MARS Winter Conference 1/13/16
Intermodal 101, 201, 301 and Current Issues and Trends
Slide Nbr 1
Greetings
Good afternoon everyone and thank you George for inviting me to give this
Intermodal Presentation. As information I have many slides but will talk very
fast to cover everything. Do not worry about missing something as I will
make the slides as well as the verbage available for you to review later.
Slides Nbr 2 & 3
Acknowledgements
Skip to Next Slide and Read page and make acknowledgements.
Slides Nbr 4 – 7
Glossary…..Speaks for itself.
Slides Nbr 8 - 12
Early Intermodal Developments
Circus Loading and the Development of Tie Downs morphing into the
Stanchion. Lift Devices.
Slides Nbr 13 - 15 Evolution of Rail Cars and Development IBC
Slide Nbr 16
Slack Action
Slide Nbr 17 & 18 Domestic Containers and Reefer Dom Cons
Slide Nbr 19 - 21
Domestic Container Counts and Info
Slide Nbr 22
Three Largest TL Carriers own 40% DC's
Slide Nbr 23
Global Trade Routes Hit 6 times to show Rts
Slide Nbr 24
Shanghi – North American Ports
Prince Rupert shortest distance and 48 hrs closer to China.
Slide Nbr 25
How does it get there once it lands at Port
There are multiple routes depending on which port you arrive at. You can
come out of LALB, Oakland, Seattle, Prince Rupert, Vancouver, Connect in
Chicago for movement East, Lazaro Cardenas, Houston, Savannah and
Charleston, Norfolk, Jacksonville or up the FEC.
Slide Nbr 26
What makes a location more favorable than another
Why is LALB the busiest port. Why is Chicago the center of the rail industry.
Large populations or consumption areas….think PSW the 6th largest GDP in
the world. Deep water for those larger ships, large cranes for the large ships,
nearby rail or highway access…thing of LALB or Norfolk or the Interstate
system availability in Chicago or Memphis. And then space for Distribution
Centeres….think of LALB or Savannah or our own western suburbs along I55 and I-80.
Slide Nbr 27
This is the San Pedro Bay Port Complex
This is the port complex of Los Angeles and Long Beach.
Slide Nbr 28
Rail Intermodal Facilities
Look at the infrastructure. This is an old slide but it still bears out the
advantage LALB has over any of the other ports on the West Coast. Add up
everything that is on the other ports and it is barely equal to what LALB has.
Slide Nbr 29
U.S. Port working depths.
You can see the ports that need to dredge on the East Coast in order to handle
the larger ships that will be coming through the Panama Canal in 2014 when
the new locks are completed. Note the exception of Norfolk which happens to
have 5 Navy Aircraft Carriers stationed there. I doubt they will ever have any
issues about whether to dredge or not.
Slide Nbr 30
West Coast Alternatives
Prior to the recession we always heard about the potential congestion issues of
the West Coast Ports and questions were always asked about alternatives to
avoid this congestion.
Slide Nbr 31
Prince Rupert
Well we already talked about Rupert being closest to China and two days
sailing closer than Los Angeles. The Canadian National Service moves at least
2 intermodal trains a day out of Rupert. They cross the lowest point in the
continental divide and just fly across the sparsely populated plains and
through Chicago on its way to Memphis or over to Toronto and Montreal.
Slide Nbr 32
Punta Colonet
Well we always heard about Punta Colonet as a potential mega port in
Northern Mexico. But there is nothing there except the idea. No water, no
electricity, no roads…nothing but sand.
Slide Nbr 33
1997 Imports – 2014 Imports
In 2000 I interviewed 26 retailers and every single one told me they were
dissatisfied with the situation on the West Coast because of the congestion,
political and labor issues. The ILWU (International Longshoreman and
Warehouse Union) went on strike every 3 years disrupting their distribution
line. They said they could not walk away from the large consumer base of the
PSW but they would look for alternative ports to bring some of their
inventory into.
