August 18, 2020 | By Jay Devers

Intermodal congestion stalls traffic out of U.S. West Coast

Intermodal congestion in Southern California has skyrocketed in recent days as equipment shortages, workforce reductions, and increasing demand for ocean imports from Asia via the U.S. West Coast causes another “unprecedented” cargo disruption. In just the last week, Union Pacific added both a $500 surcharge and a $1500 surcharge to go into effect on August 17th. As volumes are up 38% for UP and 21.8% for BNSF since the beginning of April, the industry faces issues from the initial reaction to the COVID-19 pandemic.

Following along with the rate increases, truck spot rates are up $1.00 – $1.40 per mile from California. This marks the first time that truck rates are lower than rail charges and again ties back to the fast-rising trans-Pacific ocean spot rates plaguing shippers. The logistics industry is facing soaring prices as demand outpaces the supply on the market. Some of that supply was removed to soak up excess capacity for a predicted dip in the demand that didn’t materialize.

Other issues are smaller workforces at U.S. warehouses and distributors as some staff has been furloughed or laid off to meet the aforementioned reduction in demand and socially distanced spaces. Because fewer people are shopping in stores and more often choose online shopping there is nowhere for on-hand inventory to go, which means there’s nowhere for new cargo to go and it ends up sitting in containers for longer periods, often on a chassis, waiting for unloading  – which takes longer because there are fewer workers. Taking the container out of circulation for days means that it can’t be turned around to bring equipment back to the port where it can be exported and returned empty.

Sometimes, it’s a marvel that we manage to do this without issue every day. While it will take a few months to get the world shipping machine back running at full speed and full capacity, once it’s off and running, we’re looking at the biggest peak season we’ve ever seen. It’s a difficult time to be beholden to spot rates as the market stands, but using Bestway International gives you access to our contract rates and pricing power so you aren’t stuck under surcharges. Call your Bestway representative and find out what we can do to help you!