The latest Port Rail Ramp Freight Index, produced by ITS Logistics, shows flows through US ports have returned to normal, but chassis availability at inland rail ramps is low, giving cause for concern that a rise in traffic will revive the problem.
Moreover, the stalemate in contract negotiations between port labour and terminal operators on the west coast may drag on until volumes pick up again, which is a major cause for concern, ITS warns.
While the index rates the situation at the ocean terminals as normal, inland rail ramps both in the eastern and western US are classified as “moderate”, largely due to the availability of chassis. Domestic 53ft units are readily available, but chassis for ocean containers are in tight supply at inland points, which is a big concern, noted Paul Brashier, VP of drayage and intermodal.
“We are already seeing evidence that there are not enough chassis inland,” he said.
The US administration’s moves to tackle detention & demurrage charges – an issue to which chassis availability has been a big contributor over the past couple of years – are not making much difference there, as they do not address the root cause of the problem, he explained. Dual transaction requirements and empty return availability have to be dealt with, he said.
He stressed the importance of getting chassis providers, shipping lines and railways acting together to ensure a sufficient supply of chassis at inland points, and laments a lack of forward-looking activity in the industry.
“Everything we’ve seen during the pandemic, as the industry struggled with different challenges, has been reactive. We were always behind the eight ball,” he said.
This lack means the industry and its customers will likely face a problem as traffic picks up in the third quarter, Mr Brashier warned. Projections from clients, as well as data for ITS’s index, point to a resurgence in volumes in the third quarter. With chassis supply already limited at inland points, the situation will get worse as traffic builds, he said.
The projected growth in traffic likely also figures in the plans of the International Longshoremen and Warehouse Union (ILWU) in its contract negotiations, Mr Brashier reckons.
“The ILWU has lost leverage because of the low volumes on the west coast, which further solidifies the stance that PMA is taking in negotiations in the near term,” he commented. “With volumes where they are now on the west coast, and diversions to the east, the ILWU is not in a strong negotiating position.
“I also do not believe the Biden administration will tolerate more work slowdowns with inflation now being of significant importance.”
He thinks the union will be dragging its feet in the negotiations until volumes build to boost its bargaining position.
He said it was in the interest of both parties to come to a resolution soon, as the suspense is keeping traffic away from the west coast and threatens to have long-term repercussions. Cargo owners have gained confidence in alternative routings through ports on the US east and Gulf coasts and, if they get to the point of making investment in infrastructure to support these, they are less likely to return, he said.
And this is only part of the problem for the west coast gateways, though, he continued. “If I start a new business, am I going to the west coast?” he asked, pointing to the disruption of the past year and the memory of contract negotiations in 2015 that led to work stoppages.
“We’re already seeing new companies set up shop in the east, especially the south-east and the Gulf,” he added.
On a more immediate note, Mr Brashier has some advice for cargo owners: dray rates are close to hitting bottom. He added: “Dray rates can’t get any lower. The numbers we’re getting now are similar to pre-pandemic economic downturn numbers.”
The index advises cargo owners to make a move now. “If you haven’t yet gone to RFP for ocean dray, or it’s been over six months, do so over the next 60 days, as rates are at the bottom for those services,” it advises.