IMSW has watched spot container rates over the last 12 years to monitor the issues of Asian imports-U.S. exports on waterborne trade routes and market share. Market share directly impacts the industrial real estate, trucking and 3PL industries as shippers make decisions regarding supply chain routes. These decisions will not be crafted around “slot costs” on larger vessels. These decisions will be made based on price and price alone.
We experienced the rerouting of ships in 2015, made supply chain diversion strategies after 2002, and adjusted supply chains for “slow-steaming.” Today, with shippers fixated on price, all-water rates to Gulf and East Coast ports are $200 to $300 cheaper than going through Southern California ports and transloading/interior point intermodal shipping to Chicago, New Jersey or Atlanta on rail.
Will this finally be the shift that East Coast ports have dreamed of? Well, it better not be, and here’s why. When the West Coast labor issues caused a 20 percent diversion of containerized imports to the East Coast last year, the ports were swamped and many within the East Coast port leadership expressed relief after the routes returned to normal.
Here’s my take: The railroads will not lose market share or “speed” of certain imports to their key inland destinations. Transloading will slow its growth on the West Coast. IPI moves will increase with carriers (through the railroads) offering “specials” to select inland ports where they can balance import and export loads.
It will take a huge resolve on the ocean carriers’ part to gain sole control of the earnings from their shippers instead of the more efficient land-bridge routing that has dominated the industry. Time will tell; look for my update in May, when ocean carrier contract rates get set.
Curtis Spencer, President, IMS Worldwide