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August 17 2020

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6 The Journal of Commerce | August 17 2020 www.joc.com Letter from the Editor later in the month. That will keep spot rates around $3,000 per FEU to the US West Coast and $3,400 per FEU to the East Coast through September, forwarders and carriers told The Journal of Commerce. "We're getting clients calling regularly saying they are upping their forecasts, that they are not going to be able to get additional space at the rates they contracted for, so [these large beneficial cargo owners] are looking for spot-market space, and for an extended period of time," said Kurt McElroy, executive vice president of Apex Maritime. The capacity constraints contin- ue on the landside. Drayage truckers and marine terminals at the Los Angeles-Long Beach port complex say chassis are in short supply, as they are whenever there's a rush of inbound shipments. DCLI, the na- tion's top chassis provider, counters that there are enough chassis. The capacity picture for forward- ers and shippers doesn't get any better outside the marine terminal. A sharp uptick in domestic inter- modal volume, much of it fueled by e-commerce shipments, is forcing the US Western railroads to turn away volume so they can focus on their core customers. After initially imposing a $500 surcharge on some shipments on Aug. 9, Union Pacific Railroad expanded the surcharge to all shipments, starting Aug. 16. Surging UPS volume is absorbing some of that intermodal rail capac- ity, frustrating some intermodal marketing companies (IMCs) trying to get space on trains. BNSF Railway is capping how many slots are available for the drop- off of domestic intermodal loads at the Los Angeles Hobart facility. In servicing Amazon and Walmart volume, J.B. Hunt Transport Services is driving up volumes on BNSF's net- work, according to three IMCs who asked not to be identified. Tight truckload capacity is priming spot market rates, and at least one less-than-truckload carrier has railed empty cars from Chicago to Los Angeles to meet demand for capacity. Spot truckload rates on key California outbound lanes were $1 to $1.40 per mile higher at the end of July versus the low point in April, according to a JOC analysis of data from digital broker Loadsmart and DAT Solutions. Spot truckload rates out of Los Angeles rose 20 percent or more sequentially in July to key markets such as Chicago, Dallas, and Atlanta, according to Loadsmart and DAT Solutions. The dislocation of transportation assets, layoffs and illness, coupled with a surge in e-commerce loads, has created one of "the most con- strained [surface capacity] environ- ments" on record, said Shelley Simp- son, executive vice president, chief commercial officer, and president of highway services at J.B. Hunt. "If you are an e-commerce player in California, this shows the challenges of being dependent on at most two western railroads for east- bound intermodal service," Miller said. "The brutal reality in business is when capacity is tight you focus on serving your core customers." E-commerce looks east The ports of New York-New Jersey, Charleston, Virginia, and Savannah are best positioned to at- tract more e-commerce cargo, as they have or soon will have deeper drafts for larger container ships, and inter- modal rail connections into the east, said Tim Feemster, managing partner of consulting firm Foremost Quality Logistics. But while 75 percent of the US population lives east of El Paso, Texas, many e-retailers don't have the capital to be able to carry enough inventory to support a five-corners strategy like the biggest retailers have adopted since 2002, following the US West Coast port lockout. The retailers that can expand their distribution center footprint and diversify their routings increas- ingly are expanding their presence on the East Coast. Walmart, for ex- ample, is building a 3-million-square- foot distribution center in South Car- olina that will pull from the Port of Charleston, port officials announced on July 20. The announcement comes on the heels of industrial developers announcing 3.5 million-square-foot of distribution space near the port of Savannah. "Inventory-control failures in the first half of 2020 — when many companies could not fill orders efficiently — have vividly illus- trated the urgency of having more inventory on hand to support online sales," according to real estate firm CBRE. "These changes are leading to a massive increase in infrastruc- ture spending and modernization of existing logistics hubs, and will put emerging industrial real estate markets in the southeast US on the radar of occupiers." JOC JOC Senior Editors Ari Ashe and Bill Cassidy contributed this story, along with Cathy Roberson, JOC senior contributor. email: mark.szakonyi@ihsmarkit.com twitter: @markszakonyi Continued from page 4 When space gets tight, it's the smaller e-retailers that get squeezed

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