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What's up on the waterfront?

Aug 03, 2017 | 08:00 PM | Gregory DL Morris

Given the deep downturn in coal shipments and the impact of the plunge on the nation’s barge operators, you’d think the tug-and-tow sector would be courting business from the nation’s scrap and metals industry. Think again.

Scrap operators and steel mills across the United States are taking steps to lift throughput and slice unit costs of transportation.
In many cases, that means expanding barge transport operations wherever possible. Several scrap operators are expanding on or onto the waterfront. Others are already there. Nucor is known to be a major destination of scrap delivered by barge, and David J. Joseph, the steelmaker’s wholly owned scrap subsidiary, is reported to be an important barge shipper as well.

Meanwhile, the barge business is in the grips of a serious down cycle, one due primarily to the decline in coal shipments. Numerous reports in the regional and financial press tell of barge operators retiring their less-efficient towboats, and idling barges.

Although such market dynamics would seem to suggest that barge operators would be courting metals shippers aggressively, that does not appear to be happening.

“It would make sense for the barges to come after more steel, but I have not seen it myself and I have not heard of it,” one industry insider stated flatly. “That may be because it is very regional, even local, but we have not heard from the barges.”

The disconnect seems to be corroborated by the operators themselves. American Commercial and Ingram Marine, two of the largest inland barge companies in the U.S., declined repeated requests to provide any insight about their metals business or industry trends in general. Similarly, an industrious inquiry by the trade association American Waterway Operators did not generate a single operator willing to talk about moving metals on the water.

Nevertheless, the metals supply chain continues to move closer to the water. Most recently, in late June, B.L. Duke brought into service a barge loading facility at its recycling center in Joliet, Ill. with the objective, the company stated, of reducing shipping costs and expanding its sales territory to new geographies and potential customers. That now includes steelmaking regions in Mississippi, the Ohio Valley, the Gulf Coast and export markets (, June 29).  

“Barge access has reduced transportation cost and created operational efficiencies, (and) facilitated new consumers in stronger markets,” Lou Plucinski, president, of Forest View, Ill.-based B.L. Duke, said. “Logistics are (our) largest variable expense. Minimizing cost was paramount, as it gives us a competitive advantage in the Chicago industrial market.” Plucinski noted that it costs $25 per net ton to barge material to Mobile, Ala., compared with trucking costs in excess of $100 per ton.

The next such move is just around the corner. Sometime in September, Morris Iron & Steel will bring into service a new yard occupying more than 70 acres on the Delaware River in North Philadelphia. Ronald Greller, chief executive officer, told AMM that the company originally acquired a 58-acre property on the Delaware River in May, and since then has added another smaller contiguous parcel. The new land is adjacent to the company’s main yard. Non-ferrous operations are handled by its affiliate company, Northeast Metal Traders.

Staying afloat

Similar to B. L. Duke, Morris sought to expand into waterborne shipments to increase its volume and reach new markets. The company already has truck and rail capability. Greller confirmed that his company is investing in cranes to load barges, and improving the land to allow scrap to be stored on the property. There are no plans for scrap processing on the new acres. Morris is a fourth-generation family-owned business.

“I think this was the last private property in the city of Philadelphia” Greller quipped. “We have not loaded a barge in years, but to compete we need both rail and barge. That will help reduce our transportation costs. Our inbound material comes 99 percent by truck, and our outbound has been about 50:50 truck and rail. We are selling primarily to domestic mills and to the export market,” he said

The bulkhead is in good condition, so once the land is cleared and concrete pads poured, the arrival of the cane Morris has ordered will determine when barge operations begin. “We expect delivery in September,” Greller said. “It will be a normal rubber-tire machine – we will have concrete so we don’t need a crawler – but we needed one with a long reach.”

Morris is already in discussions with new customers and once waterfront operations commence, the firm may branch out into finished goods, including steel and stone.

