HOUSTON (ICIS)--Rising transportation costs are pressuring US petrochemical markets, and chemical buyers are being asked to help absorb those increased costs.
A logistics industry mandate that has reduced the number of hours truck drivers are on the road coupled with a driver shortage have been particularly problematic in the last several months, causing significant shipment delays and mounting logistics costs.
“Trucking is absolutely disgusting in the US right now,” one trader said.
The issue is being driven by the Department of Transportation’s (DOT) Electronic Logging Device (ELD) rule. Carriers were required to start complying in December 2017, with full compliance by December 2019.
The system electronically records driving time and requires drivers and carriers to adhere to DOT Hours of Service regulations, which enforce the number of hours a driver can safely be on the road.
This has resulted in limiting the number of hours drivers are working, thus causing bottlenecks along routes. Shipment times have grown from a few days to anywhere from two to four weeks, the trader source said.
The mandate has spurred a driver shortage, with a trader source saying companies are losing drivers who cannot make as much money because they are working less. The issue is magnified with tanker trucks, which are much more specialised and require stricter regulations, so the driver pool is much smaller.
Trucking companies are asking their customers to help them absorb costs related to these logistics issues and to plan for longer lead times to help avoid congestion as carrier capacity is growing scarce.
“Transportation is killing me,” a paint producer said. “It is unreliable and getting very costly.”
Last week, two producers separately issued increase announcements, each citing escalating freight costs.
Dow Chemical plans to increase its freight adders and transactional service standards for tank truck shipments in the US and Canada and to implement fees for short-notice order changes.
“The trucking issue is a huge problem, with too many retiring drivers and the electronic log system,” one buyer said, adding that the difficulty in moving product from producer to customer is increasingly being used as the reason for raising prices.
The issue is only going to get worse, the trader source said, with no solution in sight for the next six months. “We’ve been telling customers to have lots of inventory on hand,” the trader said.
Looking ahead, a distributor source said the industry will have to determine the most efficient way to get material to customers.
One solution would be utilising rail in lieu of trucks and developing more hubs for rail distribution. While rail is more expensive, he said, a single rail car can carry four times the material of a single truckload, so it is worth the extra money.
“Supply is a price driver, and supply means getting it to the customer,” he said.
Additional reporting by Larry Terry
Focus article by Amanda Hay