A good summary as of the beginning of October 2022. Drewry research is well executed and they have thoughtful analysis.
There is an oversupply of container shipping capacity coming. There are so many newbuilds coming. And the amount of container freight seems to be leveling off, if not declining. And congestion seems to be declining, in at least the places that were bad over the past two years. Currently port congestion is responsible for only about 7% of effective capacity loss, down from as high as 17%.
Drewry’s position is that liner firms have the ability to control the supply of shipping, but they need to be careful to do it right. But the thinking is that the firms themselves cannot completely bridge the gap between supply and demand. Missed sailings can help, and so can phasing out old ships faster. that would also be a benefit for the climate change issues we face.
Drewry – Weekly Feature Articles – Managing the decline
California again takes the lead in denying demurrage and detention charges by marine terminals and intrmodal equipment providers, such as chassis providers, when return is prevented by actions outside the control of the users. Such conditions might include gates being unavailable for return, a provider diverting the equipment from the original intrchange location, and when the carrier documents an unsuccessful attempt to return the item, or because a vessel’s booking date is changed.
All these changes will be good for the business. They will force carriers and equipment providers to pay attention to the effects of congestion, and work to reduce it.
Congratulations to California for this law. Now let’s see how it works.
Obtaining a chassis from a pool is a good idea for some truckers. But beware the terms and conditions. The article indicates that pools, often owned by leasing companies and investment houses, have a goal of making money. I believe the biggest risk of renting from a pool is that the pool may be cheating on maintenance, so the chassis you pick up may have deficiencies that show up during the trip. In that case, the trucker must fix it at her expense. It’s always true that who is in possession of the chassis is required to pay for fixing the problems that occur on the trip.
Some pools, such as the one in SoCal connected with the ports, have union workers doing the maintenance. There’s probably less risk of under-maintaining chassis there. But privately operated pools have an incentive to cheat on the maintenance, because they can lay it off on the truckers.
And there is information asymmetry. There are few figures on the incidence of repairs for chassis from various pools. Such real data would inform everyone whether a pool is doing enough preventative maintenance. But without such data, it’s just a gamble for the trucker.
The article claims carriers are better off purchasing their own chassis. But I’m not convinced. Owning the chassis requires an upfront expense, or a lease, which is money out the door. If you buy the chassis you will need to put it to use often to recover your investment plus your profit. You now have to do all the maintenance. And chassis vary for different needs; a chassis for forty-foot ocean cargo won’t fit twenty-foot ocean cargo; or you might need a reefer-compatible chassis. Unless you have high predictability, you are better off taking what you need for each load.
My understanding of the situation in Europe was that chassis were mostly owned by the large drayage firms. That prompted the movement several years ago by ocean carriers in the US to divest themselves of chassis, to try to get the truckers to own them as in Europe. But as the author points out, most drayage drivers in the US are owner-operators, and don’t work for a large firm. They can’t support the capital expense of a chassis unless they are convinced that they will be able to employ the chassis for money on most loads. We did a paper on this in 2014. They would need to believe that they could almost always get paid for using the chassis. But that isn’t the way it is; somewhere around 40% of all cargoes come with a chassis provided by the ocean carrier. And that is going up nowadays, with ocean carriers getting into last-mile and end-to-end delivery promises.
So I wonder. But there should be ways to make maintenance data more visible, and make it easier for truckers to dispute charges for chassis repairs if the repairs should have been done at the pool first. I’m afraid that will be quite a while coming, though.