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Frustrated shippers caught in Canadian rail congestion call for help

Predictions that congestion at rail yards in Canada’s interior would ease this month and next are not playing out so far, prompting frustrated importers and forwarders to ask for government intervention.

The problems are most pronounced at rail hubs around Toronto and Montreal.

“The Montreal rail terminal situation is still bad to very bad,” reported Karl-Heinz Legler, general manager of Rutherford Global Logistics, adding that the forwarder’s Toronto office describes the situation there as even worse.

Truckers have waited up to nine hours to collect cargo in Montreal, sometimes arriving at the terminal having been told containers are available, only to find they are still on the rail cars, he said.

Congestion disrupted intermodal flows to Canada’s large markets throughout the summer. Industry executives predicted improvement in autumn but this has failed to materialise so far, despite a decline in waterborne imports from Asia.

According to one forwarder, Canadian Pacific has initiated an embargo for containers from the west coast to Montreal for most of the last week of November.

In August, Canadian National (CN) set up relief container yards around Toronto and Montreal, pledging to move boxes as close as possible to their destinations, and charged customers shuttle fees ranging from $300 to $550.

According to the Canadian International Freight Forwarders Association (CIFFA), the situation has been exacerbated by government efforts to help reduce congestion at west coast container gateways (notably Vancouver), which only served to push the problem to inland rail facilities already struggling to cope with volumes.

Now, forwarders and importers are looking to the authorities for help to fix the problem. Bruce Rodgers, executive director of CIFFA, has asked federal agencies like Transport Canada and the Canada Border Services Agency to help.

“Recent decisions by government to clear the backlog at the Pacific gateway only resulted in a worsening situation. Without foresight, decisions were made, not to work on a solution to the problem, but to shift the burden inland.”

Trucking interest groups have also called for government intervention.

Flows from the port of Vancouver have suffered several massive disruptions from severe weather over the past couple of years, which prompted Ottawa to set up a task force to address supply chain issues.

Transport Canada released a report on supply chain problems in early October, in which it suggested policies – from addressing the labour shortage to supply chain data flow and digitisation – and also proposed the creation of a supply chain office to concentrate Ottawa’s approach to transport issues.

Industry bodies have welcomed the recommendations, but companies argue there is a need for immediate measures to deal with current issues. Their frustration with lack of improvement in supply chain flows is aggravated by storage charges levied by the rail companies.

“Trucking companies have no choice but to pass on increased operating costs and have to refuse, in many instances, container haulage because their equipment is tied up at terminals,” said Mr Legler.

“Freight forwarders often get stuck between clients refusing to pay extra charges beyond their control and there are horror stories of uncollectable charges for some, exceeding C$100,000 (US$73,484),” he added.

According to forwarders, the rail companies have not shown any leniency on those charges, a stance that angers importers and forwarders in light of the railways’ profits. CN tabled record results for the third quarter on 25 October reporting a 26% increase in revenue and a 44% surge in operating profit.

Source: THE LOADSTAR

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Carriers consider laying-up box ships as blanking fails to prop up rates

The idled containership fleet has breached the 1m teu capacity milestone – and is set to jump significantly higher as carriers prepare to temporarily suspend services rather than blank sailings

According to Alphaliner, as of 24 October, the number of inactive containerships either in drydock or seeking employment had reached 284, for a capacity of 1.2m teu, representing 4.6% of the global cellular fleet.

At the peak of demand in February, as carriers squeezed the charter market dry in pursuit of every serviceable vessel, the consultant recorded 154 ships, for a capacity of 442,000 teu, as inactive, many in drydock, representing just 1.8% of the global fleet, .

“Weakening cargo demand and declining freight rates have prompted carriers to cull some sailings and even temporarily suspend a number of services on major east-west tradelanes,” said Alphaliner.

The Loadstar has seen a big uptick in the number of blank sailing advisories from Asia-Europe and transpacific carriers in the past two weeks, with, for instance, some Asia-North Europe loops being voided in consecutive weeks.

However, Alphaliner does not count a ship as inactive unless it has been idle for more than 14 days – hence the proliferation of blank sailings does not figure in the capacity surplus analysis.

During Maersk’s Q3 earnings call yesterday, CEO Soren Skou reiterated the carrier’s strategy to “take out capacity to meet demand”, as the group recorded a year-on-year 7.6% decline in liftings against a downgraded market contraction for 2022 of 2%-4%.

The speed of the decline in exports from China has made the reactive blanking strategies of carriers ineffective at halting the erosion of spot and short-term rates, and more radical capacity reduction plans will be necessary to avoid a collapse in contract rates.

The Loadstar understands that some of the partners in the three east-west alliances are calling for their networks to adopt ‘winter programmes’ until mid-January, ahead of the Chinese New Year holiday.

“Nobody wants to be the first to cut out a loop and potentially lose market share,” one carrier contact told The Loadstar.

“There are hawks that want radical action and doves that want to carry on blanking, but everybody is suffering, that’s for sure, and getting concerned about next year,” he said.

Meanwhile, on the containership charter market, the increase in surplus open tonnage is putting more downward pressure on daily hire rates and materially reducing durations.

“Charter rates have continued to weaken for classic panamaxes of 4,000-5,300 teu in the past two weeks, with fixtures now typically concluded for periods of six months at a low-mid $20,000 a day,” said Alphaliner.

In fact, a broker source said this week, owners were now prepared to entertain much lower time-charter periods.

“We are talking with owners and charterers on some ships about extensions of 30 to 45 days, and for new fixtures three to four months,” he said.

Alphaliner noted that a daily hire rate of $20,000 for a panamax was “still decent by historical standards”, but was “ten times lower than what owners could achieve in early 2022”.

Source: THE LOADSTAR