(The Journal of Commerce)
An
intermodal transportation executive is warning importers who ship their freight in domestic containers and trailers to prepare for equipment shortages during the summer-fall peak shipping season.
"The railroads are fragile. They're full," said Brian Avery, senior vice president-intermodal at the Hub Group in Downers Grove, Ill.
Many shippers transload their imported cargo from
marine containers (schedules) to 48-foot and 53-foot domestic containers and trailers at distribution centers on the West Coast. Some of the freight continues on by truck, and much of it moves by rail to the
eastern half of the country.
Several concurrent developments indicate that shippers could experience an equipment squeeze as holiday season merchandise begins to move from West Coast ports later this
summer, Avery told the Los Angeles Transportation Club Tuesday.
Annual increases of 10 per cent or more of Asia imports are overwhelming the capacity of the nation's intermodal network. The railroads
and other equipment providers are struggling to accommodate the increase on a base volume of 10 million units, Avery said.
Also, containers are becoming quite costly due to the growing worldwide
demand for steel. The price of a new container this year is $11,993, an increase of $1,600 over last year. Railroads last year said they couldn't achieve an adequate return on their investment in containers,
so the paltry returns this year are discouraging railroads from investing in new equipment, Avery said.
Some 90 per cent of Burlington Northern Santa Fe Railway's intermodal business, for example,
moves in containers other than those operated by BNSF, Avery said.
Facing significant demands for their investment capital, railroads are putting their money where it will produce a better return,
such as in locomotives that can be used throughout their systems, rather than in containers and trailers.
Third-party suppliers such as Hub Group and Pacer International have stepped up their
equipment purchases in recent years so the network should grow by 6 to 7 per cent in 2005. Since there was some excess equipment capacity left over from last year, the network should be able to handle a
10-per cent increase in intermodal freight this year, he said.
During the first three months of 2005, which is traditionally the slowest period of the year for international transportation, total
intermodal moves increased 8.5 per cent over the same period a year ago, while the intermodal freight moving in containers increased 10.3 per cent. If growth accelerates in the second and third quarters,
equipment shortages could become a real problem, Avery said.
Railroads are attempting to head off this problem by pushing equipment through their networks faster so the containers and trailers can be
re-used more times during the year. Avery said that when Hub reduces the cycle time of its equipment by just one day, it produces the equivalent capacity of 500 new containers over the course of a year.
Shippers should therefore not be surprised to learn that the railroads are reducing the free time they allow for storage of containers at their intermodal facilities and are increasing the storage fees,
Avery said.
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