Fits of Rage
Reporter's Notebook: May 9, 2022
Welcome to Please Haul My Freight — Edition 22. Here are items in my reporter’s notebook right now:
BLUME GLOBAL: The biggest story impacting the intermodal supply chain in the last couple weeks was the cyberattack on Blume Global. The incident — which began April 27 — highlighted how dependent the supply chain is on Blume to reserve containers, track and charge per diem, and pay demurrage invoices.
Craig Ingram, owner of Asset Based Intermodal, a drayage company in Dallas-Ft. Worth:
“This incident just changed how logistics and transportation companies operate. How have we as an industry, put all our marbles into one system like this? Maybe we see an end to this archaic system? There will be many lessons for ALL of us. For a company such as Blume to lose a ‘BILLION’ dollar system to a cyber incident... wow.”
One IMC explained that shippers are also impacted:
“Most of these larger shippers have automated reporting coming into their portals, showing what's left their yard, and they're not really relying on the drayage community to feed them that information. They are relying on Blume to get the date and time a container made it back to the gate because that's when their storage or per diem stops. It’s also important in our world because we manage the rail container pools. We rely on Blume to reserve containers. We rely on Blume’s reporting on per diem. It's not wrong. It's pretty accurate, so being unavailable for everybody is a huge problem.”
Another IMC explained to me that street turning UMAX and EMP containers is very difficult without Blume Global because it requires more legwork to determine when per diem ends for Shipper A and begins for Shipper B.
TRUCKLOAD CONTRACTS: Bill Cassidy and I had our quarterly catch up call with Dave Jackson, CEO of Knight Swift Transportation. We find these calls valuable because Dave delivers a lot of color and depth in his answers that you don’t usually hear on quarterly earnings calls.
On whether we’re seeing a shift now similar to what we saw in 2018:
“No, because in 2018, we had grossly over supplied equipment. And so we had record orders of trucks, we have flooded the market with supply. You can't get your hands on trucks right now. Over a two year period here, we'll probably only got 65% of the trucks. We've wanted to order new truck orders. And there just is no inventory there. So you don't have the small guys with reckless abandon growing, adding capacity, which has always happened in the past, and then brokers would exploit that. So we don't have that same fundamental going on.”
On why he thinks spot rates in California will bounce back in a couple months:
“There are a bunch of vessels outside of China right now. I can't even comprehend how much freight is just sitting out there. There's going to be some urgency when that stuff hits. But isn't it interesting, you have three big things that are all going to happen in the back half of this year: 1) this wave, unprecedented wave of freight that's gonna hit the west coast; 2) they're in the middle of or they're just beginning labor negotiations; and 3) the California CARB regulations say that dray trucks must be 2010 or newer by January 1, 2023. It's estimated there are 8,000 drayage trucks in California right now that are not compliant that do not have 2010 or later trucks, and it has never been more difficult to buy used equipment than it is right now.”
Jackson didn’t say much on his LTL ambitions, other than Knight-Swift needs to acquire an LTL in the Northeast and Southwest to become a national LTL, and historically Knight-Swift prefers non-union companies with a family history (see Abilene Motor Express and Barr Nunn).
One name that fits well is Oak Harbor Freight Lines on the West Coast, and Jackson could also acquire some of the nine terminals Yellow is shedding in the West too.
TRUCKLOAD SPOT: Rates continue to fall on the dry-van spot market. Rates on DAT’s Top 50 Lanes are down about ~11% year over year, excluding fuel.
Our JOC Shipper Truckload Spot Rate Index was up 6% year over year on 4,335 US lanes, but I don’t anticipate those numbers to hold for long. What happens on the West Coast tends to spread east very quickly:
Our Cargo Chief data on the JOC Intermodal Savings Index lanes shows trucking rates were up 2.95% YoY in April. As reported in the edition “Growing and Shrinking, Altogether!” another pricing portal we monitor went negative year over year in April.
JOC INTERMODAL SAVINGS INDEX: Our proprietary quarterly report into domestic intermodal pricing was released last week. There is a lot of useful data that shippers can use to determine where to use intermodal and where to use truckload. We found shippers saved more money on intermodal contracts than in any first quarter on record, as both intermodal and truckload contracts rose 20%+ YoY.
