Rolling along: the scrap industry is humming along, but finding railcars and trucks to transport material can sometimes prove difficult.

Demand for scrap materials remains strong. For transportation providers, the demand for vehicles to move this material from PointA to Point B also has grown. However, opinions vary widely on the overall health of the trucking and rail industries.

In discussions with a number of trucking and logistics firms, it becomes apparent that higher fuel costs and labor shortages are affecting the industry. However, there is a sizeable difference of opinion concerning the health of the trucking industry, and its willingness to deal with the recycling industry.

Tom Shapiro, chief operating officer for SDS Recycling and Logistics Services, a Youngstown, Ohio-based trucking and logistics firm that specializes in transporting electronic scrap, says he is finding business to be very, strong. The company has excelled at working with some of the large electronics companies, like Dell, that organize one-day collection events.

While SDS coordinates such collection programs and ensures that the material can be shipped to a reputable end source, Shapiro says that one of the biggest issues when servicing such events is the Fact that truck reliability is vital. The trucks have to show up on time for the one-day events SDS works on, Shapiro says. If that fails to happen, it is tantamount to disaster. "That can't happen," he says adamantly. Trucks breaking down or having insufficient equipment on hand can do a significant amount of damage to a company's credibility.

THE GASOLINE BLUES. Gas prices have created quite a case of sticker shock for the transportation industry. Escalating fuel prices have forced trucking companies, which typically monitor their fuel costs closely, to implement fuel surcharges.

While this hasn't been an easy choice for trucking companies to make, for the most part, they aren't seeing much resistance to these surcharges. Everyone is aware of the higher fuel prices, so a fuel surcharge is expected, one trucking executive says.

However, the level of the surcharge has become an area of concern for some trucking companies.

Peter Hodge, president of Hodge Transport, a Canadian-based trucking company that performs cross-border business, says that some trucking companies are using the higher fuel prices to impose surcharges much higher than warranted. While not naming names, Hodge feels that, while surcharges are essential to stay in business, it shouldn't be a way for trucking firms to push prices even higher.

Although the fuel issue continues to be a major factor in the market right now, most trucking companies say that business in the short term is fairly healthy. Demand for their services remains strong.

Carmen Mormeno with Jack Gray Transport, an Indiana-based trucking firm, also sees higher prices for fuel being passed along to customers. However, Mormeno says he is less upbeat about the business environment.

Reflecting on changing demand, Mormeno sees his company, which is national in scope, significantly reducing the amount of business it is doing in the scrap metal industry as an overall percentage of the business it is seeking.

Additionally, some trucking firms are questioning the attitudes of some scrap dealers. Everyone knows that prices are higher these days. However, in order to save a few cents, a scrap dealer may decide to use a different trucking company, effectively cutting off a major portion of a trucking company's business.

Bruce O'Neil, president of Jupiter Transport, a Florida-based trucking firm, notes that while fuel costs are definitely higher, scrap dealers have recognized that fuel prices have gone up, and everyone is adjusting their prices accordingly.

The nature of the business has resulted in prices continually being pressured downward, making it more and more difficult to stay competitive.

However, a greater concern for O'Neil, as well as most of the truck companies contacted, is the driver shortage, which is not a new phenomenon.

Furthermore, the lack of available drivers, one of the over-arching concerns for the trucking industry, is continuing. While the issue has been a problem for years, many trucking executives now say that the issue is getting even worse rather than improving.

John Franssen with trucking logistics firm William Edwards Inc./Team Logistics, Richmond, Va., says that while getting and maintaining an adequate number of drivers is still a problem, he senses that it is starting to stabilize.

Adding to the overall trend, the rail industry has had some difficult issues throughout the past several months-from shortages of gondola cars to sharply higher shipping rates--which are allowing many of the trucking companies to extend their business into areas that typically were heavily focused on rail movement.

For starters, trucks in the Florida area are ill scarce supply in light of demand from some of the produce growers in the area, adding additional stress to the overall shortage of drivers.

One large scrap recycler in the Mid-west who uses truck, rail and barge to move material says that from late September through December is a difficult time. "We get priced out of the market then," he says. During this time many trucking companies gear their shipments to handle more holiday orders for which they are more likely getting higher rates.

While the challenge of maintaining an effective logistics arrangement becomes more difficult as supply of equipment remains tight, Hodge also sees a difficult situation with his trucking business, which is involved in trans-border shipments of material between the United States and Canada.

