EU scrap suppliers see further rises in logistics costs

Inland logistics costs for scrap delivery in Germany and the Benelux countries have risen further in the past month because of a shortage of truck drivers and higher diesel prices, while some German suppliers continued to struggle to book train wagons for rail shipments.

Logistics costs for truck-delivered scrap parcels have increased by another 5-10pc in the past 4-6 weeks, after rising by about 5pc in 2021, scrap suppliers surveyed by Argus said. It is estimated that this most recent increase represents an extra €2-3/t in delivery costs for suppliers to collect scrap from their typical catchment areas, while delivery costs for sales to customers further away from their yards, such as to Italian mills from southern Germany, have moved up by a minimum of €5/t.

The higher costs came from a rise in diesel prices, new truck prices, higher costs to keep truck drivers and an increase in charges for hiring services from external providers. Diesel prices have risen by about 30pc since the beginning of last year, while many car manufacturers have adjusted prices for new trucks in 2022 in response to the strong inflation.

"But the main problem is truck drivers. We have to pay a lot more for truck drivers because there is a huge shortage," one German scrap supplier said.

"The worst is that you increase their salary, but it does not mean you can find enough drivers," another supplier said. "We have about 40 trucks and currently five of them are not on the road, because we do not have enough drivers."

There is a structural shortage of skilled truck drivers across Europe and the Covid-19 pandemic has made the problem worse. There was a shortage of 60,000-80,000 professional truck drivers in Germany, the country's federal association of road haulage, logistics and waste disposal said in October last year. Many scrap market participants are worried that the shortage will worsen when operations at other industries fully recover to pre-Covid-19 levels.

"Many drivers left the industry during the pandemic," a third scrap supplier said. "But not many of them have returned so far, as some of them have retired and others have moved to other industries."

The driver shortage means scrap companies have become more reliant on external logistics providers, which further lifted their logistics costs.

"The external companies have increased their prices by at least 10pc, and some even by 20pc. But we have no other options because we have contracts to fulfil," the second supplier said.

Despite the higher costs for truck-delivered shipments, changing the delivery method is not an option for many scrap suppliers. One of the alternatives is to deliver material by train. But many scrap buyers in Benelux cannot accept train deliveries, while many German scrap suppliers found it extremely difficult to book train wagons even before the driver shortage.

German scrap suppliers typically can secure only about 70pc of the number of train wagons or schedule slots for which they place an order. And many rail freight forwarders have lifted their rates by 1.5-3.0pc so far this year, depending on the routes.

Another alternative is to receive or send parcels by river barge. This is more common in the Netherlands and Belgium. And it is expected that most Dutch and Belgian suppliers, or any German suppliers that have access to river ports, will seek to make barge deliveries more often, as this method is expected to see lower price increases and disruptions this year.

But many German suppliers do not have access to river or canal ports or are not located in close proximity to one. These suppliers will most likely continue to see logistics as a major challenge for this year.

By Chi Hin Ling