Peaking at the right moment

Peaking at the right moment

As the peak season for Asian imports gets under way, many shippers are asking the same question: Will I be able to secure the intermodal equipment I need, when I need it?

In some previous years, notably in 2002 after West Coast ports were closed during the 10-day management lockout of the International Longshore and Warehouse Union, the answer was no. Cargo languished in or near West Coast ports for days or weeks, awaiting intermodal railcars or domestic containers or trailers. Another troublesome year was 1997, when railroads were experiencing merger problems.

Intermodal operators are confident that they have ordered sufficient equipment for this year's peak shipping season. Spot shortages could develop, however, if carriers can't move railcars and domestic containers back to the West Coast quickly enough to handle the annual spike in import volume.

TTX Co., which procures double-stack railcars for the nation's railroads, has placed orders that will increase its fleet of double-stack railcars by 15 percent, said Robert R. Hewett, director of market development. Chicago-based TTX has ordered 15,500 platforms, or railcar slots for marine or domestic containers, for delivery this year. A typical double-stack railcar has five wells, each of which carries two containers.

U.S. imports from Asia moving through the West Coast increased 10 percent in the first six months of 2003 compared to the same period last year, according to the Pacific Maritime Association. If cargo volumes continue to increase at about that pace, the 15 percent increase in platforms should accommodate the intermodal moves from West Coast ports this year, Hewett said.

Intermodal operators have also been ordering more domestic 53-foot containers, the most popular size for cargo transloaded from marine containers to domestic equipment at distribution centers on the West Coast.

The containers, manufactured mostly in Asia, have been arriving by vessel in Los Angeles-Long Beach at a rate of 800 to 1,100 per month, said Daniel Reehill, executive vice president of Hub Group in Los Angeles. The expansion of the domestic-container fleet is keeping the trans-Pacific logistics supply chain fluid, he said.

The flow of cargo across the U.S. is mainly west-to-east, driven by Asian imports that spike during the annual fall season for holiday merchandise.

About 40 percent of U.S. containerized imports move through the ports of Los Angeles and Long Beach, mostly for shipment eastward. A growing percentage of that freight is trucked to Southern California transloading facilities, then transferred into domestic 53-foot boxes. These domestic containers and trailers, many carrying goods consolidated from multiple import containers, move by rail or truck to Southwest, Midwest and East Coast markets.

Intermodal operators estimate that 70 percent of Los Angeles-Long Beach imports destined for points beyond the local area are carried by rail, either in 40-foot marine containers or 53- or 48-foot domestic boxes.

Much of the 53-foot domestic equipment is fresh from Asian production lines. Shipping lines have been adding to their marine container fleets. Double-stack rail providers such as Pacer Stacktrain also have been acquiring new equipment to go with the railcar capacity that TTX is adding. "Pacer Stacktrain started receiving new 53-foot containers in the first quarter and will continue to add additional capacity through November," said Pete Baumhefner, executive vice president of operations at Pacer's headquarters in Concord, Calif.

Trans-Pacific trade patterns, however, could produce spot shortages of intermodal equipment this fall. U.S. import containers from Asia exceed exports by more than 2-to-1. So when a 40-foot marine container or 53-foot domestic box is sent to the Midwest or Eastern U.S., it may sit for days or weeks awaiting a backhaul load. It typically takes 20 to 25 days to cycle a domestic container from the East Coast back to Southern California where it can be re-filled with Asian imports at a transloading center, Reehill said.

If too many boxes are stuck in the East or Midwest, importers may not have enough domestic equipment at transloading centers when they need it this fall. "The goods will be shipped, but a certain percentage of the freight will not be shipped on the day the customer wants to ship it," Reehill said. The intermodal industry refers to this condition as a "rolling inequity of supply and demand," he said.

Although spot shortages of intermodal equipment develop virtually every peak season, they could be more severe this fall because of the way the peak is developing. In recent years, the peak import season for holiday merchandise began in June or July and lasted until November. This year, however, the peak still hasn't started. Carriers and shippers predict a short but intense peak season, lasting five to six weeks in September and October.

The key to speeding the return of domestic intermodal equipment to the West Coast is to secure backhauls from the East Coast, said Pacer's Baumhefner. At times, though, companies are forced to move empty containers back to the West Coast.

Even when containers and trailers are available on the West Coast, shippers could face other problems, such as shortages of drivers to haul import containers from ports to transloading centers.

The proliferation of transloading facilities on the West Coast is straining the capacity of harbor trucking companies as well as the western railroads. The trucking companies rely on owner-operators who are paid by the trip. Delays in picking up containers at congested marine terminals has cut into the drivers' pay. As a result, drivers have left the industry faster than they can be replaced, causing shortages during the peak season.

So far, however, cargo is flowing through the ports smoothly. Several developments have combined to make Southern California marine terminals less congested than in previous years.

Importers shipped some merchandise early to beat a May 1 general rate increase of about 30 to 50 percent in the eastbound Pacific. Shipping lines also have added three more all-water services from Asia to the East Coast and have been moving more cargo through Northern California and the Pacific Northwest. Two large terminals have opened at the ports of Los Angeles and Long Beach since last summer, and all of the 13 terminals in the two ports have reduced congestion by establishing appointment systems for truckers or by keeping gates open longer.