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July 21, 2014

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24 THE JOURNAL OF COMMERCE JULY 21.2014 CONTAINER SHIPPING: PEAK SEASON FORECAST SPECIAL REPORT SIX MONTHS AFTER the most disruptive winter in recent memory for North American supply chain interests, the upcoming summer-fall period is shap- ing up as the intermodal peak season of shipper discontent. The makings are there for a perfect storm of rail delays in the summer-fall peak season, although analysts doubt ship- pers will see anything on the scale of the 2004 meltdown, when a surge in import volumes overran deployed capacity. Still, with ocean carrier slow-steaming, drayage truck shortages and potential labor actions, any intermodal delays will only increase the pressure on supply chains that already have little padding. "What you have is a lack of surge capacity in the system, and the railroads are running fl at out," said Larry Gross, a senior consultant at research fi rm FTR Associates. "If there is a backlog, you can't run any harder than you are, and more volume just further chokes the system." Railroads in western North America already got a taste of potential peak-sea- son trouble when shippers accelerated imports through U.S. West Coast ports ahead of the July 1 expiration of the International Longshore and Ware- house Union's contract. BNSF Railway and Union Pacifi c Railroad have been accused of being caught fl at-footed, with some terminal operators complaining the carriers were running two days late in providing locomotives and railcars to on-dock facilities at the Los Angeles- Long Beach port complex. Union Pacifi c, however, told the JOC the railroad doesn't have a crew or equip- ment shortage, nor has it experienced delays at the ports. BNSF did not respond to requests for comment. Cargo diversions from the U.S. West Coast, meanwhile, are testing the Canadian intermodal network. Cana- dian National Railway on July 7 issued equipment allocations to ocean carrier customers through Port Metro Vancouver and the Port of Prince Rupert to deal with a surge of U.S-bound cargo. "If the surge prior to the end of the ILWU contract is any indication of how traffic could be handled (during peak season), we could see some trouble," said Ron Sucik, president of RSE Consulting. "It would take a perfect summer with no fl ooding and derailments for them to run like they would hope." Intermodal volume in June jumped 6.7 percent year-over-year to 269,346 units, the highest for any month in his- tory, according to the Association of American Railroads. Domestic inter- modal gains are driving much of that growth, fueled by expanding manufac- turing production and shippers who are increasingly turning to the rails as trucking capacity tightens. Domes- tic intermodal traffi c rose 6.9 percent year-over-year in the second quarter, compared with a 4.1 percent gain in the fi rst quarter, according to preliminary Intermodal Association of North Ameri- can statistics. International intermodal volume rocketed 9.6 percent in the second quar- ter, a marked improvement from the 1.1 percent increase seen in the fi rst three months of 2014. Total intermodal volume By Mark Szakonyi INTERMODAL VISE Shippers worry any peak-season surge may be too much for intermodal rails to handle "WHAT YOU HAVE IS A LACK OF SURGE CAPACITY IN THE SYSTEM, AND THE RAILROADS ARE RUNNING FLAT OUT."

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