Global Transportation Trends Overheard at Chainalytics Freight Market Intelligence Summit

“There’s no shortage of disruptions to the supply chain, from Norfolk to Mumbai.”  Tweet this! “Now is not an easy time for freight transportation and logistics—whether...

“There’s no shortage of disruptions to the supply chain, from Norfolk to Mumbai.”  Tweet this!

Peter-Tirschwell

“Now is not an easy time for freight transportation and logistics—whether you’re talking about trucking in North America or ocean and air freight,” said Peter Tirschwell, senior director of content at IHS Maritime & Trade and keynote at the Chainalytics 10th Annual Freight Market Intelligence Summit.

 

Overwhelmed, Under-Prepared Ports, with Congestion & Gridlock All Over the World

Many ocean container lines/carriers have decided there’s only one way to make money in their commoditized pricing environment: order large, 20,000 TEU ships that reduce unit costs per container.

The problem?

Ports are now desperately trying to play catch-up, to prepare for these large ships, despite cranes that currently aren’t big enough to handle larger containers and productivity that can’t keep up. Larger ships have fewer ports to go to, since many harbors can barely sustain smaller-sized ships. Those ports that have increased their volume from larger TEU megaships (like the Port of New York) now face systemic gridlock, as marine terminals buckle under the pressure and (in New York’s case), trucks line up to the NY Turnpike, creating huge traffic jams on the Interstate.

Post West Coast Port Strike, Labor Repercussions

While for years, the West Coast handled most container ships from Asia, shippers are now diverting some cargo to the East Coast. East Coast-West Coast parity is one result of the labor showdown, and it has put enormous pressure on East Coast ports: New York is chock-a-block [with ocean freight], as is [the port in] Norfolk.

The East Coast largely can’t handle West Coast ocean freight overflow, although Savannah—the best-run port in North America—has increased its numbers 15 percent year over year and has no hint of congestion. (Unlike other U.S. ports, the Georgia Ports Authority runs the terminal itself.)

Ocean Rates Increasingly Volatile, Unpredictable

Spot rates from Asia to America have plummeted 50 percent in the last few months; meanwhile ocean carriers are unwilling to spend money to fund investments in marine terminals and U.S. ports compete with each other for business.

Ongoing U.S. Port Labor Issues

A political movement has evolved after the West Coast labor strike affected many shippers’ and retailers’ bottom lines. But could ports be regulated under the Railway Labor Act, which gives the president much more leverage? This move will likely take a Republican president in office. But without mitigation, labor strikes could continue unabated, since East Coast longshoremen will be negotiating their contract in two years and have vowed to strike, as well.

Logistics Service Providers (LSPs) are Gaining a Bigger Share of Business

Those offering a range of services beyond ocean capacity are thriving, which may explain some of the consolidation (truck brokerage rolled up into larger 3PLs who offer a suite of services). It’s increasingly difficult for logistics directors to manage complex freight spikes and availability on their own.

Driver Scarcity Becoming an Intractable Problem Across Modes – Not Just Trucking

While some truckload carriers have installed automatic transmissions to lure drivers, others are paying their existing drivers to recruit and others continue to operate driver training schools, the driver shortage and retention issue is escalating in the face of a warming economy that offers potential truckers better-paying opportunities. The driver shortage is even impacting intermodal carriers, which rely on drivers at either end of their route.

Driver-Turnover-Rate

Intermodal drivers are no easier to find than truckload drivers, so shippers who converted from over-the-road (truckload) to intermodal have been hurt as well. The driver shortage is also hurting ports, because there’s no clear indication of marine terminals’ ability to get truckers in and out of ports quickly, resulting in good turn-time metrics (trucker turn times can range from a one-way move into Savannah (30 minutes), a two-way move in and out of Savannah (1 hour) to a 3-4 hour turn time (in Norfolk, for example), which directly hits truckers’ incomes, especially owner-operators.

Rerouting Overflowing Ocean Freight to Smaller Ports

The Port of Prince Rupert on the west coast of Canada is starting to make more sense. Ten years ago, Prince Rupert was a little bulk, sea-rail port, with a decades-old vision of serving as a first port of call for U.S.-bound cargoes from Asia, where it is the closest port on standard Asia-to-North America maritime routings. Today it is a thriving port doing just that and it is about to double its capacity: Its marine terminal was just sold to the Dubai-based port operator DP World Ltd. (the #2 operator in the world), which is capable of bringing carriers in.

What’s the Net Result of the Constant Transportation & Infrastructure Upheaval & Uncertainty?

Tirschwell concluded, “All this is having an inverse effect on transportation—drawing out the inadequacies in the system.” He noted that to compound the issue, the United States is investing 2 percent of GDP in infrastructure, the lowest rate since before WWII.

You can view Tirschwell’s slides from the 2015 Freight Market Intelligence Summit below.

Chainalytics’ Freight Market Intelligence Summit is a Freight Market Intelligence Consortium  member-only annual event that provides member companies a platform to share and receive insights, explore relevant freight market trends and innovations, and interact with peers to build a stronger professional network.

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