Transloading Benefits Driving Growth

After watching in recent years as the number of intact containers moving to and from the Port of Tacoma by rail declined as a percentage of the port’s overall international volumes, officials spotted an interesting opportunity.

Ocean carriers want containers returned quickly so they can be repositioned back to Asia. With 24 transloading facilities within three miles of the port, officials believe they can actually return empty containers to the same ship they arrived on full just a few hours earlier.

Such an operational feat would be a dividend for carriers, and the port, stemming from transloading’s big gains as a supply chain tool of major retailers and other importers.

In Los Angeles-Long Beach, the story is similar: The percentage of total import containers transloaded into domestic equipment before being sent east via rail increased from between 22 and 23 percent in 2002 to 30 percent today, with a pronounced spike in the shift occurring during the recession, according to the Alameda Corridor Transportation Authority, operator of the rail route from the ports to downtown Los Angeles rail hubs.

Roughly 38 percent of imported containers moves intact inland via rail, the segment called Inland Port Intermodal, or IPI, while 32 percent moves from the ports by truck to local or regional destinations. Such is Southern California’s volume of transloaded containers, which don’t transit the Alameda Corridor and thus avoid a $21-per-container fee, that, for the first time since the corridor opened in 2002, the Los Angeles and Long Beach ports each had to lend the authority nearly $3 million last year to cover debt payments.

“The transload percentage has grown faster than the port volume rate,” said John Doherty, CEO of the authority.

Several factors are driving growth in transloading on the West Coast. Ocean carriers encourage it through pricing because it helps them achieve higher utilization of their container fleet when they turn the boxes near the port rather than sending them inland. Importers benefit through economies of moving goods in 53-foot containers versus 40-foot marine containers, and by gaining an additional two to three weeks to make a decision on where the goods should ultimately be sent within North America.

The decision to move a container inland by rail to Chicago, for example, must be made before the box is loaded in Asia, but fickle consumer demand can shift in the two to three weeks it takes the goods to get to North America. Transloading, therefore, allows the importer to postpone the decision on the ultimate destination.

“What you lose with IPI is the ability to react to consumer demand. If you are doing a transload, you can call an audible — you gain the ability to reroute goods in transit,” said Adam Roth, executive vice president of industrial real estate broker NAI Hiffman.

What IPI achieves, however, is efficiency — avoiding West Coast drayage, transloading and possibly damage costs — for shippers that have enough scale of volume to predict demand at inland markets. “IPI is extremely efficient if you have the critical mass to forecast that you will need that product in the Midwest,” Roth said.

If the importer must pick up drayage and transloading costs, it reduces demurrage on containers, so the cost evens out, said Curtis Spencer, president and CEO of logistics and foreign trade zone consultant IMS Worldwide. “The equivalent all-in cost of transload has become equal to or less than the full cost of the IPI move,” he said.

For Tacoma, Los Angeles-Long Beach and other ports, transloading provides greater economic benefit because it fosters an infrastructure of facilities, people and equipment such as trucks, and the strategic value to the importer tends to bind the cargo to the port more so than IPI moves that can move through any port — a factor that could prevent cargo from shifting to the East Coast after the Panama Canal expansion is completed by 2015.

The growth in transloading, therefore, has been a huge benefit to the economy while hurting IPI-dependent entities such as the Alameda Corridor. Still, ACTA’s Doherty, while admitting the shift from IPI to transloading is unlikely to swing back in the other direction, believes the percent of transloading also is unlikely to expand further. “I think the worst is over,” he said. “The (volume) is probably going to hold at around 30 percent of the ports’ import volume. I think the shift has maximized itself — that is what we’re seeing.”

Peter Tirschwell is senior vice president of strategy at UBM Global Trade. Contact him at ptirschwell@joc.com, and follow him on Twitter at twitter.com/PeterTirschwell.
 

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