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Port Report: Drayage Takes Breather From 2018 Surge, But Risks Of Another Crunch Remain

P.USA | April 12, 2019

While tariff fight may not repeat itself, other factors that lead to drayage capacity crisis still in play for shippers this year.

The tariff-driven, U.S. import binge put pressure on all parts of the supply chain, with drayage fleets feeling the biggest shoreside strains. Capacity is slack now thanks to the seasonal lull, but drayage faces more risks for another crunch, according to executives at two of the nation's largest intermodal carriers.

Wait times for drayage drivers have lessened nationally, said Jarred Winkel, commercial general manager for Schneider National's (NYSE: SNDR) port logistics group. But the growth in vessel sizes and container volumes coming into the U.S. is still not being matched by additional drayage capacity.

Speaking to an audience at CONECT's annual Trade and Transportation conference, Winkel said marine terminals and rail ramps are readying to handle ever larger container volumes. But they still need to improve truck velocity to better use the limited pool of drivers.

"We can talk about building bigger ships and bigger intermodal ramps," Winkel added. "But we really need to understand there's a (driver) shortage in our business."

Winkel said the freight surges coming from ever larger container ships meant more difficulty in adequate planning of drayage capacity.

Yang Ming (TWSE: 2609) is set to phase in a 14,000 twenty-foot equivalent (TEU) ship to call on Vancouver, Canada and Seattle, according to container research firm PR News Service. Ocean Network Express is also said to be phasing in two 14,000 TEU ships to call on the East Coast by June.

The mega-vessels now calling on the U.S. "mean more congestion at ports," Winkel said.

"Not only do you need more drivers for a shorter period of time when a mega-vessel calls, but you also have all these drivers coming into ports at the same time."

"It's good to have larger vessels, but you also need to plan forward better," he said. Nor is the issue limited to marine terminals as Midwestern rail ramps are also seeing congestion.

"Global dray capacity is tight," Winkel said.

Wait times at coastal markets have fallen below their 2018 highs, but still remain elevated. Wait time in Los Angeles (SONAR: WAIT.LAX) is running at 120 minutes. The Elizabeth, New Jersey market (SONAR: WAIT.EWR) is seeing a 159-minute wait time, which is above its long-run level.

Given hours-of-service limits and electronic logging devices, he said a drayage driver needs a wait time of no more than 45 minutes to successfully make a one-way trip over 200 miles.

The 2018 wait times were particularly bad at the Ports of Los Angeles and Long Beach. Weston LaBar, Chief Executive Office of the Harbor Trucking Association, said the optimum time for a driver to drop off and pick up a container should be 60 minutes at the busiest U.S. port complex.

Waits peaked at 98 minutes in January during the last wave of containers coming into the U.S. They have since dropped to an "average of 83 minutes for all transactions with quite a large spread" depending on which terminal a truck calls on.

With drayage drivers unable to make enough trips to make a living, they can easily move to other segments such as over-the-road or even forklift operations at a warehouse, Winkel said. He said owner-operators, which make a sizeable component of the drayage workforce, can easily "ebb and flow" between these segments depending on what their preference.

"Some owner-operators have gone to those jobs" instead of drayage, Winkel said.

David McLaughlin, Chief Financial Officer of RoadOne IntermodaLogistics, said Uber and Lyft are becoming "the dray driver career of choice" thanks to being much easier than drayage trucking.

"You just need a car, you don't have hours of service, you don't need a TWIC card," McLaughlin said.

As with long-haul trucking, the pending switchover from automatic onboard recording devices (AOBRD) to electronic logging devices (ELD) will leave drayage drivers with "no margin for error" in their hours of service, McLaughlin said.

Electronic logging reduces drayage driver productivity by up to 10 percent as drivers make fewer turns in a day, McLaughlin said. That's even before drayage-specific constraints in finding chassis and waiting at terminal gates.

"You are looking at an additional 180,000 trucks to make up for that inefficiency," McLaughlin said.

Rail providers are also putting a stress on driver capacity through their precision railroading initiatives. McLaughlin said Union Pacific reduced the weekend free time for picking up containers at its ramps beginning this April. Likewise, the use of street turn fees from steamship lines incentivizes drivers to return to "congested terminals" to drop off containers.

After falling short of capacity last year, more shippers have been signing up for RoadOne's dedicated services, McLaughlin added, as he warned that 2018's capacity crunch could rear up again.

"Please don't suspect this lull is going to last," he said. "Can this problem get repeated for 2019? Absolutely, and quicker than it did in 2018."