West Coast truckload rates in quiet before the expected demand storm

Loads, prices to remain depressed—for now, consultancy says

By DC Velocity Staff

Spot truckload rates off the West Coast will remain depressed for at least the next few weeks as labor and management working the 29 ports impacted by a recently ended nine-month contract impasse struggle to reduce immense backlogs of idled cargo, a consultancy forecast yesterday.

According to DAT Solutions, which tracks spot, or noncontract, rates nationwide, it could take between 25 and 41 days for the large number of 20- and 40-foot containers to be drayed to a warehouse, unloaded and, in many cases, cleared through customs. In addition, contract truck capacity would first need to be absorbed before sizable volumes can hit the spot market, said Mark Montague, an analyst for DAT.

West Coast truckload rates, which became severely depressed in recent weeks as loads dried up due to the port gridlock, will probably stay weak until the process runs its course, Montague said. As of yesterday, DAT's load-to-truck ratio, which measures the number of available loads per truck, was at 0.7 in Los Angeles, Oakland and Seattle; 0.4 in Stockton, Calif., and 0.3 in Ontario, Calif. Those numbers mean there is only one available load for each truck, as low a number as a trucker can work from.

For shippers, any rate respite will probably come to an end by mid- to late March. Already, the truck supply chain is bracing for a snapback in eastbound rates as shippers scramble for all available capacity to replenish depleted store shelves and assembly lines. Expedited trucking services, in particular, could see a significant spike, with one industry source projecting as much as a doubling of current rates within days.

By contrast, rates off the East Coast—which were running strong due to increased demand in part from cargo diverted to East Coast ports—will begin to decline as truckers vie for any available westbound load in order to reposition their equipment in the West, according to Larry Gross, a consultant for consultancy FTR.

In a report yesterday, Gross estimated that between 400,000 and 500,000 individual containers along the West Coast are on vessels anchored in the water and tied up at the docks, as well as piled up at the terminals. Gross estimated that it would take eight weeks or longer to work down the backlogs, a figure that includes the Feb. 19 start date of the Lunar New Year, which this year occurred 19 days later than in 2014.

Most Asian factories that close during the 15-day holiday will ship their exports beforehand. This year's historically late start date will result in lower-than-normal seasonal volumes during a period in March when dockworkers and management will be busy pushing out cargo that languished during the labor-management impasse.

To add insult to the injury of shippers and consignees who've already suffered severe disruptions due to the nine-month impasse between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), the Transpacific Stabilization Agreement, consisting of 15 ship lines operating in the trans-Pacific trade, yesterday reaffirmed already-announced general rate increases. Hikes of $600 per 40-foot equivalent unit container will take effect March 9 and April 9.

In a statement, the group said the increases are needed to recover higher costs to meet increased demand and to offset higher expenses stemming in part from the tentative five-year agreement, which was announced last Friday.

"Carriers are mindful that all affected parties face higher operating costs as well as lost revenue and business opportunities amid the current situation," the group said in the statement. "But it is also a reality that we are all not simply returning to business as usual."

The group added that the increases will help reverse some of the carrier cutbacks of the past four years, and that the "limited improvement in freight rates to date neither addresses costs accrued since last September, nor the network investment necessary through 2016 to meet customers' needs."