DC Velocity - June 2011

go figure …

70%

The percentage of 52 truck fleets surveyed who said a shortage of qualified truck drivers is affecting, or may affect, their operations.

SOURCE: CK COMMERCIAL VEHICLE RESEARCH

A long-time intermodal analyst said the days of diverting inbound trans-Pacific ocean freight from West Coast to East Coast ports have come to an end because shippers are finding they save little money in return for accepting longer voyage times to Eastern ports.

The opening of the expanded Panama Canal, slated for 2014, has been expected to siphon away Asian import traffic from West Coast ports to East and Gulf Coast ports because it would make it possible for larger vessels carrying more containers to transit the Isthmus of Panama on an all-water route to East Coast destinations. In 2009, real estate and logistics giant Jones Lang LaSalle raised eyebrows when it forecast that the expanded canal could cause West Coast ports to lose as much as one-quarter of their current traffic base to East and Gulf Coast ports in the decades to come.

However, Ted Prince, who runs his own transportation consulting firm in Richmond, Va., said on May 13 that the unfavorable economies of scale for shippers argue against any further meaningful diversion from west to east.

“Our belief is that for most shippers, the decision to route over the East Coast has already been made and that further diversions … are unlikely,” Prince said in a webcast sponsored by investment firm Stifel, Nicolaus & Co.

As an example of the comparative transit times, Prince cited an all-water routing from Shenzhen, China, to Columbus, Ohio, a U.S. market considered susceptible to diversion to East Coast ports. Prince estimated that in an

Analyst calls further diversion of port
traffic “unlikely”

AUTOMATED

environment of “slow steaming,” where vessels reduce their speeds to save fuel, it takes 20 days to move freight from Shenzhen to Columbus over the West Coast, with 15 days spent on the water and an additional five days to get to Columbus. By contrast, it takes an estimated 28 days for the same shipment to arrive at Columbus over an East Coast port, with 25 days of voyage time and three more days spent in inland transportation, Prince said.

Yet Prince estimates that the typical shipper would save only $100 per forty-foot equivalent unit if it opted for the longer East Coast trip. For most shippers, such meager savings represent an unacceptable trade-off, Prince said.

“It’s just not a very good deal,” he said.

The beneficiaries of an East Coast routing would instead be the steamship lines, which would reap much greater gains than their customers would because of less-expensive rail pricing from the East Coast versus rail rates off of the West Coast, Prince said. However, vessel operators would be loath to pass along much of the savings to shippers for fear of cutting too deeply into their own profit margins, Prince said.

The industry’s economics appear unlikely to change anytime soon. In the webcast, intermodal industry veteran Tom Finkbiner, who has joined with Prince to form a consultancy called Surface Intermodal Solutions LLC, said the slow steaming practice would become the rule for vessel operators as long as bunker fuel prices stay at current elevated levels or go higher. ;