Wednesday, October 22, 2014

OVERLAND RATES IN NORTH AMERICA TO SKYROCKET?!

Warning for shippers: overland rates in North America look set to rocket next year

By Alex Lennane in Istanbul
US truck
Forwarders have warned shippers that rates for overland services in North America are expected to “sky rocket” next year as capacity tightens further.
Speaking at the FIATA World Congress in Istanbul last week, US and Canadian forwarder associations outlined several significant trends that would force up prices.
“We have seen a 10-12% increase in rates this year, and I wouldn’t be surprised to see another 10-15% rise next year,” said one delegate from the US.
“It’s good for intermediaries, but we are working with shippers’ associations to try to find a solution.”
One of the main challenges appears to be a driver shortage and changes to trucking regulations.
“We are experiencing an incredible capacity shortage, along with insufficient investment in infrastructure and rail equipment,” said another US representative. “Along with the driver shortage, it’s going to get worse.”
He warned that new regulations for driver monitoring devices which meant “drivers can’t fudge at all”, leading to fewer drivers on the road which “could reduce trucking capacity by 10%”.
He said combined with new insurance rules, which could quadruple the liability insurance on trucks, capacity was expected to decline – just as there has been severe tightening of rail capacity and the economy is improving.
“We are at 98% of available trucking capacity, so the heating-up of the economy could mean freight left at the docks. Rates are going to go up significantly in 2015 and 2016,” warned the delegate.
Canada is not faring much better, said Ruth Snowden, executive director of the Canadian International Freight Forwarders’s Association (CIFFA).
“It’s been a nightmare on the west coast. There was a local trucker strike in Vancouver in March, and the LA labour situation meant a number of shippers shipped early, and north.”
In addition, she noted, the government had ordered the railroads to ship a minimum of 500,000 tonnes of grain each week, following a record harvest. Canadian Pacific expected to carry 20% more grain in 2014 than it did in 2013, while the rail-car order backlog topped 60,000 in March this year. Canadian National said it would see a 68% rise in grain shipments.
The problem has been compounded by inefficiencies at the ports, said CIFFA’s Marc Bibeau.
“Last month we had discussions on whether the west coast ports work. We were looking at schedule integrity from the shipping lines. The domino effect from that creates a shortage of railroad capacity, compounded by truck capacity problems. It will take all stakeholders to come together to find a solution.”
The US delegates agreed that port problems, including slow sailings that had stretched supply chains, had exacerbated the overland challenges, but issues such as “the chassis shortage problem” in LA had “really hindered the evacuation of the ports and added costs for shippers”.
Over the past few years, lines have been selling their chassis to equipment leasing companies – and this year they divested at the two main gateways.
One delegate said: “Drivers went to Congress to make the owner of the chassis responsible for maintenance and now no one wants to own them. It’s a serious problem.
“The draymen get paid by the dray. They are not making enough to own the trucks, which have doubled in price, following the clean air requirements. Everyone is trying to find a solution.”
He added that the anti-coersion regulation proposal would exacerbate the problems.
“It essentially says that no shippers, receiver or third-party can encourage a driver to break the law or lose economic gain. But it’s a Catch-22, a rule by itself that creates a problem. If a driver says he can’t take a truck from A to B because of his hours, you can’t just call another driver. You just have to sit and wait for the first to become available.