In 2002 we had a 10 day port lockout by the PMA Port Maritime Association
who was responsible for arranging the unloading of the vessels. The PMA
had the support of the WCC (West Coast Waterfront Coalition) which
included most of the large retailers from RILA (Retail Industry Leaders
Association). It cost about a $billion a day and virtually threatened to shut
down the country of China. President Bush got the call from China and
threatened to enforce the Taft Hartley Act before the strike was broken and
ultimately a six year contract was signed.
But by 2003 distribution centers on the East Coast were opening up and then
the straw that broke the camel’s back was the congestion that occurred in
2004 because the ILWU had never hired enough casuals to handle the
expanding work load. Over 100 ships were diverted away from LALB.
AWEC (All Water to the East Coast) jumped into the 23% range by 2003 and
never looked back as more and more DC’s opened up on the East Coast.
Every year the numbers continued to rise as this happened.
Much to the chagrin of the West Coast more traffic converted to AWEC as
more retailers joined the ranks of those already distributing some of their
inventory from the EC. With a strong recession the opportunity to save
shipping costs by using AW was compared against the additional time and
cost of inventory.
Slide Nbr 34
Events Contributing to AWEC Migration
The Port of Seattle had put together this timeline to illustrate the Migration of
AWEC traffic. We can talk about Rail Contracts when we talk about
Transloading but they certainly could have played into some of the decisions
to go AWEC.
Slide Nbr 35
D- Day 1944
I doubt very many of you would recognize this photo but it is looking out into
the English Channel from Normandy on D-Day June 6, 1944.
Slide Nbr 36
September 2004
Remember that ILWU strike and then the slowdown I mentioned earlier.
When the ILWU got behind with the work because they hadn’t hired enough
Casuals to work this was the result. They had over 100 ships diverted and
about 40 vessels at anchor outside the harbor waiting to get unloaded.
Slide Nbr 37
November 2012
A clerical union in LALB went on strike against 10 of the Port Terminals and
the ILWU honored their picket line basically shutting down the port for 8
days. Keep in mind that 40% of the containerized imports coming from Asia
to the U.S. come through the port complex of LALB. The strike cost $1 billion
a day.
Slide Nbr 38
March 2015
Well they dodged a bullet in September during the fall rush because of the
first extension but if they fail to come to agreement any disruption with come
right during the pre-Lunar New Year replenishment and spring shipping
period. Does everyone understand how the Lunar New Year affects the
movement of product into the US? Lunar New Year is Feb 10 this year. The
shadow effect will not take place until about March 1 and then we will see a
two week slow-down of traffic.
Slide Nbr 39 - 41
Congestion LALB 2015
Slide Nbr 42
Slow Steaming Effects
Remember when I mentioned slow steaming. Well I am sure you all wanted
to ask what that would do with delivery times. Here is a good slide illustrating
the time differences. Ignore the rates as those obviously would have changed
by now but focus on the timelines. One issue about the slow steaming is it
could be an incentive to go back to mini-landbridge services if there is a
delivery time issue. Otherwise the retailers have to order while allowing for
that extra time to get to the East Coast if they can.
Slide Nbr 43
East Coast Benefit from Diversion
Slide Nbr 44
US Population Concentration 2004
Back in 2003 I was updating the TTX Trade Flow Study and asked one of my
guys to pull up the population trends and this jumped out at us. Whereas the
NE has always had a huge concentration of the population the SE although
larger now held 36% of the population. But look at this.
Slide Nbr 45
Population Change by growth.
While the rest of the US was growing at about 13% these states were growing
anywhere from 15% in South Carolina and 26% in Georgia. And look at
Florida at 24%. So if you are a Target or Home Depot where are you going to
build your next store? And where is your DC going to be?
Slide Nbr 46
Transloaders to DC’s
By 1997 Transloading was surging and at TTX we noticed we needed a larger
sized double stack car and thus I started to do what we first called a
Transload Study but later called it a Trade Flow Study. But by 2011 65% of
the intermodal loads moving from the West Coast were moving Intact.
