North American transportation and logistics

Ocean Freight: Rising rates caught traders off guard. Even though the bunker is going down and so are most import steel prices, steel shipping rates are still going up, defying steel market players' expectations that ocean freight rates would begin to cool off in the fourth quarter. Fast rising rates are causing many traders to lose their slim margins. Going forward steel bookings are light, but for now we are at the top of the shipping activity that should last for at least another month. However, there is now an end in sight, as most experts predict that the steel shipping market will slow down within the next two to three months, when new vessels are put online and steel shipments start to thin out. Since our last report a month ago, all rates registered significant gains. Going rates for Handymax ships carrying large tonnages of steel (minimum 15,000 tons of hot rolled coils, rebar, wire rod, etc.) are as follows: Baltic to US East Coast: $52 /mt to $57 /mt Baltic to US Gulf Coast: $47 /mt to $52 /mt Black Sea and Mediterranean Sea to US East Coast: $52 /mt to $57 /mt Black Sea and Mediterranean Sea to US Gulf Coast: $47 /mt to $52 /mt East Asia to US Gulf Coast: $70 /mt to $75 /mt East Asia to US West Coast: $65 /mt to $70 /mt Port issues: Record imports are hitting ports The Port of Houston is still very congested, and it doesn't look like this situation will change any time in the near future. There are many ships still awaiting berthing, forcing many buyers to find alternative berths at greater costs. With the immense pressure for alternative berths, Houston is not a good scenario for buyers right now. East Coast ports, on the other hand, are not unduly busy. Baltimore and Philadelphia are the busiest of the East Coast ports, but there is not a lot of waiting time at either of these destinations. The Port of New Orleans is still very busy, but in general, the situation has much improved in the past several months. The stevedores are very busy, but there is not a lot of backlog or waiting ships. Barge market The aforementioned lock closure in the Mississippi has caused some barges to be delayed for six-to-eight weeks. This situation is causing anxiety to many barge carriers who are struggling to ship their barges before the winter closure of the upper Mississippi. Barge availability is still relatively good, with supply in sync with demand. Oil prices have gone down, but don't expect to see a lower fuel surcharge just yet. Fourth quarter fuel surcharges will remain at the same 30 to 45 percent range as third quarter, as the major carriers calculate the fuel surcharge on a quarterly basis. Even though in September, fuel dropped significantly, it wasn't enough to impact the overall third quarter averages. Rail/Truck The rail and truck industries continue to be extremely busy with the amount of steel being transported in the US. However some of the tightness in the rail market should be eased in Q1, as more rail cars are being added to fleets to meet the high demand. The fuel surcharge for railcars, which is usually calculated on a monthly basis, is approximately 18 percent. However, the major carriers will reduce the surcharge to 15.5 percent in October to reflect the decreasing fuel rates. The fuel surcharge for trucks, typically calculated on a more frequent basis, is 16 percent, down 4.5 percent from last month to reflect the approximately $0.40 decrease in diesel fuel prices since last month.