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July10, 2017

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SURFACE & DOMESTIC TRANSPORTATION TRUCKING | RAIL | INTERMODAL | AIR & EXPEDITED | DISTRIBUTION 56 THE JOURNAL OF COMMERCE www.joc.com JULY 10.2017 By Reynolds Hutchins T W O M O N T H S A F T E R BNSF R a i lway shifted its terminal outside Chicago from an entirely wheeled operation to a part- wheeled, pa r t-g rounded one, cha ssis were still scarce, underscoring many US exporters' challenges affording reposition- ing costs when commodity values are low. Terminal upgrades like BNSF's don't mean chassis can't and won't disappear in a matter of days if shipper demand skyrockets or cash-strapped ocean carriers are reluc- tant to pay the cost to reposition equipment — all of which happened in June. Terminal infrastructure does matter, though, and equipment shortages can be exacerbated when terminal operations are wheeled, where containers must be immediately loaded on chassis from trains, as is the case at most rail operations in Chicago and the rest of the US outside of the major Canadian Class I railways' facilities. That's because it's not actually a chassis shortage. "There's plenty of chassis. There's not a chassis shortage. There's never once been a chassis shortage. There's been a shortage of money," said Jason Hilsenbeck, president of Drayage.com and LoadMatch, an intermodal directory and container matching service based in the Chicago area. An employee at Parsec, the terminal operator at BNSF's Logistics Park Chicago (LPC), told The Journal of Commerce that one day last month the park was down to just 100 chassis total; by the next day, the park was out of CMA CGM chassis. On the following day, the park was out of chassis from the Chicago-Ohio Valley Consolidated Chassis Pool; then by the end of that week, chassis levels shot back up. Then they were out of parking. The challenge with chassis shortages is that they are just as chronic and pervasive as they are nuanced. BNSF has invested mil- lions of dollars installing six new wide-span cranes at LPC to transition what was once an entirely wheeled operation to a hybrid terminal, where containers can be stacked and held until chassis are available or imme- diately moved to chassis and rolled out. The upg rade was pa r t of roughly $1.2 billion BNSF has invested in its intermo- dal terminals since 2002 to make capacity more f lexible and responsive. "The new cranes began operations in April. The wide- span cranes have enabled us to incorporate robust ground stacking capabilities at LPC," Amy Casas, a BNSF spokeswoman, told The Journal of Commerce. That shippers were struggling to find chassis at BNSF's Chicago terminal so soon after a multimillion-dollar upgrade meant to make capacity there more flexible and responsive underscores just how chronic the chassis challenge has become. It's not just BNSF, and it's not just Chi- cago, Hilsenbeck said. "It's always money." According to Hilsenbeck, railways are reluctant to invest in entirely grounded operations at their terminals, because grounded operations take up more real estate and require two crane moves instead of the single move required at wheeled operations, which explains why most of the terminal operations in the Chicago area, and elsewhere, are wheeled. Meanwhile, ocean carriers operating under razor-thin margins after posting a collective $3 billion to $5 billion loss last year are reluctant to pay the price to reposition bare chassis back to terminals. That's true even if there's demand on the inbound and outbound side to do just that, which there is now. Export demand is high after a robust grain harvest in the US this past year and a boom in the resin industry along the Gulf. Carriers are also rushing boxes to Asia not only because demand is high, but because new Chinese reg ulations threaten to slow container production. But repositioning a bare chassis back to a Chicagoland terminal can cost a carrier anywhere from $60 to $120, Hilsenbeck said. "No one wants to spend it." At least, not without a return on invest- ment and there isn't a return on moving a set of wheels without a load. "They're not mak- ing any money repositioning for domestic. They're not making any money reposition- ing them for international," he said. Like musical chairs, it's a matter of when and where you are. For instance, the chal- lenge is particularly exacerbated at entirely wheeled terminals like BNSF's LPC last year, before its recent upgrades. Mean- WHEELING AND DEALING Grounded rail design aids US exporters, but repositioning costs price out gains "If there's no load for the container to come back to the terminal, the empty gets stored offsite at a depot."

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