• ITVI.USA
    15,913.180
    -35.240
    -0.2%
  • OTLT.USA
    2.793
    -0.005
    -0.2%
  • OTRI.USA
    22.300
    0.290
    1.3%
  • OTVI.USA
    15,900.990
    -35.610
    -0.2%
  • TSTOPVRPM.ATLPHL
    2.950
    -0.570
    -16.2%
  • TSTOPVRPM.CHIATL
    3.610
    0.650
    22%
  • TSTOPVRPM.DALLAX
    1.370
    -0.240
    -14.9%
  • TSTOPVRPM.LAXDAL
    3.550
    0.210
    6.3%
  • TSTOPVRPM.PHLCHI
    2.320
    0.220
    10.5%
  • TSTOPVRPM.LAXSEA
    4.110
    0.250
    6.5%
  • WAIT.USA
    126.000
    0.000
    0%
  • ITVI.USA
    15,913.180
    -35.240
    -0.2%
  • OTLT.USA
    2.793
    -0.005
    -0.2%
  • OTRI.USA
    22.300
    0.290
    1.3%
  • OTVI.USA
    15,900.990
    -35.610
    -0.2%
  • TSTOPVRPM.ATLPHL
    2.950
    -0.570
    -16.2%
  • TSTOPVRPM.CHIATL
    3.610
    0.650
    22%
  • TSTOPVRPM.DALLAX
    1.370
    -0.240
    -14.9%
  • TSTOPVRPM.LAXDAL
    3.550
    0.210
    6.3%
  • TSTOPVRPM.PHLCHI
    2.320
    0.220
    10.5%
  • TSTOPVRPM.LAXSEA
    4.110
    0.250
    6.5%
  • WAIT.USA
    126.000
    0.000
    0%
American ShipperWarehouse

Executive calls for more dialog over chassis

Executive calls for more dialog over chassis

   Most container carriers are exiting the chassis business, and they need to have more dialogue with shippers about their plans, said Bill Rooney, president of WFR Solutions and the former president of Hanjin Shipping.

   Though some steamship companies are moving faster than others to stop routinely providing chassis to move containers to and from U.S. terminals, Rooney thinks most will move in that direction because their return on investment in chassis is below their cost and because providing chassis does not result in premium freight rates or differentiate carriers from their competitors.

   Speaking this week to a webinar set up by the National Industrial Transportation League, the nation's largest shippers group, Rooney said he does not believe there will be an 'operational breakdown' as carriers exit the chassis business.

Rooney

   'I think the carriers certainly understand and really appreciate that is something they have to avoid, and obviously the shippers don't want that to happen. If there is a transition they want it to be smooth and I think it will be,' Rooney said.

   Speaking with shippers, 'I have almost uniformly heard that there has not been a lot of dialog,' he said, though added, 'I think it is picking up at this point.'

   For carriers, the decision to stop providing chassis is overwhelmingly a commercial decision, and 'that is where the discussion has to begin, when the carrier says to the customer, 'we are going to change the way we do business and let's have a conversation about that,' ' he said. 'That's the difficult talk that has to take place and the kind of talk there probably hasn't been enough of in order to make this whole thing work.'

   When carriers discuss this with shippers this year in contract negotiations 'you may see that negotiations on chassis end up in an adjustment in ocean rates to reflect that there is no longer a chassis provided.'

   Rooney said change is coming even in cases where carriers have been arranging door-to-door transportation — so called 'carrier's haulage' as opposed to 'merchant's haulage' where the carrier provides delivery to the dock and the shipper or consignee arranges shipment to a warehouse or factory.

   Despite announcements by some carriers that they will continue to provide carrier's haulage, Rooney believes that generally 'if they are going to get out, they are going to get out for both. They may stagger them, but from a carrier perspective, it does not make a lot of sense to incent someone to go to carrier's haulage.'

   Rooney said that while some trucking companies and large shippers will own chassis fleets, he believe most chassis will be owned by a relatively small number of large operators, and he thinks most chassis will be in chassis pools.

   'Generally chassis lend themselves to economy of scale, for a number of reasons having to do with capital cost, maintenance cost, management and repositioning,' he said.

   Rooney said there are about 650,000 international chassis, with about 335,000 owned by ocean carriers, 300,000 owned by leasing companies and 15,000 by other companies.

   New chassis cost about $8,000, and the average book value of chassis across the entire U.S. international chassis fleet is estimated to be about $3,000 to $4,000 per unit.

   He said the average cost of operating a chassis is about $2,000 per year. Add up the cost of leasing or owning a chassis, maintaining, insuring, and managing it, and Rooney said the per diem cost of a chassis ranges from $4.25-$7.00 or more and averages about $5.25.

   A lot of the variation has to do with the cost of maintenance and repairs in different parts of the country, he said.

   Companies renting chassis charge about $11-$15 per day, but Rooney said equipment may earn revenue only half the days in a year. Demand of shipping is cyclical and carriers need to have equipment for peak periods. There is a need to reposition containers, and no revenue is earned when a chassis is on terminal or being maintained or repaired.

   Shippers are reviewing how per diem chassis charges will affect their costs. Most distribution centers are not 'live load' where containers are stuffed or stripped while the trucker waits, but are dropped off at a facility and left, sometimes for days, Rooney noted.

   'If you have a couple of hundred chassis in your yard and tomorrow you are paying $11 a day for the chassis, what does that mean about how you manage your yard? Is there new software and hardware that will allow larger players to minimize their chassis cost?

   'I personally have a lot of faith in the market sorting this out in an effective way,' Rooney said. 'But the danger may be in the transition. How does the industry — carriers, truckers, shippers — how does everyone transition from one paradigm to the other without dropping the ball. The challenge is making sure the cargo flows smoothly during that transition period.' ' Chris Dupin

We are glad you’re enjoying the content

Sign up for a free FreightWaves account today for unlimited access to all of our latest content

By signing in for the first time, I give consent for FreightWaves to send me event updates and news. I can unsubscribe from these emails at any time. For more information please see our Privacy Policy.