Matthew “Bo” Bates thinks many ocean carriers have left their customers in the lurch. As a growing number of container lines abandon their long-established practice of providing chassis at more U.S. ports and inland locations, it’s costing trucking companies and shipper customers more.
“It’s really a mess out there right now,” Bates said. “We’re starting to have to provide chassis on a daily rental charge basis in a lot of different places.”
As executive vice president of Evans Delivery, a Philadelphia-based motor carrier with more than 1,650 tractors and 110 terminals nationwide, Bates has to find the chassis needed to haul containers, set up systems to manage and track those chassis and bill shippers for their use.
The shift hasn’t had a huge impact on shippers’ supply chains because the markets where many carriers have stopped providing chassis are mostly smaller ports such as Philadelphia and Boston, and various inland locations and rail terminals in the Southeast and Midwest. Most carriers haven’t stopped providing chassis in the busier Northeast or Southern California ports. “It’s more noise than an operational challenge,” said Tom Malloy, vice president of the Intermodal Association of North America. “For truckers, the challenge is to figure out where to rent chassis, buy chassis or lease them.”
Still, with the peak shipping season around the corner, volume will rise through most ports, and shippers are anxious to avoid the equipment shortages and hassles experienced during last year’s recovery.
The pace of the chassis shift is picking up as carriers quit more markets. Of the 20 major carrier members of the Ocean Carrier Equipment Management Association, 14 no longer will provide chassis in certain markets, according to OCEMA’s Web site (see www.ocema.org/SOCCAM.pdf).
Maersk Line, Cosco, CMA CGM, Orient Overseas Container Line and Hapag-Lloyd have been the most aggressive in withdrawing from markets. OOCL this month said it would drop chassis in the Port of Charleston and five other cities as of Sept. 1, and NYK Line plans to quit providing chassis in Oakland and Minneapolis on the same date.
Evans Delivery had to rent more chassis last winter when CMA CGM pulled its chassis out of five markets in the mid-South and Southwest. The pace is accelerating this summer and will continue this fall and early next year as Hapag-Lloyd stops providing chassis in another 36 locations.
“It’s going more slowly than we thought it would a year ago, but it’s still going,” said Frank Harder, a consultant for the Tioga Group. “Fortunately, there are plenty of chassis available in most locations.” Trucking companies are still able to obtain chassis for free through Consolidated Chassis Management, the nonprofit OCEMA subsidiary that manages six pools with 125,000 “gray” chassis that can be used by truckers interchangeably without regard to the carrier brand on the container. Truckers also are renting chassis from big leasing companies such as Trac Intermodal, Flexi-Van and Direct ChassisLink, the subsidiary established by Maersk Line in 2009 to take over management of its chassis.
Trac Intermodal is monitoring the carrier announcements to ensure it has an adequate supply of chassis in affected markets. “We have enough chassis to meet the demand, but where we might have had a strong positioning of chassis, we’re finding there is growth in other areas,” President and CEO Keith Lovetro said. “The Gulf might be an example of where some of that is occurring, so we’re in the process of rebalancing our fleet to accommodate that demand.”
Carriers are proceeding more slowly than Lovetro would have thought when they first started to stop providing chassis. “They are being responsive to their customers, so they are going slower at it, which makes a lot of sense, so the market hasn’t turned up as much as we might have thought,” he said.
Although Evans still gets chassis for free from CCM, this may change. “We’re not paying fees for those at this point in time. But as some of their participating carriers pull out, then three years from now, we’re going to be paying for a chassis 90 percent of the time,” Bates said. Smaller leasing companies also operate in some markets, and the competition for truckers’ chassis-rental business is likely to grow as carriers abandon more markets. “The big question,” he said, “is whether CCM, Flexi, Trac and DCLI will continue to be the four gorillas out there or whether some other players will emerge in the market.”
Although conditions vary among markets, motor carriers generally have turned to renting chassis from leasing companies on a daily basis rather than incurring the capital costs of buying them. They are passing those rental fees along to their customers with a markup. Bates said Evans typically gets charges between $11 and $13.50 a day.
“We’re going back to our customers to ask them to pay that charge plus a markup because we’re now exposed in a bigger way for the M&R than we were before,” he said.
Trucking companies generally have to pay for maintenance and repair of the chassis they rent, but this may change as leasing companies develop longer-term leases for the truckers that include such costs. Bates said the markup also includes “the cost of M&R and also the cost of the administration and the fronting of the money.”