May/June 1999
Shipping scrap by water–via river and ocean–is essential for domestic and international trade, giving scrap processors and consumers a substitute for and complement to other modes of transportation.
By Eileen Zagone
Eileen Zagone is an associate editor of Scrap.
If you want to ship scrap by water within or from the United States, you could say you’re afloat in possibilities.
According to the U.S. Department of Transportation, the country has 26,000 miles of navigable waterways that can be accessed from 1,811 inland terminals and 362 terminals on the Great Lakes. And that doesn’t even count the 1,578 U.S. ocean terminals for domestic and international shipments.
For centuries, U.S. waterways have provided invaluable routes for transporting goods. And in recent years, this well-established system has risen like the tide to meet the demands of today’s shippers, including scrap processors and consumers.
While the railroad and trucking sectors have been notable lately primarily for their turbulence, water shipping of scrap materials—especially barge shipping—has undergone a quiet revolution. One driver behind this revolution has been the burgeoning minimill industry. Many of these scrap-fed mills have located on or within close proximity of inland waterways so they have the option to receive scrap by water, rail, or truck, offering flexibility to both shipper and receiver.
Among its advantages, water shipping is generally one of the most economical transportation modes—and in today’s difficult scrap market, every way to cut costs is worth consideration. Plus, while shipping by water is slower than shipping by truck or rail, barges can carry much more cargo than those modes and reach an impressive number of destinations throughout the country.
Recycling on the River
You don’t need to look too far along the shores of the Mississippi River to see how important river commerce has been to the cities and businesses there and how important the rivers have been to the development of the U.S. economy.
Times have changed, of course, along with the cargo carried on the rivers. The waterways’ low cost and efficient movement of raw materials enticed minimills to locate close to the river shipping system, whose barges can carry scrap and scrap complements in and tote finished steel products out.
Ferrous scrap accounts for the lion’s share of recyclables shipped on the river system thanks to the plethora of minimills accessible by barge. Some stainless scrap also travels the waterways, though in negligible amounts compared with ferrous shipments. Imported scrap, scrap shipped from East Coast ports, and scrap complements from abroad—mostly South America—typically enter the river system through New Orleans, headed for destinations throughout the inland river system.
While coal and grain remain the primary commodities carried by river barge, serving the minimill steel market has become a rapidly growing sector for river shippers. For example, Ohio River Co. (Cincinnati)—reportedly the second-largest barge line—notes that scrap accounts for approximately 5 percent of its total shipments, says Peter Hubbard, senior vice president of sales and marketing. While that figure may sound low, Hubbard says ferrous scrap has been the barge line’s fastest- growing market for the past six years, averaging 15-percent growth annually.
That growth hasn’t happened by chance. Rather, the company has made a concerted effort to grow that sector of its business in response to the mushrooming minimill development, Hubbard notes. And the firm expects this niche to continue to grow, albeit at the slower rate of 5 percent annually for the next five years, which still represents significant expansion of the market. “We consider scrap an important item to ship, and servicing steel interests among our most important objectives,” he says.
Barging Benefits
There are definite pros and cons to shipping by barge versus other transportation modes.
On the downside, barge shipping is slower than truck or rail. And while it’s a useful transportation mode for bulk commodities such as ferrous scrap, it’s rarely used for higher-priced and weather-sensitive materials such as nonferrous and paper scrap. (Covered barges can be used to protect higher-value products, however.)
On the plus side, barge shipping’s big advantage lies in cost savings. Though rates vary and are negotiated by the ton or bargeload, shipping by river barge is generally a third the cost of rail and a tenth the cost of truck. “If you can use it, it’s very cost-effective,” says Hubbard.
Barges can also carry much larger quantities of material than trucks or railcars. Ferrous scrap and steel products are typically shipped in “jumbos,” or jumbo hopper barges, which are open-top vessels measuring 195 feet long by 35 feet wide. These vessels can carry about 1,500 net tons or more compared with about 25 tons for trucks and 100 tons for railcars.
And while barges often take longer to get cargo to their destination, they are generally more accurate and reliable in their pickup and delivery services. Barge companies know how long it takes to ship material particular distances, and these estimates are worked into the equation so that both the shipper and receiver know the material’s schedule. “The service is much more reliable than what we get from the railroad,” says a Midwestern scrap processor.
Part of the reason for such high service standards is that the competition is fierce on the rivers: While many scrap processors may have limited choices when shipping material by rail or truck—sometimes even being served by just one railroad—there are numerous choices in the barge shipping industry. Essentially, any barge company can operate on the river and vie for business. “Unlike the rail industry, we don’t own the tracks,” Hubbard observes. Service, therefore, is the way barge companies distinguish themselves and develop customer loyalty.
Shipping scrap by barge isn’t just for big processors that can regularly fill a 1,500-ton barge, of course. It’s a common practice for brokers to assemble a scrap package from a number of different processors to fill a barge headed for a minimill. In this case, the recycler may not negotiate directly with the carrier, but rather the broker negotiates and puts together the right mix of scrap and shipping cost to please both recycler and consumer, Hubbard explains.
Also notable, the barge system doesn’t operate isolated from other transportation modes. Rather, it’s often an integral piece in the puzzle of intermodal shipments in which barges, trucks, railcars, oceangoing vessels, and more work together to get scrap and other products to their destination. In this way, barge shipping isn’t so much a substitute for other modes of transportation as a complement to them. This intermodal versatility is especially helpful and important to scrap shippers and consumers that aren’t located close to the inland waterway system.
