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IANA panel: Intermodal chassis squeeze easing, but it’s far from over

Executives say market for vital equipment likely to be permanently changed

(Editor’s note: an earlier quote at the end of the article attributed previously to Daniel Walsh has now been correctly attributed to Mike Wilson).

LONG BEACH, Calif. — The great chassis squeeze of 2021-22 isn’t over and likely will leave in its wake a changed market for the equipment so vital for intermodal movements, according to a panel of industry executives. 

That was a key takeaway from the panel on the second day of the Intermodal Association of North America’s annual exposition. While the worst may be behind the industry, things aren’t all that much better, several of the panel members said. 

The disruption in the market has taken a staid corner of the supply chain and put it through a wrenching change, said Ronald Widdows, the CEO of FlexiVan, which leases chassis.

“Customers didn’t have to think about chassis,” said Widdows, talking about earlier markets. “It came with the container.”

But that’s changed, according to Widdows.

“If you’ve gone through the experience of the last two years, you get it now,” he said. “The awareness is that if I need a set of wheels and it’s not there, the effect is not just on my supply chain, but it threatens the business model.”

According to Daniel Walsh, the president and CEO of industry leader TRAC Intermodal: “We’re seeing a freeing up of the market and product is starting to move. [The industry is] still dealing with inventory that is temporarily dislocated.”

TRAC partnered with a chassis producer to provide more supply earlier this year. 

Volume will be “easing” through the fourth quarter of 2022 and into 2023 “but still will be remaining reasonably robust,” Walsh said. 

However, Dave Manning, the president and CEO of the North American Chassis Pool Cooperative (NACPC), was less confident about a significant rebalancing of the market anytime soon.

Current chassis utilization is 90%, Manning said, and that tight number is running up against the fact that “over the next few weeks customers are asking for thousands and thousands of chassis. I think it’s going to be a lot longer than just a few months. It’s going to be late 2023 before we catch up with the backlog and the indications are now that we’re into 2024.” 

Part of the squeeze on supply, according to CCM CEO Mike Wilson, is that too many chassis are experiencing excessive dwell at various places in the system.

“If the chassis is doing what it is supposed to do (transporting a container), that is one thing,” Wilson said. “But if it is just sitting out there under a container somewhere, that isn’t good.”

Mike O’Malley, the senior vice president of government and public relations for DCLI, noted an aspect of the excessive dwell: Even though companies are getting paid for the chassis they have out in the market, it can hinder servicing customers.

“We are in the odd position of having to ask our customers for the asset back,” O’Malley said. “[When that request is made,] we’re asking them to stop paying us.” 

Wilson said he expected excessive dwell time to be a “significant factor that we should see alleviate over the next three to six months. Those chassis will start to come back into the system.”

Looming in the background to the tight chassis market is not just that all elements of the supply chain have been disrupted. But the supply of chassis into the U.S. also was hit with a steep tariff regime. Those tariffs, handed down by the Department of Commerce, were levied approximately 220% against Chinese manufacturers.  

Manning said the annual supply of new chassis had been running at about 40,000 units, with roughly 75% of that coming from China. “The tariffs shut that off,” he said.

The tariffs did what they were supposed to in that a renewed domestic supply was created. But Manning described the amount of new supply as just a “thimbleful.” Just obtaining parts for building a chassis is a three- to four-month wait, Manning said. 

But he expressed optimism about the supply of domestically made chassis after manufacturers get through the ramp-up. As far as when, it isn’t soon.

“I think it will be through 2023 before we see a supply-demand balance,” Manning said.  

The drop in Chinese imports has led to strains in the supply chain. Doug Hoehn, the president of chassis and containers at Milestone, said the company went from one supplier to seven quickly.

“We are looking to buy chassis from multiple locations,” Hoehn said. “It changes everything for us.”

While the tariffs and changed role of the Chinese have created short-term disruptions, Hoehn said the long-term impact is positive.

“It’s good for the market as we continue to bring in new participants who can bring in new ideas,” he said. 

A potential lasting impact to chassis supply coming out of the last few years might be the decline of the traditional chassis “gray pool.” Under that model, numerous suppliers contribute chassis to a pool located near a key port or logistics hub, and truckers can use any of them.

But with the uncertainty that has hit the market in the last two years, that model is under pressure. 

“[Increasingly], we’re looking at a direct interface with our customers,” said Wilson, noting that the models of the past have issues with inefficiency, but the possibility of change still exists. “As (pools) evolve, continuing to offer interoperability will be important to ensure solid fluidity in the market.” 

More articles by John Kingston

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3 Comments

  1. Illegal contracts of Shipping Lines (SSL) and 3 chassis suppliers (FLEXI-VAN, TRAC, DCLI) is The Problem (See FMC docket no. 20-14). In those contracts chassis suppliers get exclusive rights to bill for chassis use – no matter what chassis is under container, chassis supplier its the “exclusive right” to bill trucker. In return, SSL gets guarantee of chassis availability (priority) and about 1/10th of the rate truckers are being billed.
    Essentially, truckers and shippers never see any chassis available. SSL, on their direct shipments always have chassis available and can sit for weeks on those chassis – it cost them next to nothing.
    Then, if you ask any US chassis manufacturers, how many chassis those 3 above have bought (or intended to buy) since 2005 (when chassis model changed), you will hear the same answer – few dozen! Why? But then why would they – it is oligopoly – entire Ocean container chassis market is owned by 3 companies. Well, technically, three SSL groups owns it brought those three chassis suppliers.
    And there you have it – Intermodal crisis – which everyone on the inside agrees – is actually chassis crisis.
    But those 3 bigwigs will continue blaming truckers for holding chassis too long 🙂 – they make insane amounts of $ of off thin air – worthless (40+ old on average)chassis generates about $8000-10000/chassis/year, while mostly sitting!
    Imagine Herz would blame car shortage on people holding on their cars too long! 🙂

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.