Railcar woes beset ferrous sector

A troubling aspect of the ferrous sector in 2017, according to one scrap processor, has not involved supply or demand but rather the transportation link in between.

“The single biggest obstacle we all face right now is a shortage of railcars,” the recycler in the Great Lakes region says of his company and other scrap processors in that area. “It has been absolutely brutal.” 

The problem is not a new one, he says, and it has been getting worse throughout 2017. “Railcars have been an issue for the scrap industry most of the year across all regions, [and] the last 30-to-60 days we have been hit particularly hard,” he commented in early July.

“People I’ve talked to all over the United States are encountering the same shortage, but the Midwest seems to have been affected the most,” the recycler says of the overall situation.

A recycler in the Southeast says the gondola car shortage has not been as acute in his region, although he says the primary Class I railroad serving his company had pulled back on its service schedule earlier in 2017 and had to be convinced that the lighter schedule was insufficient.

Scrap hauling seldom represents one of the three of four largest sectors for freight rail companies and can fall behind intermodal cargo, agricultural commodities, coal and oil tank cars (depending on the region) in terms of attention and service.

In a summary of its 2017 second quarter trends presented to investors, Jacksonville, Florida-based CSX Corp. says its international intermodal shipments grew by 6 percent, its agricultural and coal shipments by 2 percent, but shipments in its industrial sector fell by 3 percent. On its website, CSX lists ferrous scrap—along with sheet steel—as “two primary markets—[that] account for 55 percent of the steel business CSX transports annually.”

Virginia-based Norfolk Southern Corp. hosts a Scrap Metal Shippers Directory on its website and says that it serves more than 150 scrap metal locations and 37 steel mills, both integrated and electric arc furnace mini-mills.