Unclogging the intermodal backup
Containers stacked three high for as far as the eye can see and 25 miles of inbound trains waiting
The sight is an odd one. Straddling a pair of 8,000-foot tracks where BNSF Railway wide-span cranes are supposed to unload and load intermodal trains at Logistics Park Chicago, international containers are stacked three high in a line that extends as far as the eye can see. The boxes awaiting pickup are the equivalent of 10 double-stack trains of imported goods. And the total number of containers dwelling at the terminal — an average of 7,816 per day in July — has nearly doubled since March.
The container stack is a symbol of another disruption caused by the COVID-19 pandemic, as the big six Class I railroads deal with an unprecedented logjam of international intermodal traffic at major terminals, mostly in the Midwest. The congestion has spilled out onto main lines, where BNSF and Union Pacific have had to stage dozens of trains daily until terminal space becomes available in Chicago and Memphis. “I’ve never seen anything like it,” intermodal analyst Larry Gross says.
Terminals are clogged due to a combination of record port volume and shippers and receivers being slow to pick up containers unloaded from inbound trains. Warehouses are facing labor shortages and pandemic-related restrictions that have significantly curtailed their ability to receive and unload containers. Retailers, meanwhile, continue to import goods to keep up with consumer demand and to restock depleted inventories, which are still well below normal levels.
The mismatch between the pace of inbound and outbound intermodal terminal volume has been a recipe for trouble. “As even more freight is being put into the global intermodal pipeline, the shortage of chassis, drivers, and labor to support distribution center unloading is causing shipments to back up into rail facilities,” BNSF CEO Katie Farmer wrote in an August letter to the Surface Transportation Board. In July, the board sought information from each railroad on its intermodal bottlenecks and container storage charges.
Like other railroads, BNSF has increased lift capacity, terminal throughput, and storage, and placed limits on container flow to some inland destinations. In August, the railroad reopened its intermodal terminal in Marion, Ark., to provide more capacity in the Memphis area. “However, the measures we take to maximize efficiency in our handling of cars across our network and within our terminals are largely rendered meaningless if receivers are not ready to pick up those containers from our facility,” Farmer wrote. “For example, while we are transporting and unloading volumes this year at a pace exceeding our peak year of 2018, international containers are dwelling in our yard after unloading nearly 30% longer. The reality is that significantly more freight is coming into BNSF facilities than is being picked up, and that simply is not sustainable.”
U.S. intermodal volume set a record in 2021’s first five months. But the four-week average intermodal volume at the big four U.S. systems — BNSF, CSX Transportation, Norfolk Southern, and Union Pacific — declined from mid-May through late July before starting to tick up again in August. “With demand still strong, it appears that the intermodal network is simply bogging down and its ability to process traffic is becoming steadily more impaired over time,” Gross says. He notes declining average speeds for intermodal trains and a rising number of loaded intermodal cars that had not moved in more than 48 hours.
LIMITING INBOUND VOLUME
The combination of soaring port volumes and sluggish outgates at inland terminals has prompted railroads to take steps — some of them unusual — to limit volume headed for destinations where they’ve run out of room for more containers.
BNSF and Union Pacific have been the hardest hit, thanks to record import volumes at the ports of Los Angeles and Long Beach, Calif.
In July, UP suspended shipments of international containers from all West Coast ports to its Global IV terminal in Joliet, Ill., for a week. At the time, UP had 25 miles of inbound stack traffic awaiting room at Global IV, according to Port of Los Angeles officials. The embargo was designed to help UP dig out from a backlog of containers at Global IV, which had risen 208% between July 2020 and July 2021. UP did not say how many containers were awaiting pickup.
UP temporarily reopened its Global III terminal in Rochelle, Ill., as a storage facility to help bail out Global IV. Global III, which once could handle 720,000 lifts per year, was closed in 2019 as part of a Chicago-area terminal consolidation. Facilities now focus on a specific business segment: Global IV became the primary international terminal, Global II handles domestic shipments, and Yard Center is devoted to auto parts and north-south traffic. UP also expanded Global II and Global IV.
CEO Lance Fritz says UP took other steps to alleviate congestion over the spring and summer, including meetings with ocean carriers, ports, and drayage providers to identify inefficiencies and make recommendations on how to increase fluidity in the intermodal supply chain. UP also allowed draymen with private chassis into terminals in order to give shippers more options to outgate their containers.
