June 18, 2019
This guest blog is courtesy of the Institute of Scrap Recycling Industries (ISRI).
Railroad has long been a critical mode for transporting ferrous and nonferrous scrap metal throughout the United States, particularly for distances greater than 200 miles. Since many recycling facilities are served by only one major freight railroad, there are rarely alternative modes of transportation – which means scrap metal and other recycling companies are too often at the mercy of the rail companies. This means having to deal with suffering poor rail service and skyrocketing fees. And recently, things have only gotten worse.
Since major Class 1 freight railroads implemented “precision rail scheduling” at the beginning of 2019, scrap metal recycling companies have seen astronomical increases in shipping costs. Unreasonable rail practices under this new system also include: (1) reductions in available time for rail car loading, unloading and storage; (2) service inconsistencies which precipitate demurrage and storage charges and impact facility operations (e.g. bunched cars, or missed switches); (3) the introduction of “not prepared for service” charges and, (4) congestion charges.
A survey of members of the Institute of Scrap Recycling Industries (ISRI) found a number of examples of unfair rail practices including:
- One member reported an increase in demurrage/storage charges of 669% in the first two months of 2019 compared to the 2018 average;
- Another member paid 1000% more in demurrage/storage charges per month in 2019 compared to 2017; and
- The bunching of rail cars resulting in increased demurrage/storage charges. To mitigate the expense, scrap facilities must employ a second crew or require employees to work overtime driving up operating costs despite having no control over bunched deliveries.
- One ISRI member explained their facility can only accommodate an 18-car switch but the railroad will pool cars at various stations along the route and deliver 30-40 cars regardless of how they were ordered.
The recycling industry though is fighting back.
In May, the Surface Transportation Board (STB) held a hearing to address unreasonable railroad practices related to railcar supply and storage fees. Ben Abrams, president and CEO of Consolidated Scrap Resources, Inc. and Bobby Triesch, vice president and regional general manager of SA Recycling each testified in front of the STB on the impact these practices were impacting business.
ISRI also called on the STB to apply the following principles in its evaluation of reasonableness of railroad demurrage practices:
- Demurrage practices must serve their underlying purpose of incentivizing an efficient rail network and must not be designed to generate additional revenue for the railroads;
- Railroad customers should not be penalized for railroad service failures; and
- Railroad customers should be given sufficient notice to allow for adjustment of their operations.
ISRI supports the STB’s collection and analysis of rail data on demurrage and accessorial charges in order to help ensure these fees properly and fairly incentivize rail network efficiencies, rather than simply drive profits.
It’s time for the STB to evaluate the commercial fairness of railroad demurrage tariffs and practices, which in many cases are the result of delays across the broader rail network.
NERC welcomes guest blog submissions. To inquire about submitting articles contact Lynn Rubinstein.
Disclaimer: Guest blogs represent the opinion of the writers and may not reflect the policy or position of the Northeast Recycling Council, Inc.