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OR

Transportation

May 29, 2019, 08:20 AM by Weekly Market Report
As per ISRI’s press release last week, “The nation’s recycling industry is calling on the Surface Transportation Board (STB) to address unreasonable railroad practices related to railcar supply and storage fees.

Members of the Institute of Scrap Recycling Industries (ISRI) testified before an STB hearing that rail is a critical mode for transporting ferrous and nonferrous scrap metal, particularly for distances greater than 200 miles. Since many recycling facilities are served by only one major freight railroad, there are rarely alternative modes of transportation – which means scrap metal and other recycling companies are too often suffering poor rail service and seeing skyrocketing fees.

“It’s time for the STB to evaluate the commercial fairness of railroad demurrage tariffs and practices, which in many cases are the result of delays across the broader rail network,” said ReMA President Robin Wiener.

Since major Class 1 freight railroads implemented “precision rail scheduling” at the beginning of 2019, scrap metal recycling companies have seen astronomical increases in shipping costs. Unreasonable rail practices under this new system also include: (1) reductions in available time for rail car loading, unloading and storage; (2) service inconsistencies which precipitate demurrage and storage charges and impact facility operations (e.g. bunched cars, or missed switches); (3) the introduction of “not prepared for service” charges and, (4) congestion charges.

A survey of ReMA members found additional examples of unfair rail practices:

  • One member reported an increase in demurrage/storage charges of 669% in the first two months of 2019 compared to the 2018 average;
  • Another member paid 1000% more in demurrage/storage charges per month in 2019 compared to 2017; and
  • The bunching of rail cars resulting in increased demurrage/storage charges. To mitigate the expense, scrap facilities must employ a second crew or require employees to work overtime driving up operating costs despite having no control over bunched deliveries.
  • One ReMA member explained their facility can only accommodate an 18-car switch but the railroad will pool cars at various stations along the route and deliver 30-40 cars regardless of how they were ordered.

ISRI is asking the STB to apply the following principles in its evaluation of reasonableness of railroad demurrage practices:

  • Demurrage practices must serve their underlying purpose of incentivizing an efficient rail network and must not be designed to generate additional revenue for the railroads;
  • Railroad customers should not be penalized for railroad service failures; and
  • Railroad customers should be given sufficient notice to allow for adjustment of their operations.

ISRI also supports the STB’s collection and analysis of rail data on demurrage and accessorial charges in order to help ensure these fees properly and fairly incentivize rail network efficiencies, rather than simply drive profits. ISRI’s entire testimony can be viewed on the STB website. Testimonies of two ReMA members testifying in person are also available: Ben Abrams, president and CEO of Consolidated Scrap Resources, Inc. and Bobby Triesch, vice president and regional general manager of SA Recycling.

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