We found, however, that spot intermodal savings fell to 12% in March. Lanes less than 1,200 miles may soon become truck competitive on spot market loads, if spot truckload rates keep falling in Q2.
Loads out of Los Angeles subject to UP’s surcharge are already cheaper on trucks in many cases.
JOC paid subscribers can view the Q1 report in the link above, and contact me for the underlying data for any of the origin and destination pairs. We will have a session at the JOC Inland Distribution Conference on Sept. 26-28 in Chicago on intermodal vs. truckload pricing.
TIA REPORT: The Transportation Intermediaries Association released its Q1 report last week. I pay close attention to the intermodal data:
The invoice amount is lower than other data sources for Q1.
IANA: $3,380.06, +20.5% YoY.
J.B. Hunt: $3,139.00, +27.5% YoY.
JOC Contract Intermodal Savings Index: $3,042.34, +18.9% YoY.
The data is in unison on margins: as low as 8% and as high as 13% in any given quarter.
RAIL DEMURRAGE: The National Shippers Advisory Committee is urging the Federal Maritime Commission to crack down on rail storage fees (demurrage) on containers moved via a through bill of lading — when the ocean carrier is responsible for the door-to-door delivery.
The Surface Transportation Board oversees the US Class I railroads, but intermodal is exempt from regulations on demurrage covering other commodities.
Commissioner Carl Bentzel wants to apply the FMC’s standards on demurrage to rail storage fees. Here is what he told me:
“We could review those sorts of claims because the ocean common carrier is providing the service on a through bill of lading. It’s their contract, and it may include items that are prohibited by the FMC. Under my view, the ocean common carrier could be held responsible for violations of their subcontractors. Now if the contract is merchant haulage terminating at the port or the rail ramp, we probably wouldn't have the authority to review those, but I would embrace an interpretation to allow us to consider claims under a through bill of lading, even if they were related to demurrage charges by a railroad.”
Bentzel said my coverage of the meltdown in Chicago last summer, including Union Pacific Railroad charging $11,000 in demurrage to one customer, was a catalyst to act. Shippers have been pushing the FMC on the issue for a couple years.
One question is unanswered:
Does STB Chairman Martin Oberman support or oppose the FMC asserting jurisdiction over rail demurrage on carrier haulage? I reached out to him and his staff, and so far the Chairman has not responded to any of our requests. What about Robert Primus, Patrick Fuchs, Karen Hedlund, or Michelle Schultz? Do they support or oppose Bentzel’s position?
IPI REPORT CARD: Chicago is a mess. It’s difficult getting ocean containers at BNSF Logistics Park Chicago, and the situation is quickly becoming as bad as last year, according to my sources.
BNSF is putting containers in Lot 17 and an ITS Conglobal depot, and we’re hearing that BNSF is using Lot W again. Union Pacific is not having problems.
A drayman tells us there are problems in NS Landers and CN Harvey:
“We've had multiple boxes both at NS and CN over the last couple of days where the drivers go in and it takes 10 lifts to get to that box out because the stacks are getting so big. We're not getting service because they have to move 10 boxes to get the ours, so it's just not happening. We called NS because of how long our driver was waiting and we got an extra free day because of it.”
Chassis are not easy to find at the start-stop locations near the eastern US railroads:
“If a guy goes and hooks the chassis, and the chassis is bad order and he needs a flip, I might as well forget my plan for that guy for the rest of the day because it's two to three hours to get it done. Your chances of getting a bad order 40-foot chassis are way higher than 53-foot chassis, and also way higher than two years ago. We sent seven drivers home before 10 o'clock in the morning because of a lack of good chassis. The situation is about as bad as it was last year.”
But folks in Dallas and Memphis ramps tell me it’s all good. Conditions are fluid, and much better than a year ago:
“I think what is happened is that shippers have changed their routing patterns after last year to avoid Los Angeles and Savannah IPI into Memphis. They are routing cargo into Houston, transloading, and then trucking directly to their distribution centers. It’s not touching the rails anymore, so Memphis ramps are doing a lot better.”
Regardless, US railroads need to work closely with their third-party terminal operators — ITS Conglobal, Parsec, PacRail, Rail Terminal Services — to recruit more workers for the rail ramps. There doesn’t seem to be enough operators to work the lift machines, side loaders, or yard hostlers right now.