Shortly after UP announced its embargo, BNSF said it would limit volume from LA/ Long Beach to Logistics Park Chicago in Elwood, Ill., for two weeks. BNSF also found other ways to meter the flow of inbound international traffic to inland terminals.
In some instances, BNSF sent S-symbol international stack trains out of route so that they would take longer to arrive in Chicago or Memphis. These trains originating in
Southern California veer north off the Southern Transcon at Amarillo, Texas, and run to Pueblo, Colo., then turn east and head for Kansas City. From there they continue to either Chicago or Memphis.
In other cases, BNSF has parked international stack trains in sidings and yards on the Southern Transcon as well as its bypass route through Kansas. Some of the trains have been parked for more than a week.
“At any given time, we have around 30 trains (holding around 7,500 containers) staged for prolonged periods outside our intermodal facilities because there simply is not space in our hub to get those containers unloaded for pickup,” says Farmer, whose railroad handles the largest intermodal volume in North America.
The temporary container stack on two of Logistics Park Chicago’s six production tracks is a Band-Aid solution. It frees up 10 sets of well cars to return to the West Coast. “However, this footprint modification came with considerable expense and the loss of rail production capacity,” Farmer wrote.
The Class I CEOs said railroads could only do so much to deal with the congestion issues. UP’s Fritz took it a step further in his letter to the STB: “Shippers and receivers are responsible for their decisions to overextend their capacity in shipping and receiving, which congests the supply chain. This overextension is beyond our control.”
EASTERN CONGESTION
In the East, Norfolk Southern and CSX metered the flow of inbound international shipments to some terminals amid record volume from East Coast ports, including Savannah, Ga., and Norfolk and Portsmouth, Va., and ongoing heavy volume from the Port of New York and New Jersey.
NS restricted traffic at origin terminals to keep inland terminal volume “consistent with the ability of the drayage and warehouse communities to pull them from those terminals, and increased the flow of inbound containers as outgate capacity has improved,” CEO Jim Squires told the STB. Its most congested terminals were Chicago Landers; Austell, Ga.; and Columbus, Ohio.
NS made changes at Landers that boosted stacked container capacity by 60% and lift capacity by 40%. NS also worked with BNSF and UP to create more steel-wheel interchanges in Chicago, which freed up some drayage capacity by reducing the need for crosstown rubber-tire moves.
While the number of containers dwelling at CSX terminals has increased this year, particularly in Chicago, the railroad says it has kept its terminal gates open. Ocean carriers, however, say CSX has at various times limited inbound moves to Chicago, Cleveland, and Indianapolis. Draymen say CSX also set an allocation on empty containers destined for East Coast ports due to congestion on the docks.
CSX says it has boosted efficiency by increasing ground storage capacity and moving containers to off-site parking. The railroad also simplified its Chicago operations by shifting much of its international traffic to its Bedford Park terminal and much of its domestic business to its 59th Street terminal.
But CEO Jim Foote said CSX would need ocean carriers and cargo owners to do their part. “An intermodal terminal has a designed throughput capacity and CSX depends on receivers and steamship lines to maintain a relatively consistent flow of freight out of our facilities to accommodate the additional freight being moved in,” he told the STB. “Rail intermodal terminals simply transition containers off railcars and make them accessible for distribution to consumers — they were not designed for, and are not physically capable of, long-term container storage for significant volume.”
CANADIANS AFFECTED, TOO
Canadian railways have limited the flow of containers from British Columbia ports to the U.S. Midwest but have still seen the number of stored boxes rise at their terminals.
Canadian Pacific’s inbound intermodal volume for the first six months of this year was below levels of 2019 and 2020, CEO Keith Creel noted, yet the number of containers stored at its four U.S. intermodal terminals nearly doubled compared to 2019. “Our best assessment is that this phenomenon is primarily the result of logistics challenges affecting intermodal shippers’ access to, and decisions on how to allocate,
the resources (chassis, draymen, loading dock space, etc.) needed to handle inbound intermodal shipments, leading them to delay the pickup of loaded containers that have arrived by train at our terminals,” Creel told the STB.
