Are Freight Rates Slowing Your Steel Delivery?

Truck A leaves its facility going 60 miles per hour carrying a load of steel. Truck B leaves one hour later going 70 miles per hour, also carrying a load of steel. How long will it take truck B to catch up with truck A and deliver the steel on time?

It may sound like a math problem from elementary school, but it’s playing out for real in the steel market today. However, perhaps the more important questions are:

1. How much does that load of steel cost compared to last year?
2. Are we even certain that these trucks are available right now?

At a time when steel supply is limited and prices are at record highs, there is yet another factor impacting your ability to get the product you need: A lack of trucks for steel transportation.

The U.S. trucking industry is straining to keep up with demand, causing limited capacity on vehicles and a rise in rates. For steel, the market for flat-bed truck shipping is the one to watch—and currently, it’s not producing the results you’d like to see.

Trucking the Load

Start with the availability on trucks. For this analysis, we turn to DAT Freight & Analytics, which is a valuable source when it comes to logistical trends and analysis. A few factors to examine:

• Load-to-Truck Ratio: This number represents the number of loads that need to be shipped for every available truck. This can act as a real-time indicator of the balance between spot market demand and capacity. According to DAT, the national flatbed load-to-truck ratio as of April 11 was 94.69—representing 94 plus loads for every available truck, up from 87.80 at the end of March.
• Spot Rates: These rates have jumped $.40/mile since January 2020 and are $.60-70/mile higher than fall 2020. Perhaps more accurate is to look at average percent increase rather than actual rates.

Kyle Ubinger, Ryerson’s common carrier logistics manager, says while the rates themselves are important, it’s generally more imperative to watch the percentage increases to gauge the direction of shipping costs. According to DAT, spot rates for flatbeds rose 7.9% from February to March and are up 26.2% year over year.

Driver Down

Next, look at the availability of the trucks themselves. Steel isn’t the only material shipped via flatbed truck, which means it’s a fight for what limited vehicles are on the road.

The operative word here is ‘limited.’ It’s no secret that the U.S. has been facing an extreme shortage in drivers for quite some time. Like with nearly everything else, the COVID-19 pandemic has exacerbated the situation, as many drivers were forced into early retirement. According to data from D&A Clearinghouse, 26,000 drivers were removed form service through October 2020.

On the flipside, new truckers were unable to enter the workforce as well. According to data from the American Truckers Associations (ATA), the pandemic contributed to the closing of driving schools and 27 states closed their State Driver Licensing Agencies.

This contributed to a shortage of 25,000-40,000 drivers because candidates could not be trained or certified. As a result, 40% fewer new drivers are joining the workforce, according to ATA.

The Road Ahead

As with all other factors impacting the ability to get steel these days, there is limited visibility as to when things may indeed ease up.

“You tend to see some seasonality factors lead to a rise in rates during the summer months,” adds Ubinger. “In addition, keep a close eye on the oil & gas market. Should the price of oil continue to rise you may see drivers shift from shipping steel to shipping oil because of the higher rate they get to ship it.”

In all, it’s simply another reason to stay in close communication with your steel sales representative on your needs and priorities in the months ahead.

Have questions about how freight rate impacts your steel purchase?

Contact us to discuss your specific needs.