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LA-LB terminals cast wary eye on intermodal rail cutbacks

Home News LA-LB terminals cast wary eye on intermodal rail cutbacks

Terminal operators at the ports of Los Angeles and Long Beach are bracing for an increase in their rail container backlogs as both Union Pacific (UP) and BNSF this week are implementing measures to restrict the flow of intermodal containers to their congested ramps near Chicago.

At the same time, tracking tools at both ports project a significant increase in laden imports from Asia in August, which will only pile more containers into a supply chain that is expected to be severely taxed during the peak shipping season that begins in a matter of days.

“The surge is very much alive and will continue in the months ahead, and it will stress the entire system,” Noel Hacegaba, deputy executive director and COO at the Port of Long Beach, told JOC.com Wednesday.

Los Angeles-Long Beach, with 12 container terminals, handles 50 percent of US imports from Asia, according to PIERS, a JOC.com sister product within IHS Markit. The ports have handled record or near-record monthly import volumes every month for the past year as they continue to struggle with container dwell times that restrict cargo velocity. According to the Pacific Merchant Shipping Association (PMSA), which represents terminal operators, container dwell times for local-delivery cargo increased to 4.76 days in June from 3.96 days in May. Rail container dwell times averaged 11.8 days from an already high 10.5 days in May, PMSA said in a statement.

Rail container dwell times may increase further depending how long restrictions on intermodal shipments to Chicago remain in place. Although the national rail networks from Southern California serve many of the intermodal rail hubs in the eastern half of the US, Chicago is the largest destination.

International rail volume between the Southwest and Midwest, which includes Los Angeles to Chicago, has increased faster than the overall North American market. Ocean container volume between the Southwest and Midwest increased 43 percent in the second quarter compared with a year ago, while volume rose 25 percent across all North America, according to the Intermodal Association of North America (IANA). Second quarter volume compared with 2019 — when the COVID-19 pandemic was not a factor — increased 22 percent between the Southwest and Midwest, while the broader North American market only grew 5.6 percent.

Therefore, when UP last week announced that it is temporarily suspending eastbound intermodal service from all West Coast ports to Chicago this week, and BNSF followed with a statement that it will meter intermodal shipments to Chicago, the terminal operators said it is likely that the backlog of rail containers that has been congesting their facilities in recent months will get worse. That will compromise the ability of the terminals to vacate both rail containers and those earmarked for local delivery.

“We’ve already cut [longshore] gangs because of the backlog in our yard. We have to use more workers to clear away the backlog to make additional space in the yard,” said a terminal executive who did not want to be identified.

Temporary lull in vessel arrivals is over

Terminal operators say that in a way, they are fortunate because for the past few weeks, vessel arrivals in the port complex were down and the time that vessels were forced to wait at anchor for berthing space was lower than it has been most of the year.

“It had gotten better, but now it will get worse,” said Ed DeNike, president of SSA Containers. SSA operates three of the six container terminals in Long Beach. As the vessel arrivals dropped, the time they waited at anchor dropped, and SSA was able to clear more containers for intermodal and local delivery from the terminals, he said.

In fact, the Port of Los Angeles Signal on Wednesday listed the average time at anchor as 4.8 days. Wait times had been consistently above five days last month.

Anthony Otto, president of Long Beach Container Terminal (LBCT), said some landside key performance indicators (KPIs) such as container dwell times and truck turn times at LBCT have been improving. “The KPIs are doing much better because of the greater cargo velocity,” he said.

Carriers for weeks now have been working more containerships each day than ever before. The Marine Exchange of Southern California said 28 containerships were being worked in the port complex on Tuesday. Gene Seroka, executive director of the Port of Los Angeles, told a port webcast last week that the number of containerships being worked each day is up 50 percent from the pre-pandemic period.

That is all subject to change, possibly quickly, if the dwell times for rail containers spike and terminals become more congested because intermodal rail service is being curtailed. An executive at a shipping line who did not wish to be identified expressed concern about UP’s decision to suspend eastbound intermodal shipments for a week.

“One week won’t make a difference for UP,” the source said, adding that the railroad should have looked closer at the impact of its decision on other members of the supply chain. “They did not give us a lot of heads up — a couple of days.”

The immediate impact of the rail cutbacks will differ from terminal to terminal depending which railroad is the primary provider. “LBCT is 90 percent BNSF. We’re somewhat isolated from the UP cutback,” Otto said.

Read full article here.

Source: Journal of Commerce

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