Aluminum or Stainless: What’s the Best Bet for Crude Haulers?

by John Kipp,

I thought it was an odd comment to make at that morning’s weekly sales conference call. It was early 2013, and we were discussing what stock aluminum, 407 crude trailers, we should be making to satisfy the steady demand in Western Canada. One of our big sellers at Advance Engineered Products Ltd. (AEPL), was a 37.5 M3, single compartment, TC 407 tridem trailer. When I asked the Territory Manager (TM) covering the Saskatchewan and Manitoba markets how many he wanted built for his market, he responded; “Not a one.”

Huh?

I asked the TM why he didn’t want new inventory to sell and he told the group that his customers in Southern Saskatchewan and Manitoba were no longer purchasing aluminum crude trailers. They were now asking for stainless steel models instead. This was a shock of course; Southern Saskatchewan was AEPL’s second largest market for aluminum crude equipment. And now, after a ten-year run, demand for these trailers was drying up. What was going on?

We had seen another transition to stainless crude in Northern Alberta and B.C., but believed that phenomena was due to tougher terrain which was beating the hell out of aluminum trailers. But then again, we were still selling plenty of aluminum crude equipment to some of the largest carriers operating in that basin, and they were not reporting significant structural issues, yet. In fact, some of our aluminum crude equipment was being deployed to the Wabasca AB area, which had developed a reputation for the most punishing terrain on the continent.

The base economic case for stainless versus aluminum crude made no sense at the time either – and even less so now, because of rising steel costs. Today, a similarly sized and equipped 407 stainless crude tridem is priced approximately 30% higher than its epoxy lined, aluminum counterpart, and hauls about 1 MT less payload. In some traffic lanes like petroleum, that’s a carrier’s total profit margin!

In fact, during the first Western Canadian crude renaissance in the early-2000’s—driven by the advent of horizontal drilling and multi-stage fracturing—aluminum crude wagons were flying off our assembly lines. Given their cost and weight, why would anybody want stainless, except to haul milk, and chemicals?

Early in the renaissance, the trucking industry understood that some crudes would be corrosive, but there was a “fix” for that. Line the aluminum trailers with an epoxy coating, then load and go. Life was great at AEPL in those days!

And then, one day in April 2013, the answer to my question appeared in a box dropped off at my office. Inside was the sump out of a two-year-old Advance aluminum 407, crude B-Train. It had been cut-out by our Service Department in Regina and replaced at a cost of $5,000. Two other sumps were also cut-out and replaced in the lead and the pup.

 

The sumps were severely corroded and pitted, despite having an epoxy liner. Somehow the liner had failed near the “heat-affected” areas of these multi-piece sumps, where the epoxy’s bonding properties would be sub-optimal. But, why were the linings failing after just two years?

 

One theory was that dosing methanol into the trailer by service centers in the winter might be the key. Hazardous materials trailers need to be emptied of residue and steamed before interior shop work can be undertaken. There is always the potential for explosion caused by flammable vapors inside the tank. Methanol is often use as “antifreeze” after service in the winter, to prevent the plumbing and valves from freezing-up after steaming, while the trailer sits outside waiting to be picked-up.

Dosing trailers with methanol would likely pool at the sumps causing the epoxy to soften. A breach of the lining could occur when offloading, because crude containing abrasive materials (sand) would wear down the softened lining at the sump. Once the aluminum was exposed, the residual fracturing acids and other chemicals would rapidly attack the material. The result? Expensive re-sections, complete sandblasting of the interior, and re-lining with epoxy! On a two compartment tridem trailer, the carrier was looking at $20,000 worth of repairs.

Some carriers were asking themselves whether they should be planning this kind of maintenance expense every couple of years? Could they defer service to the Summer or only use shops that had explosion proof bays?

Not quite. Methanol was also showing up in the crude oil they were hauling.

Approximately 150,000 liters of chemicals are used on a typical well frac. Proprietary chemical “cocktails” are developed by the oil well services industry and sold as effective, yield producing formulas. Typical chemical additives can include hydrochloric or acetic acids, used in the pre-fracturing stage. Ethylene glycol is used to prevent the formation of scale deposits in the pipe. But, some of the most common chemicals used for hydraulic fracturing are methanol, isopropyl alcohol, 2-butoxyethanol, and ethylene glycol.