Slide Nbr 47
Hub & Spoke Concept With Logistic Parks
During the recession of 2001 the railroads had excess capacity and offered
very favorable service contracts to the steamship companies to attract traffic
to utilize their own assets effectively. The steamship companies signed up for
multiple year contracts which were reflective in their IPI (Inland Point Intact)
rates to the shippers and ultimately transloading percentages started to
decline. Coinciding with this time frame was the completion of the Alameda
Corridor which I will discuss in more detail later.
Slide Nbr 48
Population Density Makes Intermodal Essential
Once we had focused on the population growths of the southeastern states the
numbers were sliced and diced every which way to understand how this would
affect transportation movements. Note that 66% of the population and 75%
of U.S. consumption is in the East.
Slide Nbr 49
East Coast – West Coast Cost Line Equilibrium
More realistic to consider is the cost issue and at what point is it difficult to
compete with the mini-land bridge traffic coming from the West. At this time
it might be difficult to compete but that is not to say that at some time the rail
service inland from the East Coast Ports will be able to economically compete
for some of that service to places like Memphis and perhaps even Chicago.
Columbus Ohio is already attainable with the completion of the Heartland
Corridor.
Slide Nbr 50
Which Route to the Midwest
The Port of Seattle also put out this slide projecting that there will be a battle
for the traffic to the Midwest. You can see the options for movement from
either coast but although going to Chicago seems like it would be a stretch
from the East Coast do not forget these large ships that might come through
the Suez Canal if manufacturing shifts further West to Malaysia, India or
Pakistan.
Slide Nbr 51
NS Corridor Projects
And speaking of corridors here is the list of active corridor developments
taking place on the NS.
Slide Nbr 52
CSX National Gateway
I am sure you have all heard about these projects but I must include the CSX
project to extend their double stack network East from the ports.
Slide Nbr 53
Emma Maersk 14,000 TEU Vessel
I have to shift gears a bit and talk about steamship sizes. Recent
developments have led to the building of larger and more fuel efficient vessels.
Some are now so large they can only enter a few of the N.A. ports that have
the necessary water depth.
Slide Nbr 54
`22 Containers Across
These larger vessels are now 22 container rows across instead of the early
standard of 16 rows. They require the newer larger cranes that can span that
width so not only are many ports scrambling to get dredging to handle these
vessels they are also purchasing the cranes to unload them.
Slide Nbr 55
World's Largest Container Ship for 53 Days
Ships now 19.224 TEU's
Slide Nbr 56
What it takes to Unload the Mega Ships
Slide Nbr 57
Canal Routes
The transition of traffic from the West Coast Ports to the East Coast Ports put
a strain on the capacity of the Panama Canal. And the introduction of the
larger ships exasperated the situation.
Slide Nbr 58
Panama Canal Today
By now just about everyone should have seen these next two slides. These are
vessels less than 3500 TEU’s trying to get through the existing locks.
Slide Nbr 59
3,500 TEU Vessel in Panama Canal
You can see why they needed to put in a third set of larger locks to handle
these larger vessels coming on line.
Slide Nbr 60
Panama Canal Expansion Project
The new locks will be able to handle vessels just over 12,000 TEU’s.
Slide Nbr 61
The Alternative is the Suez Canal
Or you could come through the Suez Canal.
Slide Nbr 62
On Dock Rail
Staging area for trains of IPI containers headed inland. And where do many
of them go.
Slide Nbr 63
LPC
Logistic Park Chicago became the template for what every inland port or
logistic park would like to look like. Remember the earlier comments why
some places work better than others. Chicago has 7 major Interstates or
Interstate arteries nearby, and huge consumption base, all 6 major Class One
railroads and plenty of greenfield development west on I-80.
Slide Nbr 64
What about transloading?
Have any of you been to the LALB port complex and seen how busy the I-710
freeway is. It used to be that after about 2 PM you could probably walk from
hood to hood of the trucks coming out of the port. It has improved and I will
explain in a minute.
Slide Nbr 65
Transloaders
A poor picture but a satellite view of the area adjacent and just north of the
port complex. Those light colored rooftops are the warehouses that belong to
all the transloaders located near the port.
