Driver shortages and chassis availability at intermodal terminals continue to be an issue for customers, particularly in Southern California and the Midwest, according to service advisories from ocean carriers Hapag-Lloyd and Maersk.
According to a Hapag-Lloyd advisory from last Friday, average dwell times for Hapag-Lloyd boxes at terminals and ramps were 15 days at Long Beach, California, and 9.2 days in Los Angeles. These dwell times include rail and truck moves, according to Hapag-Lloyd.
The longer dwell times come as both West Coast ports and East Coast ports continued in May their streaks of record monthly volumes. Meanwhile, year-to-date U.S. rail traffic is 13.7% higher year-over-year, totalling nearly 11.8 million carloads and intermodal units, according to the Association of American Railroads. Carloads are up 8.3% to 5.3 million, while intermodal volumes are 18.5% higher, at 6.5 million containers and trailers.
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But the Midwest and Southeast were also experiencing longer dwell times as East Coast ports also witnessed increases in import volumes and Eastern railroads struggled to keep up with demand for service. Hapag-Lloyd boxes in Kansas City, Missouri, faced dwell times averaging 10.5 days and Chicago saw dwell times averaging 7.5 days. In the Southeast, average dwell times were 7.6 days in Norfolk, Virginia; 6.7 days in Charleson, South Carolina; and eight days in Savannah, Georgia.
The lack of chassis, compounded by higher volumes, constricts vendor capacity in places such as Chicago, according to a Wednesday advisory for Maersk.
Class I railroad executives at recent investor conferences described some of the ways they’ve been seeking to relieve congestion, such as improving communication with the ports and other supply chain stakeholders and holding containers that don’t need to go out as quickly.
But the congestion could continue into the second half of 2021 as retailers and grain shippers enter into their respective peak periods. Retail forecasts are projecting market strength to persist for the remainder of the year amid pent-up demand for consumer goods.
FreightWaves Market Expert Mike Baudendistel said, “in addition to all the capacity constraints inside of North America, the latest ocean rates highlight the constraints on the ocean as retailers and consumer goods companies continue the process of rebuilding inventories back to targeted levels.”
Class I railroads respond to supply chain challenges
Amid the existing congestion and anticipation for a busy fall peak, the Surface Transportation Board recently asked each of the Class I railroads to explain how it expects to meet demand for rail service in the second half of this year.
The railroads have begun to respond, noting the challenges that are disrupting the broader supply chain, including supply chain-wide labor shortages and the unavailability of chassis.
“The industry is experiencing a dramatic volume surge combined with driver shortages as well as labor shortages at customer facilities. This is delaying the unloading of containers and consuming additional chassis that are in short supply,” CSX (NASDAQ: CSX) President and CEO Jim Foote said in a Thursday letter to STB.
Domestic intermodal volume (right) is now roughly in line with year-ago levels since comparisons versus a year ago have become more difficult. (Source: SONAR)
“Loaded containers are waiting much longer for truck pickup causing significantly higher dwell times at certain terminals compared to pre-pandemic dwell. We are also seeing unloading delays at customer facilities which is constraining chassis resources (which we don’t own). Many new chassis that have been ordered will not arrive until next year,” Foote said.
He said CSX has been taking measures to relieve terminal dwell, such as using off-site container yards at terminals such as Memphis, Tennessee, and Indianapolis and regrouping international and domestic traffic at its Chicago facilities.
BNSF (NYSE: BRK.B) President and CEO Katie Farmer said in a June 9 letter that BNSF has been taking “aggressive measures” to increase capacity on its routes and in its intermodal facilities, such as increasing its lift equipment and using offset lots, and is seeking to expand its customer communication infrastructure.
But Farmer said part of the challenge stems from the different operating hours between supply chain stakeholders as well: “It is also important to note that our rail operations are 24/7 and our service can be impacted by parts of the supply chain that are not. As an example, some of our westbound flow is restricted into various terminals due to their processing capabilities.”
She continued: “We need all parts of the supply chain to be willing to operate 24 hours a day, 7 days a week to help keep up with these unprecedented demand levels. As these inland supply chain constraints moderate, the resulting velocity improvement on our rolling stock will generate more than enough capacity to handle the current backlog as well as increasing volumes, including those at major ports.”