Rail Customer Profile: The Steel Manufacturers Association

March 25, 2015

The Steel Manufacturers Association (SMA) is the voice of the North American electric arc furnace steel industry.  SMA’s 30 member companies account for over 75 percent of domestic steelmaking capacity.  They operate 127 steel plants across North America, directly employ more than 60,000 people, and indirectly generate over 300,000 additional jobs.  SMA also has 116 Associate Member companies worldwide that provide goods and services to the steel industry.

SMA’s members rely heavily on rail service for the movement of incoming raw materials and outgoing finished steel products.  The ability to reliably, cost-efficiently serve steel markets is critical to the success of domestic steel producers.

What sort of issues are SMA members experiencing?

In recent years, many steel shippers have been subjected to rapidly escalating rail rates combined with deteriorating service.  Most SMA members are captive to a single railroad and, therefore, have little ability to negotiate or pursue alternatives when service or rates are unsatisfactory.  The current truck driver shortage has further limited options for steel shippers.

While railroads often attempt to justify rate increases by noting capital investments, we unfortunately have seen little investment in many of the car types that serve the steel industry.  Railcar availability is now severely strained in many markets.  Service delays and delivery of substandard, dirty railcars have become increasingly common.

We have reached a tipping point where the lack of competitive rail service is having a serious impact on American steelmakers.

What’s at stake for your industry?

Steelmaking is an extremely competitive industry.  U.S. producers compete not only with one another, but also with producers overseas.  Proximity to the sizeable U.S. steel market historically has been a major advantage for domestic producers.  Rising transportation costs negatively impact the competitiveness of domestic steelmakers, and service issues threaten relationships with important steel customers.

What needs to be done?

SMA does not support rail “reregulation.”  We wish to see healthy, profitable railroads that make investments to serve our industry and that operate in a market-oriented manner.  SMA, however, does support sensible improvements that would increase shipper access to competitive freight rail service and that would modernize the STB.

We look forward to continuing our work with other shippers, as well as with Senators Thune and Nelson, and their counterparts in the U.S. House of Representatives.