Slide Nbr 66
Inland Empire
As land and labor got too expensive near Long Beach the retailers located
million plus sq. ft. Distribution Centers in Ontario. These warehouses are
large enough that the big retailers bring in seasonal products all year long and
store them until the correct time to distribute them to their stores or regular
DC’s. This way they do not clog up their Regional DC’s. The BNSF San
Bernidino Ramp is very near.
Slide Nbr 67
Transloading Reaching New Highs
As those previously mentioned favorable IPI rates started to expire in 2006
the railroads were raising the rates as their excess capacity had been eaten up
with the surge of traffic in 2004-2006. Higher inland rates to the steamship
companies along with greater reluctance of the steamship companies to let too
many containers move inland resulted in a renewed surge of transloading.
Does everyone understand what transloading means?
Slide Nbr 68
Transloading Exceeding 32%
Does everyone understand what Transloading means?
Slide Nbr 69
Cross Dock at Cal Cartage
Transloaders will unload ISO containers and usually mix product from other
containers and reload in a domestic container or trailer for further movement
to a store or DC. Some product may be held for a day or two to mate up with
other shipments before loading.
Slide Nbr 70
Packing a 53 ft. DomCon
Transloading is advantageous because it delays the choice of destination to the
last possible moment. Use example of snow shovels. And the cube from 10
ISO containers can be loaded into 7 DomCons.
Slide Nbr 71
Back to Rail or OTR
But let’s get back to the rail and or truck movements
Slide Nbr 72
Alameda Corridor
Just about the same time the railroads were offering favorable rates to the
steamship companies to move their containers inland the Alameda Corridor
was completed.
Slide Nbr 73
Looks Like A Giant Zipper
From the air the Alameda Corridor looks like a giant zipper running from the
ports toward downtown. Watch for it the next time you fly into LAX.
Slide Nbr 74
Leaving the Port and Entering the Alameda Corridor
Shot of container train coming off dock and entering the Alameda Corridor.
Slide Nbr 75
Trench is 25 ft below grade
The trench is more than 25 ft. below the normal road grade therefore below
all street crossings.
Slide Nbr 76
Alameda Corridor
What used to take anywhere from 2 to 4 hours to make the run from the Port
Complex to Hobart or the UP yard before turning East can now be run in 35
minutes. No railroad crossing to block and no congestion to contend with.
Just unload the containers right from the ship to an on dock track, couple the
train, run up the Alameda Corridor for 35 minutes and then hit Hobart and
turn and burn East to LPC in Chicago. How much more efficient can you get.
Slide Nbr 77
Rising Fuel Costs
Just to put this into perspective Hub Group put this slide together to illustrate
how far $500 worth of fuel would get you and how that has changed
throughout the years.
Slide Nbr 78
Modal Shift Opportunity
Another way to look at it. Notice the opportunity for intermodal to penetrate
the 500-700 range.
Slide Nbr 79
Intermodal 2nd Largest Mode of Transportation
Slide Nbr 80
Intermodal Market Share of Containerized Moves
Slide Nbr 81
Intermodal Ldgs Intl vs Dom by percentage
This is not a decrease in numbers it is a shift of the percentages. Domestic
loadings have been on the increase greater than International.
Slide Nbr 82
Intermodal Outlook
Slide Nbr 83
Why is Domestic Loadings Inreasing
Slide Nbr 84
Intermodal Share of Traffic % on RR's
14% of loadings in 1981.....48% in 2012
Slide Nbr 85 & 86 Lunar New Year Shadow Effect
Discuss the effect of the factory shut down in Asia to observe the Lunar New
Year and the drop of traffic volumes in the transportation systyem.
Slide Nbr 87
Driver Shortage/Pay Disparity OTR vs Company
Slide Nbr 88
Demographics of Age of Available Drivers
Slide Nbr 89
What to Take Home
I hope you have learned something you unaware of or that a question you
might have had about intermodal was touched on and answered today. This
is just such a great industry and it is always evolving.
Slide Nbr 90 - 94
Thank you and Glossary.