With signs of stability emerging in the metal industries, producers are finally looking to get their products on the move. But getting product from point A to point B is not as simple as it may sound.
Orders are beginning to pick up and financial positions are stabilizing, but increased metal demand for manufacturing and fabrication is straining an already-taxed trucking infrastructure. This means suppliers can expect to see a growing incidence of delayed shipments in the immediate future.
Among the worst hit on the upstream side of the supply chain are service centers, which form the intermediate link between producers and consumers. The biggest issue has been availability, sources said, noting that even the largest carriers aren't always well equipped to respond to shipping demands.
"The service from major carriers is a shadow of what it was a couple of years ago," one copper and brass service center source said.
The traffic manager at a Texas-based service center said his company is having a difficult time contracting flatbed trucking, noting that common carrier service has deteriorated over the past 16 to 18 months. In particular, less-than-truckload shipments are difficult to schedule. "If we don't have 40,000 pounds to load, the flatbed guys won't show up," he said.
The wait time isn't unique to those distributing copper and brass. "We're having to wait longer for trucks, especially for less-than-truckload shipments," a traffic coordinator at a Midwest scrap metal processor told AMM. The trucking issue isn't restricted just to flatbed trucks, either. "I would say that we're having difficulty with full vans (especially)—we're seeing spot rates up now," he said.
Some of the country's largest distributors have insulated themselves from broader trucking capacity issues by having their own fleet of trucks, which allows them to more closely align their shipping schedules with actual demand and even lease their trucking capacity to outside users when demand is weak.
"I'll bet it's probably less than half that use their own trucks, but as far as actual numbers, as far as volume is concerned, I'd say those that own do 75 percent in volume," the copper and brass service center source said.
However, the proportion that doesn't own its own carriers is finding it difficult to place shipments from producers and to consumers.
And with carriers running under tighter cost structures, some in the service center industry say they're concerned about the impact of delays and security concerns on their business.
"We've seen an increase in freight claims from common carriers; people are trying to do more with fewer people," the service center operator said.
The problems have been exacerbated by financial difficulties that still face the trucking industry. "A lot of capacity has been taken out of the market. A lot of trucking operations have closed," the Midwest traffic coordinator said.
Indeed, while the rate of trucking company bankruptcies has cooled since its peak in late 2008 and 2009, companies are still going under and capacity is still being reduced.
At the same time, however, shipments from distributors have ticked higher, exacerbating the problem. Steel shipments by U.S. and Canadian service centers totaled more than 3.7 million tons in June, up 30.5 percent from a year earlier, according to Metals Service Center Institute figures, putting the five-month tally at nearly 20.5 million tons, up 18.7 percent from the same period last year. Likewise, shipments of 136,100 tons of aluminum products from U.S. and Canadian service centers in June were up 34.9 percent from a year earlier, and the year-to-date total of 684,400 tons was 16.1 percent higher than in the first five months of last year.
These shipments mirror a broader increase in industrial production and demand for shipping. Production in nearly all major sectors rose in May, with 1-percent growth in the production of consumer goods boosted by sizeable gains in primary and fabricated metal products.
As manufacturing continues to lead a nascent economic recovery, a shipping infrastructure that was deeply damaged during the recession struggles to keep pace. While service centers continue to juggle inventories, sources say that getting the metal to the next stage of the production chain might be a bigger headache.