Time is money
Dec 1, 2003 12:00 PM, By Mary Davis
TIME is money. Tank container operators and drayage companies are well aware of that business axiom, so as increased security produces slowdowns at ports, terminals, and border crossings, they are feeling the financial pinch.
“Port security is getting tougher every day,” says Woodie McDuffie, president, Miller Intermodal Logistics Services, Jackson, Mississippi. “Some of these big ports were already a nightmare to get in and out of. The security situation has made it worse. Congestion and bureaucratic red tape have taken a toll on everybody handling hazardous materials. In some cases tank containers have been left sitting because of product issues and paper work.”
Gregg Pittman, intermodal services director, Liquid Transport Corp, Indianapolis, Indiana, agrees. He points out that not only is the slow down costing money, but providing driver identification cards, as is now required, adds a financial burden. “As expected, we have seen longer delays picking up and delays turning tanks in to the piers,” says Pittman. “The ID cards have helped with getting the drivers in and out a little faster.”
Lines are growing at the various rail and terminals throughout the port areas because of security checks, and cargo sometimes seems to be held longer in Customs, says Paul DeFalco, president of Linden Bulk Transportation. “Documentation is looked at more thoroughly at the ports and rail sidings,” he adds.
Another far-reaching problem arises with the eventual implementation of fingerprint-based driver background checks that will be processed through the FBI and Transportation Security Administration. Although the regulation has been delayed temporarily, the industry expects it to present serious delays in qualifying drivers.
At Quality Distribution, Tampa, Florida, Bob Kelly, vice-president, marketing, says that like all trucking companies, the carrier has had to compete for a limited pool of qualified drivers. “As regulation, security, and driver qualifications increase, the pool of acceptable drivers gets smaller for all bulk carriers,” he adds.
All of this is to say that tank container transporters, like all tank truck carriers, are facing challenges today that come from increased security, as well as a down economy and tough federal regulations.
On the subject of the tank container market situation, DeFalco says that 2003 began with operators in the Northeast having tank container inventories to work from.
“As time went on, the idle inventory was used up either by repositioning to areas that had exports, or with the minimal export work out of the Northeast,” he added. “The imports that would be used to fill the vacancies left behind were not as forthcoming. Operators were forced to utilize leasing company tanks to complete export bookings, and in some cases work with competitors to reposition tanks on a one-way basis from one area to another. This, in turn, has continued to deplete the stock piles of 23,000- and 24,000-liter (6,076- and 6,340-gallon) tanks that most leasing companies had.”
At Quality Distribution, Kelly says: “On the import/export side, demand from larger deep-sea operators has been up slightly, while smaller operators have focused their fleets on higher growth Asian and European opportunities. The domestic side of the house has been stable — not bad for the (depressed) state of the domestic chemical industry.”
DeFalco points out that now is a better time for the leasing companies and operators than it is for the depots, due to tank shortages. The leasing tanks now available are usually 21,000-liter and less, or specialized pieces of equipment. With all shippers wanting to maximize their net weights, this type of equipment is in short demand.”
At Liquid Transport, Pittman reports that the tank container business was strong for the first two quarters of the year, but the future does not look as promising.
“Certain areas of the country like the Gulf Coast are very busy while others are not,” Pittman says. “The imbalance of imports versus exports has a great deal to do with the slow down. The slow down in imports is definitely impacting our depot and cleaning revenues.”
As the carriers adopt strategies to work with the economic climate that the market produces, they are beset with regulations that require time and money to implement.
“The regulations spawned by the USA Patriot Act with their inconsistent implementation, for example fingerprinting/background checks of drivers, have caused difficulties because of timing and postponements,” says Pittman. “Further, the HM-232 security requirements have caused costly changes in policies, procedures, training, and equipment that are difficult to pass on to the customer.
“The changes in the hours-of-service (HOS) regulations due January 4, 2004, that we are now training for will definitely impact the productivity of some of our shipping lanes. We are currently in the process of discussing the HOS challenges with several of our customers, attempting to manage the impact as best as possible.”
Kelly suggests that the new HOS regulations will mean that more astute domestic customers will develop a greater understanding of the value-added potential that ISO tank containers bring to the marketplace for long-haul bulk shipments.
The economy and regulations aside, the future prospects for tank container carriers seems good, if not as promising as the historical use of the equipment in Europe and the rest of the world. The transportation industry in the United States has not embraced tank containers like other countries, but that appears to be changing.
Quality Distribution sees increased use of tank containers in North America, Kelly says. The company is in the final stages of developing a North American intermodal tank container product that will complement the carrier's current bulk truckload, import/export, and domestic tank drayage products. The carrier believes the North American intermodal service product is maturing and offers greater reliability than in previous years, which allows tank containers to be utilized more frequently in the bulk supply chain.
“We are also expecting tank containers to be more widely accepted in the domestic market, not only for transportation, but for storage options, too,” says Pittman. “We fully expect business levels to increase in both imports as well as exports within the next few months. If (world) currencies stabilize, we anticipate substantial growth over the next few years.”
Slow growth in tank container usage in the United States appears to be a common denominator among carriers, and there are bumps in the road to be overcome before that situation changes.
“The problem that we have now is that most loading/unloading racks are set up for tank truck operations, so it will take time to retrofit loading racks to make them more adaptable to tank container and tank trucks at the same racks,” says DeFalco. “In addition to adapting racks, it also will take time to train individuals that a tank container performs the same function as a tank truck without its own wheels. A lot of old timers do not want to switch, but as time moves on, attrition will take over and the use of the tank container will become more commonplace.
“The usage of the tank container, we do not feel, will ever meet that of Europe.”
There is some good news for the future regarding the United States railroads' attitude toward tank containers, says McDuffie. They are beginning see that tank containers are not competition to railcars, he says. On the other hand, he points out that the railroads often require hold-harmless agreements that tank truck carriers are reluctant to enter.
Others see the next few years bringing a consolidation of tank operators and leasing companies.
“The consolidation is needed to get rates up,” says DeFalco. “Rates right now are well below the required break-even point in most markets. Bulk transporters will continue to have shortages of qualified chemical drivers due to rates being so depressed and the inability to increase driver and owner-operator pay.”
Quality Distribution is projecting growth in both the import/export and domestic tank container segments.
“Specifically, Quality is developing a tank container product that will allow our customers greater supply chain options as they address their own cost and competitive issues,” says Kelly. “If our customer produces the product off-shore and imports the product to North America for competitive reasons, Quality will be able to run the domestic supply chain. If our customer, as a result of say hours of service, focused plants, supply chain expense, etc., needs additional transportation options to remain competitive, Quality will work to add value on the truckload, transload, or tank container mode of transport.”
As for other future considerations, McDuffie thinks the tank container business will be affected by the cost of natural gas and the value of the dollar.
“These two factors will have the most effect on our business in my opinion,” he says. “Security issues will just slow the process down, which costs money, but not as much as the value of the dollar and the cost of natural gas. Many of the chemical companies we haul for either use natural gas to run their plants or use it somewhere as a feed stock.
“The next few years will be hard to predict. We have the effects of the consolidation of some very large chemical companies, costs of feed stocks to run these chemical complexes, and the value of the dollar. The future should be interesting.”
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