Canadian National has become a relief valve while also working with ocean carriers to limit volumes. At Vancouver and Prince Rupert, British Columbia, CN accepted traffic diverted from Pacific Northwest ports and added capacity at Halifax, Nova Scotia, and Mobile, Ala., to handle ships diverted from the West Coast. In Chicago, CN has expanded crane capacity by 30%, boosted terminal staff by 25%, and increased terminal capacity by 20% by shifting to grounded operations. The railroad also ran 35% more intermodal trains in the second quarter of 2021 compared to the first quarter, and boosted the length of trains departing Prince Rupert by 20%.
“Despite these successful efforts to manage the rail container pipelines and volumes, the average daily count of stored international containers has increased at most of CN’s U.S. intermodal terminals,” CEO JJ Ruest told the STB. The number of boxes in storage at Chicago and Memphis has more than doubled since January.
A STRESSED SYSTEM
Chicago is the largest inland destination for cargo that arrives at the ports of Los Angeles and Long Beach, the busiest port complex in North America. Port officials supported the railroads’ efforts to limit congestion despite the impact on the docks.
Gene Seroka, executive director of the Port of Los Angeles, says BNSF and UP are hustling empty cars, locomotives, and crews back to the West Coast to move traffic. But he says the entire intermodal supply chain is under strain due to trade imbalances and a 100-year surge in consumer buying. “There is no one lever we can pull. There is no one cause that is to blame for the ill of the supply chain on a global basis, much less here in Los Angeles,” Seroka says.
Port officials continue to work closely with BNSF and UP. “Believe me, those folks at the highest levels are working around the clock to solve the rail issues,” Seroka says.
Ocean carriers have dispatched “extra loaders” — the equivalent of an extra train — from Asia to North America. The volume then floods ports and railroads. Gross says railroads don’t have many tools to limit volume without causing problems elsewhere. Staging trains chews up locomotive and well-car capacity, for example, while UP’s week-long embargo at Global IV was disruptive but necessary. “This is a very difficult Gordian knot to unravel,” Gross says.
Intermodal terminal congestion has put more pressure on the draymen who pick up and deliver containers to their final destinations. It’s reduced their pay because they might be only able to handle one load a day instead of three, says Jason Hilsenbeck, president of LoadMatch and Drayage. com. Some draymen have simply quit, exacerbating a persistent driver shortage, while others refuse to go to the terminals
with the worst congestion.
Railroads shoulder at least some of the blame for the terminal slowdowns, Hilsenbeck says. There wouldn’t be hours-long trucker lines at terminal gates, he says, if terminals were fully staffed, lift capacity was sufficient, and processes were more efficient. And he wonders if the capacity of inland intermodal terminals has kept up with a spate of major port expansion projects that have opened in recent years.
Complex arrangements involving ocean carriers, railroads, and chassis pools also can gum up terminal operations during peak-volume periods, Hilsenbeck says. If a drayman shows up with a private chassis, the box must be put on a pool chassis first, then hauled to a “flip area” where it can be loaded onto the private chassis before heading out the terminal gate.
NO QUICK FIX
Major inland intermodal terminals typically experience congestion during the fall shipping peak. But as volume slacks off after the peak winds down, railroads are able to catch up. “The railroads are going to have a tough time digging out of this until they get a break,” Gross says. “And they won’t get a break until next year.”
Railroad and port officials expect demand to remain strong into 2022. “Key economic indicators all suggest that U.S. consumer spending will remain strong through the remainder of 2021,” Seroka says. “Even as Americans return to airline travel, vacations, and in-person events, retail sales and e-commerce remain robust.”
Analysts predict volume won’t slow until the Feb. 1 Lunar New Year holiday, when Chinese factories and ports shut down. And the situation may get worse before it gets better. “There is unfortunately no short-term outlook pointing to improving conditions,” says ocean shipping expert Lars Jensen, chief executive at Vespucci Maritime. The number of container ships anchored offshore at LA/Long Beach fell to 10 vessels in May and June, Jensen notes, but by late August had risen to a record 44 awaiting dock space.
Over the summer no one was predicting that intermodal service would melt down, largely due to the capacity limits the railroads periodically placed on their busiest and most congested terminals.
The various links in the intermodal supply chain — from ports and main lines to inland terminals, chassis and truckers who provide drayage — have enough capacity to support current volumes. “But only if all parts of the supply chain do their part,” Farmer says. “Operating 24/7 in all parts of the supply chain, not just rail, would generate substantial capacity immediately.”
UP’s Fritz echoes that sentiment, but adds: “Clearing our network will take some time.”