Whether or not your company can ship by barge—directly or intermodally—depends largely on your location and the location of your consumers. This will determine not only the cost and timing, but if it’s even possible to ship your scrap by barge. It’s especially worth looking into, however, if you’re shipping long distances, which are often most efficiently covered by barge at rates that are difficult for truck and rail to match.
Scrap on the High Seas
If you’re shipping scrap within the United States, you can choose truck, rail, barge, or a combination of those three. If you’re shipping scrap overseas, you have no such choices. Your material must travel via oceangoing vessel.
International scrap shipments generally tip the scales between 15,000 and 30,000 mt, though some international shippers operate small barges that carry about 385 mt and there’s the occasional huge shipment in excess of 60,000 mt. In the larger vessels, ferrous scrap is usually loaded directly into the hold for bulk shipment, while nonferrous and paper scrap is shipped in containers. When shipping ferrous, it’s common for different grades to be shipped together. For example, shredded, No. 1 bundles, and plate and structural could be layered in the ship’s hold and transported together.
In the ferrous scrap trade, shredded is considered the jewel to ship because it packs more compactly and doesn’t tend to scratch or otherwise damage the ship the way other ferrous grades do during loading, transporting, and unloading. Also, with larger unshredded or uncut ferrous scrap, the vessel is carrying a lot of air instead of product and the large pieces have more potential to damage the vessel, notes one shipping consultant. Plus, shredded scrap is generally cleaner and thus more attractive to carry than other types of ferrous, such as motor blocks or turnings.
Which brings up one of the biggest challenges scrap exporters face in shipping: the poor perception of the industry among shipping companies.
“The first thing that scrap processors should understand is that scrap is rough on a ship, and for that reason it doesn’t have the best reputation with ship owners,” says Mark Fenzel, a partner with Maritime Brokers and Consultants Inc. (MBC) (Northbrook, Ill.). Illustrating his point, Fenzel notes that MBC counts among its clients some large international scrap recycling companies, and the company still has to constantly educate ship owners about scrap to persuade them to carry it.
On the plus side, ship owners’ attitudes toward scrap are improving, especially with regard to shredded ferrous scrap. And more owners now understand the issues involved with carrying scrap. But some remain reluctant to accept ferrous scrap because they don’t want to be expected to ship other grades that may be dirty or more prone to cause damage.
One way to deal with these problems is to contract with older ships—those more than 20 years old—to carry ferrous scrap, Fenzel suggests. There are several reasons for doing this. For starters, scrap isn’t as sensitive to some of the problems associated with older ships, including rust, so generally a lower rate can be negotiated. Plus, since the ships are older and have experienced more stress, the owners typically aren’t as worried about the cosmetic damage that can result from loading scrap. And the scrap exporter faces no additional risk by using an older ship because all ocean-going vessels must be insured and “in class,” which means they’re seaworthy.
There are other reasons why it can be challenging to ship scrap internationally. It is important to understand that the international freight market is driven by big-volume cargoes of iron ore, coal, grain, and minerals, says Fenzel. Scrap simply isn’t shipped in the same volumes as these commodities, and therefore doesn’t tend to drive the market except in specific market sectors on rare occasions.
In short, scrap has to compete with everything else shipped by oceangoing vessel. To understand the situation, try to think from the ship owner’s point of view, recommends Fenzel. To ships, time is crucial. How long it takes to load and unload a ship affects the shipping rate. Basically, the longer it takes, the higher the rate. Of course, the time it takes to unload a vessel varies widely and wildly depending on where the cargo is going, the equipment used to unload it, and the efficiency of the unloading personnel, Fenzel notes. The range, he says, can be anywhere from 1,500 to 10,000 tons a day.
When considering shipping scrap by oceangoing vessel, you should also be forewarned that there’s a complex and independent body of international maritime law that has developed over centuries. The shipping industry is also awash in practices and customs that simply aren’t common knowledge outside the business. Navigating these unfamiliar waters can be difficult and fraught with confusion for all but maritime shipping specialists.
“This is totally different than river barging,” Fenzel emphasizes. “My best advice is to consult an expert in the field.” Attempting to ship scrap without the guidance of a shipping professional is tantamount to trying to represent yourself in court and sell your house by yourself at the same time, he suggests. It’s not that either would be impossible, it’s just not advisable, he says. Even if a scrap processor knows one or two ship owners, they don’t have access to the worldwide market of ship owners, which can put them at a great disadvantage in finding the best rates and options.
Navigating Into the Future
In considering the long-term forecast for shipping scrap by water, the signs are optimistic.
By locating near inland ports, the minimill steelmaking industry has established a long-term commitment to use the river system for receiving scrap and shipping finished steel. And as the scrap export market recovers from its current setback and grows in the future, more scrap will be shipped by barge to international ports such as New Orleans. Service will continue to be what distinguishes successful barge lines in this business.
When it comes to ocean shipping, much hinges on the economic recovery of scrap-consuming regions such as Asia and South America. When that happens, more scrap shipments will have to vie for ship space and containers with other internationally traded commodities, while scrap exporters and their shipping representatives must continue to improve the scrap industry’s reputation among ship owners.
Certainly there will continue to be challenges when shipping scrap by water, but that applies equally—perhaps more so—to the trucking and rail industries given such issues as driver and gondola shortages, mergers, service concerns, and more. Whatever the challenges, scrap will—one way or another—continue floating.•
Shipping scrap by water–via river and ocean–is essential for domestic and international trade, giving scrap processors and consumers a substitute for and complement to other modes of transportation.