While agreeing that the driver shortage is a major problem, Hodge also says border delays when moving material from Canada to the United States affect many drivers. While security issues remain at the forefront of border crossings, Hodge points out that customs agents can impose significant fines for what he calls potential "paperwork screw ups."

These fines could be imposed immediately on the driver, making his trucking company even more challenged to land owner/operators willing to shuttle cargo between the two nations.

Another challenge for the Toronto-based Hodge Transport is the difference between the U.S. and Canadian dollar, which is putting the Canadian company at a major disadvantage.

Just-in-time (JIT) shipping is still a factor in today's transportation market, offering the trucking industry a way to solidify its position as the most service-focused mode of transportation.

While JIT delivery is still a service that many companies are seeking, the changing dynamics of the transportation industry are making it more difficult to develop a consistent JIT approach, particularly in respect to rail service.

RAIL CHALLENGES. The rail industry seems to have always had a peculiar relationship with the scrap industry. While overall demand for gondola cars to ship scrap metals has increased througout the past several months, scrap dealers continue to complain about acute shortages of gondola cars available.

While there are some shortages of rail cars right now, the situation could be come even more challenging later this year in some regions of the country.

Greg Dixon with Baker Iron & Metal, Lexington, Ky., says that the biggest issue in regards to the rail industry is the continuing problem with gondola shortages. He says that some rail lines are looking to add more gondolas to their fleets, while other rail companies are repairing some damaged equipment and hope to bring these into the market as a way to help offset some of these shortages.

While purchasing gondola cars is one step to alleviate the situation, only a handful of companies can truly take advantage of the situation by purchasing and leasing their own gondola cars.

Dixon estimates that perhaps five or six companies can go out into the market to buy their own gondola cars.

Along with the lack of gondolas available, Dixon also says that many rail lines have developed a reputation of providing less-than-adequate service, including getting cars in and out of yards and mills in a timely fashion.

Far from refuting the problem, some rail companies have acknowledged the difficulties they are having with supplying the proper equipment to the scrap industry.

Jim VanCleave, marketing director for CSX Transportation's Metals Division, based in Jacksonville, Fla., estimates that the company presently operates a fleet of around 8,000 52-foot gondola cars for the scrap metal industry. Even with this amount of cars, he guesses that the company is around 1,000 gondola cars short every week.

While the natural inclination would be to add more gondola cars to the existing fleet, VanCleave says that the business sector servicing the scrap metal industry has to go out and compete with other, more high-value sectors for the limited capital for new equipment. This makes it a more difficult proposition, as shipping scrap metal is a much less lucrative business than many other services that CSX provides. Thus, it is less likely that the Metals Division will be able to add a significant number of gondola cars that are dedicated to the scrap metal industry.

Along with the lack of gondola cars, VanCleave also echoes the sentiment of many scrap dealers when he says CSX has to work on improving its service. Along with the lack of gondola cars, getting the cars in use as quickly as possible has been a major objective for the company.

To improve its speed, the company is hoping to get more engines, as well as more employees to handle the market.

While there isn't any one particular area where the bottleneck occurs, Dixon sees some issues when the end consumer receives a significant number of cars at one time, keeping the gondola car out of circulation for a longer period of time.

As for the trucking industry, while higher fuel charges will likely remain a significant issue, the overall concern of driver shortages is one that is less likely to be resolved in the near term.

Whether trucking companies can hire more drivers is of great concern for many trucking companies, as well as the customers they serve.

CALLING ALL (GONDOLA) CARS

The state of the railroad industry was among the topics addressed at the Institute of Scrap Recycling Industries Inc. Operations Committee meeting late last year. The sense from representative at the meeting was that rail rates will continue to climb and that the availability of cars continues to be a sore spot for the industry.

As for suggestions on how to improve rail service, a panel of industry representatives assembled by ISRI suggested that recylers work with customers that already operate gondolas; lease their own gondolas; pay a premium for the service; and ensure that the gondola cars are kept in good condition.

In his presentation before the ISRI committee, John Flicker with the National Industrial Transportation League, Arlington, Va., said the swing toward tighter supply is a combination of a much stronger global economy, which was put greater demands on rail cars, including gondola cars.

The author is senior and Internet editor of Recycling Today and can be contacted at [e-mail].