As ports prepare for a modest spike in cargo volumes during the peak shipping season, ocean carriers, marine terminals, railroads and equipment providers appear to be flush with capacity. So why do harbor truckers fear ports on both coasts will be congested this fall?
Truckers are concerned that deteriorating terminal productivity, aggravated by equipment dislocations as carriers leave the chassis business, will reduce the effective capacity of the transportation supply chain during the peak season.
At the Port of New York and New Jersey, spot congestion surfaced in the spring because of labor issues associated with dockworker negotiations for a new waterfront contract.
The port, however, also is grappling with equipment dislocations as carriers form vessel-sharing agreements, and the VSAs in turn form partnerships with other VSAs to share assets and reduce costs.
Jeff Bader, president of Hillside, N.J.-based harbor trucker Golden Carriers, said shipping lines are so concerned about cost-cutting and profits that they’re ignoring the impact this is having on productivity. “Terminals are not as productive as they used to be,” he said.
The ports of Los Angeles and Long Beach have experienced sporadic labor issues as contract negotiations continue between the Office Clerical Unit of International Longshore and Warehouse Union Local 63 and waterfront employers. The OCU has been working without a contract for two years, and there is no indication a settlement is near.
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The Southern California ports also are experiencing an increase in equipment dislocations as ocean carriers end a 50-year practice of owning chassis and providing free usage and storage of chassis to their customers.
With VSA pools and third-party providers increasingly controlling chassis, harbor truckers no longer are consistently picking up and returning chassis to the same location. The days of efficient two-way hauls are gone, said Brian Griley, president of Southern Counties Express.
Rather, drivers often are instructed to return a chassis to a location other than where it was picked up in order to maintain balance among chassis pool members. “It kills productivity,” Griley said.
Cargo volumes won’t tax the capacity of ports this year. The industry consensus is that container volumes will increase between 2 and 5 percent.
Marine containers and rail capacity shouldn’t be issues, either. Container lessors have placed large orders with Chinese container manufacturers, said Robert Pedersen, president and CEO of Textainer Equipment Management in San Francisco. Textainer purchased $660 million worth of containers in the first quarter alone, compared with $904 million during all of 2011. With ocean carriers increasingly favoring leasing over owning equipment, leasing companies have stepped in to fill the gap, he said.
TTX, which supplies well cars to the railroads, will have added $870 million in double-stack capacity to the industry’s fleet by the end of this year. That investment, plus improvements in train speed and terminal dwell time, should facilitate the railroads’ ability to handle peak-season volumes, TTX stated.
BNSF Railway’s own investments in equipment, track and lift capacity in recent years have positioned the railroad to handle peak-season demands. “BNSF does not anticipate any capacity issues,” the company said.
Even harbor truckers that have been pressured to buy costly clean new trucks have enough trucks and drivers to handle peak-season demand, said Mike Stark, president and CEO of Pacer Distribution Services.
Stark, however, told the Harbor Transportation Club in Long Beach on June 14 that all of the capacity in the world means nothing if truckers can’t move efficiently into and out of marine terminals because of productivity issues and equipment dislocations.
The Harbor Trucking Association in Southern California has found no significant improvements in overall gate times despite numerous stakeholder meetings the past two years, said Fred Johring, president of Golden State Express. A few of the 13 marine terminals in Los Angeles-Long Beach consistently provide good service, but gate times at most terminals aren’t acceptable, he said.
PierPass Inc., which represents the terminal operators, expects its members this year, as in the past, to flex their morning and evening shift start times, and as volumes build, to keep the terminals open five extra shifts each week, said Bruce Wargo, PierPass president and CEO.
Truckers believe chassis dislocations could be the biggest issue this year on both coasts. The issue of split returns — dropping a container at one terminal and bringing the chassis to another facility — actually emerged six or seven years ago with the formation of carrier VSAs, said Greg Stefflre, owner of Rail Delivery Services in Fontana, Calif. VSA partners planned their vessel rotations carefully, but didn’t prepare sufficiently for the impact split returns would have on harbor trucking productivity, Stefflre said.
More recently, VSAs have combined with other VSAs, or linked up with mega-carriers, and the web of equipment sharing has grown exponentially. Now that individual carriers are exiting the chassis business, pools, carrier VSAs and third-party lessors are assuming chassis responsibilities.
With such diverse models at play, the complexity of supplying chassis and managing chassis fleets has increased significantly, said Steve Rubin, principal at InterPro Advisory, who is leading a Transportation Research Board study of chassis best practices. The Uniform Intermodal Interchange Agreement governs the pickup and return of chassis. The UIIA for years stipulated the trucker must return the chassis to the location where it was picked up.
The UIIA, however, was amended two years ago to allow the equipment provider to direct the trucker to drop off the chassis at another location, provided the trucker is notified by 4 p.m. the previous day, said Joni Casey, president and CEO of the Intermodal Association of North America.
With the proliferation of pools and leasing company involvement, disruptions were bound to happen, Casey said, so closer cooperation among industry participants is crucial during this transition period.
Truckers are caught in the middle as they are often charged for use of the chassis and must then recoup the fee from their customers, so ultimately they must decide how much to charge for administering the process. “For the trucker,” Stefflre said, “it comes down to, how do you price your services?”