Chassis, Containers And Draymen All Stars Of The Intermodal Service Meltdown

It's times like these that it's more fun to write about transportation issues than to actually have to move freight (not that I've ever actually moved freight). On Wednesday, topics at the FreightWaves Intermodal Summit included port congestion, rail ramp congestion, the chassis shortage, the drayage capacity shortage, the international and domestic container shortage, and the persistent imbalances in freight flows. And the transportation industry has to clean up from Hurricane Ida on top of that.

Numerous speakers said that they expect freight demand to remain strong, citing robust consumer demand and the need for inventory replenishment. The other major theme was capacity constraints. In particular, chassis availability is perhaps the biggest intermodal capacity constraint right now, with Elise Gosch, VP of intermodal sales at Union Pacific, describing chassis as "the ultimate constraint of 2021." 

The full sessions are available on demand at tv.freightwaves.com and through the FreightWavesTV app. Here are my other takeaways from the Intermodal Summit: 

Ports along the East Coast are expanding to accommodate larger vessels. In particular, the Port of Virginia has invested heavily in that area and just received its largest inbound vessel ever, a 16,000-TEU container ship. The port expects to accommodate even larger vessels than that and can now handle 24,000-TEU container ships following capital projects to dredge (taking depths from 50 feet to 55 feet) and also widening channels. In addition, the port is adding rail lift capacity. Unlike many U.S. ports that are capacity-constrained, the Port of Virginia has surge capacity available. 

In light of capacity constraints, the Port of Virginia is focusing on accommodating customers that use intermodal in core intermodal lanes. Capacity constraints have caused carriers to shift resources to accommodate established customers that utilize intermodal in traditional intermodal corridors. As a result, there is little thought of taking share by addressing less developed, non-core intermodal destinations; that would require moving assets away from the core markets. The Port of Virginia wants to first make it through the fall peak season before potentially opening up intermodal service to a smaller location or two in 2022/2023, perhaps in a less torrid intermodal demand environment.

Union Pacific is taking numerous operational actions to address intermodal terminal congestion. Union Pacific has reopened some previously shuttered facilities to alleviate strain on its core facilities. The Class I railway is opening an intermodal ramp in Minneapolis, has made an investment in its West Colton (Southern California) yard, and is making temporary use of some facilities in Chicago.

One of the major intermodal capacity constraints has been a lack of drayage capacity leaving too many containers at terminals. To address the shortage, Union Pacific is collaborating closer with its Loop Logistics subsidiary to find drayage capacity. (Loop has capacity of its own.) In addition, Union Pacific is focused on improving drayage drivers' experience by minimizing the time it takes them to get in and out of intermodal terminals, making use of automated gate technology. (Drivers are verified at terminal entrances automatically.) 

Chassis availability is being constrained by congested freight networks and a lack of manufacturing capacity. Chinese manufacturing used to be the largest source for chassis used in the U.S., but the tariffs that resulted from the recent anti-dumping case (ruled in favor of U.S. manufacturers) has essentially eliminated Chinese production as a source of chassis. The U.S. manufacturers are ramping up production, but that process did not fully begin until this spring following the resolution of that case. Current chassis manufacturing backlogs are now extended through 2Q22. Plus, congestion at ports and rail yards has caused the existing pool of chassis to be used less productively. As a result, a chassis shortage seems likely until at least early to mid-2022.

Finally, some stats and anecdotes to illustrate shippers' pain: 

• Drayage capacity has been an issue throughout the country, not just on the West Coast.
• Typical wait time for a vessel at anchor is seven to eight days. 
• In some locations, containers have been sitting at ports or in terminals for 30-60 days. 
• Rail ramp congestion has been so bad in some locations that drivers are struggling to locate the assigned container.
• Some retail shippers have seen delivery schedules slip six to eight weeks or longer.
• Initially, shippers just want to get their freight into the U.S. even if it's not through their preferred port. Once it's stateside, shippers will then figure out how to get it to its destination. That has caused shippers to move freight through ports they don't usually use and forced them to move freight in domestic lanes that they haven't used before. For instance, there are a lot of new domestic transportation routes originating in Savannah, Georgia. 
• Some shippers that usually use two ports of entry are now using four to make their supply chain more flexible. Shippers expect this to be a permanent change.

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