North American transportation and logistics

Ocean freight rates soften up as imports slow Ocean freight rates have come down slightly since last month as import steel shipments to the US have slowed. However, shipping experts say that prices will trend sideways for awhile and that the market will start to trend up again in the second quarter. The talk about the VAT rebate reduction may force some traders and producers to ship their goods as early as possible to beat the yet-to-be-announced deadline. This may re-energize the Asian freight rates within the next couple of months. In general, per-ton Handymax rates (minimum 15k tons of rebar, wire rod, hot rolled - big tonnage) have slipped approximately $2 /mt to $5 /mt since last month. Current Handymax rates for big tonnage steel shipments: Baltic to US East Coast: $45 /mt to $50 /mt Baltic to US Gulf Coast: $40 /mt to $45 /mt Black Sea and Mediterranean Sea to US East Coast: $42 /mt to $47 /mt Black Sea and Mediterranean Sea to US Gulf Coast: $40 /mt to $45 /mt East Asia to US Gulf Coast: $65 /mt to $70 /mt East Asia to US West Coast: $58 /mt to $63 /mt Ports still taking a breather The situation at US ports that are major steel destinations like Houston and New Orleans has improved further since last month, since business has slowed and the ports are finally able to get caught up. The congestion has disappeared, but the ports are still busy. Import shipments should start to increase again in March, and availability at the ports will then start to tighten up again. However, 2006 was a record year and it will be hard to imagine to repeat the same import numbers for 2007. Things will be more manageable this year. Icy river conditions for barge market The big issue for the barge market right now is the icy conditions on the Mississippi and other inland rivers which prevent barge transportation to major steel destinations like Chicago and Pittsburgh. This commonly happens every year, but the icy conditions caused by this winter, which came late this year, are worse than usual. Officials say that ice in the Mississippi River near St. Louis and the Illinois River is thicker than usual. Barge traffic will be very limited until conditions improve for another couple of weeks. Fuel surcharges for barges are down significantly from fourth quarter levels, and are currently at about 10 percent – a pleasant relief for many. Barge availability is also good. Rail and truck fuel surcharges fall slightly The fuel surcharge for rail car transportation in February is 14 percent, based on the December 2006 diesel price of $2.610 per barrel. The fuel surcharge will be reduced to 12.5 percent in March, based on the January 2007 diesel price of $2.485 per barrel. The fuel surcharge for truck transportation is approximately 15 percent, based on the average highway diesel price of $2.476 per barrel on February 12.