A shortage of truck drivers and flat-bed trucks is delaying steel shipments at critical points in the supply chain and further driving up shipping costs and lead times, Fastmarkets has learned.
Fastmarkets AMM
April 7, 2021
By Robert England
In March, there were 84 loads that need to be shipped for every available truck, up from 22 loads for every truck in March 2020, according to DAT Freight & Analytics.
"Demand for the entire flat-bed market, of which steel is a huge piece, has been surging for six weeks and is approaching record highs," Avery Vise, vice president of trucking at FTR Transportation Intelligence, told Fastmarkets.
Steel products, such as beams and coils, are shipped via flat-bed trucks due to their heavy weight, as well as their size and shape, which require special handling precautions, according to R+L Global Logistics.
"It's terrible right now. A lot of shipping guys say it's the worst they've ever seen," a southern distributor said.
Flat-bed truck shipping is comprised of two major markets - industrial and home construction, according to Vise. Heavy machinery, mostly headed for the Permian Oil Basin, is the third largest segment of goods shipped by flat-bed trucks.
Another sign of the capacity squeeze is the sharply rising shipping volumes for available flat-bed trucks. Volumes shipped by flat-bed trucks are 3.5 times higher than pre-pandemic volume levels and near a record high, according to Vise.
The capacity squeeze has also driven up freight costs. Shipping rates without fuel surcharges were 33% higher in March than a year earlier, Vice said. The average cost for a flat-bed shipment last week was $2.44 per mile, excluding fuel, and $2.80 per mile with diesel included.
Freight costs are rising at a time when steel prices are reaching record highs. Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $66.22 per hundredweight ($1,324.40 per short ton) on Tuesday April 6, down by 0.65% from $66.65 per cwt on Monday April 5, but up by 0.62% from $65.81 per cwt one week earlier. The index hit an all-time high of $66.73 per cwt on April 1.
Regional dynamics
A Northeast distributor said he found it difficult to get shipments into his region. "Shipments from one mill that used to take a day or two now take three or four days," he said.
At the same time, the distributor said, freight charges from one mill have increased from $3 per cwt to $4 per cwt, not including the fuel surcharge.
A Northeastern fabricator also reported that it was difficult to get trucks into the region during the winter, but said that trucks were becoming more available now that the winter weather has passed.
A Mid-Atlantic distributor said that trucks are scarcer in the Northeast because there are more deliveries going into New York and New England than leaving, which means the truckers are "dead heading their shipments" and will only get paid for going one direction instead of the round trip.
A West Coast distributor also reported delayed arrival of shipments.
"You can't just pick up the phone and a truck will be there the same day. Now it takes a couple of days or even three days," he said.
"A lot of drivers got out of the business because of [the economic slump caused by] Covid-19, particularly in the steel business and in flat-bed shipping," the West Coast distributor said.
While truckers were leaving the workforce, new ones were unable to enter it, according to Vise. During the pandemic, potential truckers were unable to obtain appointments for a learner's permit to become licensed, Vise said.
As a result, the number of payroll jobs for long-distance truckers fell 5% in March compared to pre-pandemic levels, according to FTL.
The sudden drop in truck drivers combined with a sudden surge in demand and rising prices has delivered "a perfect storm" for shippers, Vise said.
A distributor in the Midwest said low pay was a contributing factor to the lack truck drivers.
"Mills are not paying enough to get drivers. They should be paying more," the midwestern distributor said. "Look at what steel costs. The mills are selling steel for a lot more. They've got the margins to pay more."
With produce season arriving, truck drivers may switch to carrying produce instead of steel since produce shippers typically pay more, the distributor said.
But there are positive signs too. "As I look down the road, I don't think we're going to be at this peak level [of truck shortages] for a long time]," Vise said. For one thing, demand for flat-bed trucks from the residential construction sector is expected to ease, leaving more trucks for shipping steel.
"While the truck shortage will not quickly ease, for shippers, the worst is probably behind them," Vise said.
