapyards and the large export
yards, on both the East and West Coasts have been using
Ferrous scrap markets in China, South Korea
and several other Pacific Rim nations were once a near-monopoly
for the large exporters on the West Coast, but several years
ago the smaller processors invaded that realm. They realized
they could load 20 tons of, say, No.1 heavy melting steel scrap
into an FEU and truck it to the dock. It was shipped overseas
just as easily-and at a much lower cost and more profitably
than the big bulk cargo shipments.
Initially, large export yards looked on the
ferrous scrap-in-container shippers as a nuisance that would
disappear once bulk cargo rates began to drop. They didn't.
Instead, they actually began to increase faster than container
rates, a development that helped propel some of the large
shippers to rethink their disdain for containers and buy a few
so-called tilters for loading scrap into containers.