North American transportation and logistics

Ocean freight rates holding firm Steel shippers and traders report that the steel shipping market, particularly the Asian, Baltic, and Atlantic shipping markets, are still relatively strong and are not coming down in a big way as some expected would happen in Q1. Shipping rates are expected to continue to trend sideways in the short term and have maintained their strength since last month. Rates for: (Minimum 15k tons of rebar, wire rod, hot rolled - big tonnage) (Handymax) Baltic to US East Coast: $47 /mt to $52 /mt Baltic to US Gulf Coast: $42 /mt to $47 /mt Black Sea and Mediterranean Sea to US East Coast: $45 /mt to $50 /mt Black Sea and Mediterranean Sea to US Gulf Coast: $42 /mt to $47 /mt East Asia to US Gulf Coast: $70 /mt to $75 /mt East Asia to US West Coast: $62 /mt to $67 /mt Ports taking a breather from imports There is slower traffic at the main steel ports like Houston and New Orleans, as the ports are now taking a breather in January and February before import shipments start to pick up again in March. However, there is still some availability issues for warehouse space at major steel ports, as excess inventories have not entirely been cleared out. Still, the space issues are not nearly as dramatic as they were in the third and fourth quarters of last year, and they will be resolved as inventories are worked through. Also, terminal congestion and stevedore availability are both much improved over the third and fourth quarters. The Port of New Orleans, a major destination for steel imports, reported in a press release this week that steel imports were very important in the recovery of the Port after Hurricane Katrina. Steel and iron imports for the first nine months of 2006 totaled more than 3.44 million net tons, an increase of 60 percent compared to the same period of 2005. The Port expects another big year for imported steel in 2007. Barge availability loosens up The unusually warm winter season in the US has allowed the flow of barge traffic along the Mississippi and its connected inland rivers. Also, the barge business for steel is relatively slow as shipments have slowed down. As the steel industry has slowed down and the grain season is coming to an end, market professionals report that barge availability is very good. Barge rates for the first quarter are approximately 12 to15 percent higher than in the fourth quarter. However, the fuel surcharge, which is included in the total cost, is significantly down from the 30 to 40 percent fuel surcharges we saw in the third and fourth quarters. Current fuel surcharges for barges are at around 10 percent. Rail rates up for '07 Railcar rates for steel cargoes are up in 2007, as the main rail companies do not compete very fiercely and stick to announced price increases. As of January 1, domestic rail carriers' rates for finished and scrap steel were adjusted upwards by approximately 8 to 10 percent. The rail fuel surcharge in January is 13.0 percent, staying flat since December. In February, it will rise to 14 percent. Trucking fuel surcharge down along with diesel price The fuel surcharge for trucks is currently 15.5 percent, compared to 16.5 percent last month. The lower fuel surcharge is due to the decrease in diesel fuel cost, which as of January 8 was $2.54 per gallon, compared to $2.62 per gallon one month ago. In the New Year, the trucking industry, in addition to problems of tight capacity and high driver turnover, will also face additional costs as a result of new federal standards to make diesel fuel and engines more environmentally friendly. Diesel engines manufactured after January 1 must use ultra-low sulfur diesel, which reduces more than ninety percent of harmful emissions. The new technology will add between $2,000 to $15,000 to the cost of a new industrial-grade diesel truck. However, experts agree that the benefit to society in the long run will far outweigh the additional costs, which will eventually be passed along to customers.