The ultimate symbol of globalization is the megaship. These new 77,000-ton leviathans ply the world piled high with containers containing the fruits of a global economy. Textiles from Bangladesh, computer parts from Malaysia, and you-name-it from China all travel the globe inside containers aboard massive container ships.
Much of it lands on North American shores, where it is unloaded at ports like California’s Long Beach and B.C.’s Vancouver port, or eastern ports like Charleston, S.C. and Halifax, and shipped inland via truck, train, or both — intermodal.
And the fact that giant ocean shippers like Cosco, Hanjin, Maersk, and OOCL are keeping ship builders’ order books full for these megaships speaks to the ever-growing demand for transportation — both on the high seas and on the highways and rail lines that haul goods out of the ports and into the consumer supply chain.
In the last five years North American intermodal growth has been averaging 5.5 to six percent a year. “And we don’t do projections, but barring any major impacts to the global environment — like another 9/11 — it appears we are on target to see continued five- to six-percent growth rates,” says Tom Malloy, VP of member services with the Washington-based Intermodal Association of North America (IANA).
Unfortunately, many Canadian container haulers aren’t sharing in this growth. Calls to container haulers in Halifax, Montreal, and Toronto all resulted in the same answer: a recent downturn in export business, largely due to the rise in the Canadian dollar.
“In terms of exports, people have always dealt in U.S. dollars and they’re holding onto their product or not moving it because of that. They don’t want to get less than what they started with,” says Brian Conrad of Halifax’s Conrad Transport.
Meanwhile, in Montreal, Garfield Transport general manager Ralph Fishman blames the dollar, rising fuel prices, border issues, and the competition from rail for the declining fortunes of carriers moving out of the Port of Montreal.
“The declines have been substantial over the last year or so,” says Fishman. “Another big impact has been from the railways,” he says.
“They’ve taken a lot of freight off the road. Rail has been progressively building up their resources to handle freight and it’s been building over the last three to five years. Plus there’s been a lot of pressure on the railways to improve their services to get some of the trucks off the road. They haven’t done it totally, but enough to effect the business of carriers such as ourselves.
“Sure there’s more containers arriving every year, but the steamship lines are trying to call inland ports closer to major market areas — you have a lot more ships calling Montreal which at one time were calling U.S. eastern seaboard ports. When containers arrive in Montreal, they just rail it in to the Toronto market.”
And in Toronto, a source at a local container hauler says business is down at least 20 percent over the past five months — largely due to the rise in the dollar and a lack of U.S.-bound exports.
“Because we have no exports, we’re sending people down to the port in New Jersey with bare frames to pick up import loads.” While exports are down, he did note that “imports are currently busy as hell” because it’s produce season. “We’ve got tons of containers down in New Jersey to pick up, but not a lot of them to take down.”
Meanwhile in Vancouver, home of Canada’s largest port, drayage firm Quantum Transport is desperate for drivers. Operations manager Chandra Nand says they’re even thinking of asking for government help to import overseas drivers for three-year contracts.
While numbers currently look grim in parts of Canada, containers continue to pile up at ports on both North American coasts — with no real end in sight.
“Both the indicators looking backwards and forward all show an upslope in container traffic that we expect to see at virtually all port areas. The growth market in containers is positive on both coasts, and for whatever moves it inland — be it rail or truck — the numbers seem very positive,” says Curtis Whalen, head of the American Trucking Association’s Intermodal Carrier Conference.
The growth has been primarily driven by consumer demand for international source products — clothing, electronics, products that are coming from low-cost producers in Asia.
Another major area of growth has been in intermediate goods —
manufactured goods that are not all made in one place.
“You now see components being shipped from one plant for assembly in another plant; or goods that are partially made in one place, like China, and shipped elsewhere, like Canada, for completion. That never happened before, and now it’s routine because the transportation costs are so low,” says Marc Levinson, author of a book on the history of the shipping container.
In Garfield Transport’s case, rail has taken a chunk out of the carrier’s container volumes out of the Port of Montreal, but intermodal carriers have being using rail as a cost-effective means of moving freight cross-country. Malloy says it’s up to three times cheaper to move a trailer or container via rail over a truck — as long as a customer isn’t in a big rush to get it someplace.
Ask a transportation Goliath like Schneider or Consolidated Fastfrate and they’ll say they use it all — rail, OTR, expedited, air — to get freight shipped.
Using a truck or rail “really depends on the characteristics of the freight and the demands of the customer. If a customer wants something moved 800 miles overnight, that’s not going to be conducive to intermodal movement. It’ll be trucked,” says Malloy.
But if they need something across the continent in 10 days, it makes sense to go intermodal. “It’s cheaper and from a motor carrier’s standpoint, they can redeploy assets to other areas — instead of tying up five trucks to go 3,000 miles, they can have them moving in different lanes and utilize rail for linehaul services and not incur all the fuel and exposure for those miles.”
The desire of most shippers is to have goods moved intact in their original container. Obviously if you’re going to move less than 500 miles, it makes more sense to maybe break up the shipment into vans and ship it by truck. But if you’re moving beyond that range and depending on the freight characteristics and the demands of the shipper, that’s when you pick and choose how you’re going to have your service provided — and it’s usually a combination of truck and rail. A major retailer like Wal-Mart has several different transportation options in their quiver to cover how they move goods.
Whether there is truck-rail competition depends on the shipping season, with the high demand time of year starting in late July/early August to deal with the lead times for fall merchandise and the run-up to Christmas.
“At that point there is some competition,” says Malloy. “Say Kmart has 40 containers of merchandise coming in to Vancouver, and they want to ship 30 of them via rail because the stores don’t need them all at once; however, they’re having a hot sale in selected stores and they need 10 of them moved over the road to these locations, then they’ll either move them intact in the containers, or have them unloaded and put them in OTR equipment. They’re meeting their internal goals by utilizing both services.”
Still, all those container-laden megaships steaming to North American shores are straining capacity — especially in the U.S.
“We’re having trouble in North America with rail capacity,” says Levinson. “Rail deregulation has meant that a lot of capacity has been removed. Duplicate lines have been taken out, double track has been turned into single track, and so the railroads have been having trouble coping with the high level of shipments.”
For the short term, the ATA’s Whalen is confident in trucking’s ability to pick up any slack from the railroads, but it hasn’t been easy — and the future is uncertain.
For ailing Canadian container haulers like Conrad Transport, Garfield Transport, and our undisclosed hauler out of Toronto, a shortage of drivers is definitely not a problem. But they’re not shedding drivers either.
“There will always be a need for the type of service we provide, like there is for any other specialized service. What the demand will be in years to come, I guess time will tell,” says Fishman. “Plus everything is cyclical. Not every year’s a winner and this year’s been very tough.”
Ret Tinning, a sales manager at intermodal carrier Berry & Smith Trucking in Penticton, B.C., says about 10 percent of the company’s business is hauling dray out of the Vancouver port, but they have no desire to go after more.
“There’s probably growth out there if we chased after it. We haven’t. And part of the reason why is the instability at the ports. We don’t want to be there if they decide to go on strike,” he says.
As for intermodal, which Tinning says makes up another 30 percent of Berry & Smith’s business (the rest going to OTR), he’s confident in its growth potential.
“It’s a very cost-effective way of shipping freight. And if you’re not in a panic for your freight then it’s definitely cheaper than OTR, so it’s got its place in the industry. And with the cost of fuel going up, I see it as a growing segment of the transportation industry. And that’s in conjunction with the economy growing anyway. Maybe to some degree everybody’s going to win by default.”
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