LA-LB port complex confident it’s chassis-ready for peak season

LA-LB port complex confident it’s chassis-ready for peak season

Two trucks at the Port of Los Angeles.

Beneficial cargo owners and truckers in Southern California have experienced only spot chassis shortages, and given current import projections, this condition should continue through the peak season. However, store-door contracts that designate the use of specific intermodal equipment provider chassis are still an issue, and this condition could worsen if non-vessel operating common carriers expand their use of door contracts with chassis clauses. (Above: Two trucks prepare for cargo at the Port of Los Angeles.) Photo credit: Shutterstock.com.

Truckers, intermodal equipment providers (IEPs), and terminal operators in Southern California are approaching the peak shipping season with confidence that there will be sufficient chassis available to handle the expected increase in container volumes from August through October.

“I don’t anticipate that there will be a problem even as the peak season picks up,” said Greg Moore, executive vice president of FlexiVan. In fact, the chassis regime in the largest US port complex has been functioning relatively smoothly since the three IEPs formed the Southern California pool of pools in 2015, and Moore sees nothing in the upcoming peak season that would change that condition.

“We’ve been operating under the most consistent conditions since the pool of pools was started,” said Alan McCorkle, vice president of Yusen Terminals in Los Angeles. McCorkle said Yusen several weeks ago experienced a shortage of TEU that lasted three or four days. “It’s never going to be perfect, but it’s been the most consistent in my experience,” he said.

Pool of pools meeting demand, save some ‘spot’ shortages, dislocations

Truckers by and large agree. Vic LaRosa, president of TTSI, said there are always “spotty” chassis shortages or dislocations, tied primarily to ocean carrier requirements in so-called store-door contracts, where the trucker is told which IEP-controlled chassis to use. Door contracts offer a bundled rate that includes both the ocean voyage and the drayage haul to the importer’s warehouse.

“Our biggest problems are that ocean carriers continue to be involved in the business,” said Weston LaBar, CEO of the Harbor Trucking Association in Southern California. LaBar said that issue could become even more of a concern to truckers if the larger non-vessel operating common carriers (NVOCCs) designate the chassis that must be used as they move deeper into end-to-end logistics contracts. “Those contracts usually have chassis in the mix,” he said.

While Moore is seeing some NVOCC contracts with chassis provisions, he is not especially concerned about that development becoming a significant problem in Southern California because most of the parties involved in the contracts have already signed with all three IEPs in the pool of pools — FlexiVan, Direct Chassis Link, Inc. (DCLI), and TRAC Intermodal. “At this point, it’s not an issue,” he said.

Ocean carriers until 2009 owned almost all of the chassis used in moving containers from marine terminals to local warehouses and intermodal rail yards. In order to reduce financial exposure to the ownership and maintenance of those assets, Maersk Line in 2009 sold its chassis to DCLI. Since then, most of the carriers have exited the chassis business and under many service contracts cargo owners and truckers are not bound by which IEP must provide the chassis for a given move.

The major exception is that some larger shippers, especially the national retailers, demand all-in contracts that include the chassis. In those door contracts, the ocean carrier designates its IEP partner as the chassis provider the trucker must use. Truckers find this arrangement annoying and costly because they frequently do not have the correct chassis, so they have to search in the region for the designated equipment in order to complete the move.

However, some carriers allow trucker choice in the Los Angeles-Long Beach pool of pools, said Bill Shea, DCLI’s CEO, so truckers are not always restricted by the “designated chassis to use” clause. “They can use any pool chassis regardless of chassis ownership, but they can pay a specific IEP if the ocean carrier allows choice,” Shea said.

Logistics director: chassis system in US is fragile

The issues of split chassis moves and chassis shortages were topics of concern for truckers and cargo owners at the Agriculture Transportation Coalition conference June 13-14 in Tacoma. Michael Symonanis, director of North America logistics/global container logistics group at Louis Dreyfus, said the chassis system in the United States is fragile, so small shocks to the system get magnified and can affect the entire logistics network. Equipment shortages this past winter in Chicago and Memphis reverberated throughout the system, he noted.

However, even though a case can be made that door contracts designating a particular chassis provider can cause a shock to the overall chassis system, those contracts are of value to the shippers that sign door contracts, so the practice cannot be unilaterally ended. “There is no right or wrong way. There is no silver bullet,” Symonanis said.

As for current supply conditions in Los Angeles-Long Beach, Bruce Chilton, vice president of trade management at Ascent Global Logistics, said the NVOCC is experiencing at most 24-hour delays because of chassis dislocations. “We’re not struggling,” he said. There is always the possibility that chassis conditions could tighten “if the peak season becomes a real peak season,” he said. However, Alphaliner predicts that the 4 percent to 5 percent increase in imports in the first half of 2018 will edge up to 5 percent to 6 percent in the second half of the year. If that is the case, spot shortages could occur, but overall chassis availability should not be a problem, Chilton said.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.

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