Observation # 1: Every barrel of crude that comes out of a producer’s holding tank has some residual of the chemical cocktail used to frac it. That’s the epoxy softening and corrosion part of the equation.

About five years ago, oil well service companies discovered that using (much) more sand in a frac job equaled more crude yield: Low cost – higher profits. The result? Back in 2012 the amount of frac sand used in a well averaged about 1,000 lbs./foot. Today, it averages 1,500 lbs./foot, with some producers going to 3,000 lbs./foot. That’s a 50% to 300% increase in frac sand use. In other words, a one kilometer deep well in 2012 would have consumed 1,500 metric tonnes of frac sand. Today, that same well consumes between 2,200 and 4,400 metric tonnes of sand. That’s 50 to 100 B-Train loads headed to a single well.

Observation # 2: Every barrel of crude that comes out of a producer’s holding tank has some residual frac sand in it. That’s the abrasion part of the equation.

Last year, I visited several customers in S/Saskatchewan and North Dakota to determine, among other things, whether the theory held true. As I toured one shop, this workbench caught my eye:

“What happened here?” I asked. The Shop Manager told me that tearing out and replacing sumps was becoming a great revenue stream for his shop, but wasn’t sure what was happening. He blamed it on poor linings and installations.

In Northern Alberta, sales of stainless crude equipment had been outselling aluminum versions since the late 2000’s. In one shop, I asked the owner whether he had seen the pitting and corrosion that was happening in other parts of Western Canada. His answer was “not really” but, he stated that crude carriers were buying stainless equipment for other reasons.

“What other reasons?” I asked. He told me that aluminum trailers were lasting five years at most; “Not tough enough for this market.” Conversely, he was seeing stainless trailers coming in for maintenance that were 10, and sometimes 12 years old. At that moment, I flashed back to another conversation with a shop manager in Weyburn SK, who told me that stainless crude trailers were lasting 5 – 7 years longer than their aluminum counterparts.

Trailer engineers will tell you that, unlike stainless steel, aluminum does not have “fatigue strength” and will eventually fail from small stress amplitudes. Translation? Stainless trailers are better able to absorb punishment than their aluminum cousins.

But, what about those aluminum trailers being employed in the Wabasca area? Were they new? Was the reporting accurate? I couldn’t tie it together and since retiring from AEPL at the end of 2014, could not get updates.

Observation # 3: Crude oil hauling is very tough trucking with a lot of short, off-road hauls, to access holding tanks located on oil leases. In straight highway hauling, chemical stainless trailers can remain in service for 25 years or more. Aluminum units hauling petroleum, typically retire after 18 – 20 years of service.

Now, the economics of aluminum versus stainless crude was starting to make more sense to me. The up-front costs for stainless are much higher and the payload penalty is significant. But, the lifecycle cost of a stainless unit appeared to be much cheaper than aluminum, particularly from a maintenance and longevity standpoint.

Some carriers argue that proper inspections of aluminum epoxy lined equipment (stainless does not need lining) should be sufficient to ensure protection against barrel pitting and corrosion. That’s true, however proper lining inspections require cleaning and downtime – which is costly. And, even if you find a breach in time to prevent the residual acids from attacking the aluminum, you’re looking at a $10,000 reline, and a week of downtime. Do that every couple of years and you’ve cut the aluminum initial cost advantage to 5% over stainless but, you still have that 1 MT payload advantage!

Now, factor in the observations from the field that stainless crude trailers last ten years while aluminum crude trailers last five on average, and the economics become much clearer. As Foghorn Leghorn once said: “You can argue with me but you can’t argue with mathematics!”

Does aluminum still have a place in the crude fields? Of course, but the carrier needs to understand what it is he’s hauling, where to, and how he will handle ongoing maintenance, to assess the total lifecycle costs of the equipment he is buying. Hauling sweet crude from a terminal to a pipeline injection station over the highway is likely more profitable with aluminum, than it is with stainless. It’s all about properly assessing the hauls when planning your fleet.