BNSF HI-VIZ: Speaking of upset railroad employees, there was an article last week in the Montana Free Press on BNSF’s new attendance policy focusing on an engineer who left BNSF after eight years.
SHIRTS AND SHOES: Vietnam is having trouble manufacturing apparel and footwear because most of the raw materials come from……China.
More from Bloomberg:
China’s Zero Covid strategy is “dramatically” reducing key material at shoe factories, which derive about 60% of supplies from China, said Phan Thi Thanh Xuan, vice chairwoman of the Vietnam Leather Footwear and Handbag Association. It is also driving up the costs of logistics, she said.
Production of televisions dropped 18.9%, mobile phones fell 9.9% and fabric decreased 9% during the period…China’s continued strict disease control procedures at some border gates in northern Vietnam have resulted in supply chain disruptions and restrictions in the flow of some products.
GLOBAL PORT TRACKER: A robust forecast from the National Retail Federation on US laden imports:
Ports have not yet reported April numbers, but Global Port Tracker projected the month at 2.27 million TEU, up 5.7% from last year.
May is forecast at 2.3 million TEU, which would be down 1.4% from last year but nonetheless the third-highest level on record. June is forecast at 2.29 million TEU, up 6.6% from last year; July at 2.31 million TEU, up 5.3%; August at 2.29 million TEU, up 0.9%, and September at 2.15 million TEU, up 0.3%.
The first six months of 2022 are expected to total 13.5 million TEU, up 5.1% year over year.
WAN HAI: Ocean carrier Wan Hai accepted an $850,000 fine for improperly assessing detention penalties in 2021 on empty containers that no terminal operator would accept. Wan Hai does not admit to violating the US Shipping Act, but it must “cease collection attempts against the Shipments at Issue which were previous enumerated in the Order of Investigation and Hearing issued on December 30, 2021.”
TOO MANY EMPTIES: With so much cargo coming into East Coast ports, there are problems handling the empties. No one wants a repeat of the issues with empties in Southern California. The Georgia Ports Authority diverted empties last week for HMM, Maersk, Yang Ming, and ZIM. The South Carolina Ports Authority has been diverting certain empties on and off for months. And Michael Angell has a good piece in The Journal of Commerce about empties in the Port of New York and New Jersey.
YELLOW: In late April, the Congressional Oversight Commission questioned a $700 million loan to the then YRC Worldwide (now Yellow) because of its contracts with the Department of Defense. The New York Times wrote:
The report, released by the Democratic staff of the House Select Subcommittee on the Coronavirus Crisis, describes the role of corporate lobbyists during the early months of the pandemic in helping to secure government funds as trillions of dollars of relief money were being pumped into the economy. It also suggests that senior officials such as Steven Mnuchin, the former Treasury secretary, and Mark T. Esper, the former defense secretary, intervened to ensure that the trucking company, Yellow Corporation, received special treatment despite concerns about its eligibility to receive relief funds.
OCEAN TARIFFS: The Federal Maritime Commission issued a notice of advanced rulemaking for changes to the rules on tariffs. More from Jeffrey/Fenneman Law on what you need to know as an NVOCC. The comment period goes through May 28.
CARGO CHIEF: FactorFox Software and Cargo Chief entered into a strategic partnership a few weeks ago that should benefit both companies. To the extent that this partnership helps Cargo Chief provide even better data on real-time rates between brokers and drivers, we believe JOC paid subscribers and readers of this Substack will benefit from our analysis.
JOC INLAND: If you enjoy Please Haul My Freight, please register to attend our conference at The Westin Chicago River North this September. Lots of great conversations on intermodal, drayage, and trucking. Find me and please say hello!
Any opinions in this notebook represent the author’s views, not the Journal of Commerce, IHS Markit, or S&P Global. Any rumors in this notebook are just that: rumors. Unconfirmed. Not news stories.
Do you have an opinion or a subject you’d like me to cover? Email me ari.ashe@spglobal.com to send your thoughts.
You may also request the data behind JOC’s Intermodal Savings Index and JOC’s Shipper Truckload Spot Rate Index, available to paid JOC subscribers.
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