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Aluminum market faces rising truck costs

Keywords: Tags  aluminum, trucking costs, Department of Energy, freight


LONDON — Trucking costs appear poised to rise yet again next year for U.S. aluminum market participants.

In addition to a driver shortage and a potential rise in fuel costs, sources are closely watching the low water levels of the Mississippi River, arguing that this could eventually affect truck availability and costs.

Low water levels in the northern part of the Mississippi have already led to delays of steel raw material shipments (amm.com, Nov. 28) and ferroalloys (amm.com, Dec. 7). Although the majority of aluminum is shipped via truck or rail, sources say that should the barge delays persist, it will ultimately have a trickle-down effect on the aluminum market.

“I have been watching the low river levels. ... It’s impacting large traffic (for other industries). Not a lot of aluminum or alumina is sent (via the river). And if coal or steel scrap can’t go by barge anymore, they can only go via truck or rail,” a trader said. “That will take trucks away from aluminum, which could definitely impact the price and availability of trucks (next year).

“There’s not enough capacity to take everything from the river and put it in trucks ... if that barge traffic is converted to trucks in huge numbers,” he added.

One producer agreed that the Mississippi River issue could pose a problem for the aluminum market, and a consumer said he was watching the situation closely, but both agreed that it has not become a major issue yet.

“It’s a concern, but it’s not a fear yet. It’s a Defcon 3, not 5,” the trader added.

The shortage of drivers and fuel costs that have continued to rise show no signs of abating, sources said.

“There are always (price) increases. Year after year, it’s always a little more difficult. The main thing for the trucking industry is to find drivers,” the producer said. “It’s not the most exciting job. And as a parent, you’re not going to tell your kids to go into trucking.”

“Obviously there’s a driver shortage. And unless you’re addressing it, it’s going to have a major impact on the (aluminum) industry,” a service center source agreed.

According to an OHL International report based on data from the U.S. Bureau of Labor Statistics, the trucking work force actually increased 0.27 percent month over month in October, but the uptick was so minimal that sources are still reporting a scarcity of trucks.

“Freight is getting a little more difficult. Just seems like it’s getting harder every day to find trucks and get the metal moved, which is surprising considering what the unemployment rate is. You’d think people want to work and drive trucks,” a second producer said. “I’m sure people will have to pay more for trucking (in 2013).”

One way to avoid rising trucking costs is to run your own fleet, the service center source said.

“We have our own fleet. It comes along with more headaches than I want, but it guarantees that I am in control of my metal units and it’s cost-competitive,” the service center source said. “But (truck) pricing is going to keep rising until driving positions become attractive to younger generations.”

Sources are also watching fuel prices closely, and they remain mixed about which direction they will go after President Obama’s re-election in November.

“I think if (Mitt) Romney got in, energy costs would come down. He’s very much of the ‘drill, baby, drill’ mindset,” the second producer said. “But I think Obama and the Democrats are smart enough to figure out that if oil goes from $90 to $120 (a barrel), they have a problem. They will do whatever (they can) to not get it to $4 (a gallon).”

Average U.S. fuel costs the week of Dec. 10 were $3.35 a gallon, according to U.S. Department of Energy statistics.

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