By Steven S. Klinger, Director of Operations,
Cargo Services, Inc.

With the continuing demand for imports from Asia, the Trans-Pacific Westbound (TPWB) Agreement has announced plans to increase eastbound rates again in 2005, with a possible second increase in the fall of 2005.

The U.S. dollar continues to be weak against several currencies, including the Euro. This is good news for exporters, but has also led to full ships outbound to North Europe, the Mediterranean, and Australia. Rates are market-driven, so now that ships are full and space is at a premium, the lines feel they are in a position of strength, and can demand rate increases. Brace yourself - rates are going up!

In addition, shippers have experienced huge delays in the movement of cargo on many fronts. First, steamship lines added huge 8,000 and 10,000 Twenty-Foot Equivalent vessels to help with imports from Asia. Amazingly, it seems there was very little dialogue between the steamship lines and the rest of the transportation infrastructure in our country. So, while larger volumes of containers were arriving per vessel, the stevedores were not prepared to unload; railroads were not prepared to lift and move, and trucking companies were not prepared to transport of the additional volumes.

This culminated in a huge delay in the Los Angeles/Long Beach harbors in October of 2004. During that time, up to 60 vessels were lined up at sea awaiting an open berth, and steamship lines announced a congestion surcharge of $200 per container. After the peak season ended, Longshoreman unions ramped up their hiring and training to prepare for the 2005 season.

Locally, a severe winter storm at Christmas caused huge delays at the Louisville NS ramp. This caused a bottleneck of cargo which forced the NS to suspend service to Louisville for a week in January. When containers can’t move on the railway, they sit, tying up chassis which would normally be used for multiple daily moves. Once the rail embargo was lifted, it still took weeks to clear up the back log. Drivers, unable to make numerous daily runs, became frustrated as they were unable to generate the normal revenues for their trucks.

What has resulted is that two carriers have withdrawn from the local container drayage market at a time when inter-modal traffic is booming. The remaining carriers are unable to keep up with their existing business, let alone absorb the business previously handled by those who withdrew. I have personally been told by local truckers: “I can’t schedule any new loads for 3 weeks”, and “we’re not taking any new business at this time.”

With increased demand, comes increased costs - the old supply & demand paradigm. Local cartage rates have risen from $25 to $75 per move, as carriers take advantage of the market situation. The days of calling today for a container tomorrow are nearly gone, and shippers must project their shipping needs farther in advance to ensure timely loading and unloading.

Cargo Services, Inc., is a full service international forwarder, based in Indianapolis. We strive to offer customer service that is “Best in the Midwest”. Part of that service is keeping our customers informed of market conditions so they can plan accordingly.

For more information about Cargo Services, please contact Laura Hosbach in our Louisville office at 502-797-2577.