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Monthly Archives: August 2013

Ocean Carriers’ Exit Puts Stress on Inland Chassis Supply

Ocean Carriers’ Exit Puts Stress on Inland Chassis Supply
The Journal of Commerce
Bill Mongelluzzo, Senior Editor | Sept. 19, 2013

A prominent trucking industry executive warned that operational changes at rail ramps and other inland locations because of the accelerating exit of ocean carriers from the chassis business are placing added stress on the fragile intermodal drayage industry.

Ken Kellaway, president and CEO of RoadOne Intermodal Logistics, which has drayage operations across the country, told The Journal of Commerce’s Inland Distribution Conference on Sept. 18 that intermodal drayage companies are already experiencing longer turn times and additional costs under the new chassis regime.

Maersk Line shocked the U.S. transportation industry in 2009 when it announced that it would no longer directly provide chassis to truckers, forwarders and cargo interests because of increasing maintenance costs and liability risks.

Most other container lines since then have either divested themselves of many of their chassis, or announced their intentions to do so, thus bringing to an end the 50-year-old tradition of carrier-provided chassis.

Philip Wojcik, president and CEO of Consolidated Chassis Management, the equipment operating affiliate of the Ocean Carrier Equipment Management Association, noted that since 2009 carriers have made 400 announcements that they would cease to provide chassis in 42 seaport and inland cities.

While the new chassis regime has caused problems at marine terminals, inland rail ramps are also experiencing their own unique problems because most railyards today maintain “wheeled” operations in which containers are stored on chassis.

As carrier-owned chassis are replaced with chassis provided by pools, cooperatives and leasing companies, railroads will gradually shift to “stacked” operations in which chassis are stored four or five high on ground, similar to the system found at many marine terminals.

Kellaway said intermodal drayage operators view this development as bothersome and costly as the truck turn time for grounded operations is 15 to 45 minutes longer than at wheeled facilities. Also, storage of chassis at off-site equipment pool facilities creates additional trips for truckers, he said.

Additionally, when containers must be “flipped” from one chassis to another or transferred between equipment pools, more costs are created that someone has to pay for. While these new costs and added delays reverberate throughout the intermodal transportation industry, trucking can not assume a disproportionate share of the problems.

“This fragile industry cannot absorb other sectors’ challenges,” Kellaway said.

Railroads understand that they will have to make the transition from wheeled to grounded operations at their facilities, but Brant Ring, assistant vice president intermodal terminal operations at BNSF, said this won’t happen overnight.

Rather, as railroads build new facilities or expand existing yards, they will consider designing them for grounded operations, and will purchase the lift equipment that will be needed. “The transition to grounded will be incremental,” he said.

Another fear shared by the transportation industry is that a number of the chassis that carriers are selling to pool operators and third-party providers are old and in need of repair. “I am concerned about the condition of the equipment,” said Paul Dean, director of intermodal equipment/maintenance at Norfolk Southern Railway.

The chassis often feature non-radial-type tires that are prone to blowouts, lights that need replacement and other residuals of wear and tear that will eventually cause mishaps or result in fines, Dean said.

Wojcik said the condition of the chassis fleets vary with the operators. CCM, he said, pays close attention to M&R requirements, and as a result only 3 percent of its chassis are out of service. “That’s better than the entire industry,” he said.

However, some factors in the chassis regime have yet to change. The most important feature of the new chassis regime at inland locations is that railroads will continue to sign their intermodal contracts with the ocean carriers as they do now. Those contracts will include a provision for adequate chassis that will then be implemented by the pools or leasing companies.

“The chassis are still there. They haven’t vanished. It’s just the relationships that have changed,” Wojcik said.