The St. Louis Regional Freightway is taking a different approach to moving scrap on barges. The public-private partnership is developing a plan to bring scrap into the Port of St. Louis and load it into intermodal shipping containers, then stack the box containers on barges and send them down the Mississippi River for processing or export in New Orleans.

“We have tried to identify commodities that are not time-sensitive and that could benefit from consolidation,” Mary Lamie, executive director of
the Regional Freightway, explained. “We have several scrap companies in the area, and putting together the business plan we determined that we could support this service.”

One key factor in determining the business case for box-container shipments of scrap is, of course, the availability of the containers. Depending on the types of shipments in and out of any locality, there may be a surplus or shortage of containers.

Houston, for example, is a major export hub, so containers are scarce. Just a few hundred miles inland, however, Dallas is a consumer-driven region, so empty boxes pile up. Lamie said that St. Louis is fairly balanced, while New Orleans, another major export hub, is container-short.

AMM has reported in past years about several initiatives for inland scrap sellers to enter the global market. With containerized freight and on-line tracking and billing, virtually any mom-and-pop auto salvage yard can sell to Turkish mini-mills. Real world, however, global markets are complex, and netbacks were variable. Container lessors also complained that scrap loads damaged the boxes; some insisted on prophylactic polymer linings, adding expense and complication.

Lamie says that the Regional Freightway is agnostic as to the ultimate destination for the containerized scrap, whether it winds up in an electric furnace in the southeastern U.S. or one in Asia. “It will be up to the freight forwarders to decide.”

She added that the project may also involve shipping some finished metal forms, steel, aluminum, or copper. If all goes according to plan, the first shipments will move downriver next year.

Untapped opportunities

The barge business has been relatively more depressed by falling coal shipments than has the rail sector, Dennis Wilmot, president and chief executive officer of Iron Horse Logistics Group, noted. “Barges have seen spare capacity increase dramatically,” he added. “That is on top of the backhaul issue that was always a challenge. There is usually more barge traffic going upriver on the Mississippi than down.”

While Wilmot was not familiar with the St. Louis Regional Freightway containerized-scrap-on barges plan, he said that “it makes sense to consolidate commodities and increase southbound business on the river, whether that is scrap or finished or semi-finished forms.”

Wilmot also noted that the only recent greenfield mill project, the Big River Steel complex completed last year at Osceola, Ark., was built on the river for a reason. “They are able to move raw materials in and finished goods out, but other than that move taken by the mill itself, the barge industry has not taken opportunities to build business in the metals sector, especially in times of spare capacity.”

One advantage barges have over rail, Wilmot noted, was cleanliness. “Barges are cleaned after every unloading. Railcars accumulate more and more dirt and debris. That is why you can’t really reload gondola cars that brought in scrap with outbound finished steel. Cleaning is just part of the barge business, but not part of the rail business.”

One significant challenge in building new barge business in steel is that shippers and consignees need to be on the waterfront or at least located within a few miles of a port. Wilmot suggests that the cost and volume efficiencies of barge dissipate quickly beyond five or ten miles, depending on the road and rail links available to and from a port. The volume, however, is impressive: given wide variations in scrap density by grade, one barge load is roughly equivalent to 15 to 20 rail cars or 70 to 80 truckloads.

There are also sectional differences. Scrap operators on the coasts tend to receive inbound loads by truck or rail, and ship out by deep-sea vessel. The large inland barge operators are mostly confined to the river system – vast though it is – and the Intracoastal Waterway along the Gulf Coast. Technically, the Waterway extends around Florida and up the East Coast, but inland operators tend to stay on the rivers and Gulf. East and West Coast barge operators tend to be more localized.

One further factor is fuel. “Rail is most efficient,” Wilmot said, “although barge may dispute that. But both have an advantage over truck when fuel prices are high. As fuel prices have come down in the last couple of years, trucking can and has recaptured some steel shipment.

“Trucks tend to be more aggressive on rates, and also offer greater flexibility,” Wilmot added. “We will see, however, when mandated electronic logs come into effect for trucks. That may take away some flexibility.”