US importers are being forced to take greater control of landside delivery, whether by using expedited full truckload services or by funneling ocean containers through transloaded facilities to spit out freight in 53-foot domestic containers or trailers, or even by tapping less-than-truckload (LTL) capacity.
Shippers’ embrace of new inland distribution points during the COVID-19 pandemic, such as Salt Lake City, Las Vegas, and Phoenix, has further redrawn the inland delivery landscape. In many cases, the point of deconsolidation for containerized freight is shifting further inland from the coasts.
Shippers tell JOC.com that domestic intermodal contracts are rising more than 10 percent across the US, while truckload contracts are rising in the upper-single-digit range. LTL trucking companies are pushing for low-double-digit percentage rate increases in contract negotiations, according to LTL shippers.
High trucking spot rates may moderate as more contracts with substantial price increases take effect, drawing spot truckload capacity back to the contract trucking market. However, that hasn’t happened yet, and it’s not clear when — or whether — continuing shortages of labor and equipment will ease.
Keeping freight moving, shelves stocked, and plants running will continue to take precedence over price, as importers grapple with supply chain disruptions from winter storms to shortages of labor and raw materials.
The initial challenge, however, is simply getting freight out of congested port terminals. Ports are unlikely to see much relief in clearing cargo backlogs, even as the annualized growth in US imports slows to 1.5 percent in the first half, according to the Global Port Tracker report from Hackett Associates and the National Retail Federation.
“A shortage of equipment, worker availability, and storage space at distribution centers and warehouses across the country remains problematic, as does the export of empty containers back to Asia,” Ben Hackett, founder of Hackett Associates, said February's Global Port Tracker.
The Los Angeles–Long Beach port complex, which handles about 50 percent of total US containerized imports from Asia, according to PIERS, has experienced unprecedented congestion during the rebound of the US economy that followed early COVID-19 lockdowns in the spring of 2020.
Key indicators suggest congestion has stabilized, although the largest US port complex is nowhere near the state of cargo fluidity it was prior to the pandemic. The average truck turn time at Los Angeles and Long Beach terminals was 92 minutes in January, up from 62 minutes in July 2020, according to the Harbor Trucking Association.
The average dwell time on Los Angeles–Long Beach docks for containers that move by truck to local destinations reached 7.7 days in December. That was down from 8.4 days in November but still nearly double the pre-pandemic average of less than four days, according to data from the Pacific Merchant Shipping Association.
Transloading to domestic intermodal may become a better option for those importers in early 2022, as railroads have canceled surcharges and intermodal marketing companies (IMCs) including Hub Group, J.B. Hunt Transport Services, and Schneider National have ordered thousands of 53-foot containers.
And large IMCs aren’t the only ones adding containers; LTL providers such as ArcBest, Estes Express Lines, and Yellow are also increasing their equipment fleets. That itself is a sign that transportation providers known primarily for domestic point-to-point service are crossing deeper into international business as their customers seek capacity.
But importers are demanding greater speed from transportation providers as they try to make up for time lost on the ocean leg. That’s pushing more freight that would have been shipped inland by rail into tractor-trailers, even if there are savings available putting cargo on trains in 53-foot containers.
Some shippers are turning to over-the-road truckload and LTL trucking, but they’re hitting well-publicized capacity and pricing constraints in those sectors as well. That’s making it difficult to tap overflow capacity as shippers have in the past.
The truckload sector is undergoing a shift of capacity in the form of truck drivers. Those drivers are leaving larger carriers to work for smaller companies or strike out on their own, a trend that has accelerated during the COVID-19 pandemic as truckers sought to capitalize on spot truckload rates that soared to new records.
Spot market truckload rates from major West and East coast ports were particularly strong late last year. From October through December, the average monthly spot rate from seven West Coast ports to Chicago rose from $2.88 to $3.25 per mile, according to DAT, outpacing the national average.
Larger, high-volume shippers have difficulty connecting with those smaller truckload carriers, such as their smaller drayage counterparts. Many shippers are reportedly asking LTL carriers for help, betting they have more capacity to spare. But as shipping demand rises, LTL is hitting capacity limits.
LTL networks were hit hard by the severe winter storm that struck about two-thirds of the US in early February, dislocating freight and disrupting linehaul shipping schedules. Unless shippers are already a carrier’s customers, they’re unlikely to get access to that carrier’s capacity anytime soon.
Pearce said she is hearing a consistent message from C&D Trojan’s LTL providers. “They’re saying ‘no’ to freight that doesn’t make sense for them,” either in terms of return or their freight mix. A more disciplined approach to network management is evolving from LTL pricing discipline.
Yet, customers are drawing LTL providers closer to ports. “We absolutely have customers that are begging us to pick up loads at the ports and expedite them,” said Webb Estes, vice president of process improvement at Estes Express Lines, the fourth-largest US LTL operator by annual revenue in 2020.
Estes Express plans to replace a 25-door facility in Savannah, Georgia, with a 125-door terminal this spring. The Richmond, Virginia-based carrier also handles deconsolidated freight from the ports of Norfolk, Virginia, and Charleston and is building a terminal in Southern California to expand capacity.
“We see no shortage of freight coming into the US in the coming years,” Estes said. The result will be more distribution options for shippers. New options will be needed as fluctuations in capacity and demand continue, driving containerized freight into new transportation channels.