When will Shortages in the Supply of Transportation Equipment Ease and Chassis Leasing become more Readily Available?
Recent actions by the Federal Government include raising interest rates to curb inflation and the signing of the Ocean Shipping Reform Act in June will contribute to removing supply chain bottlenecks. However, other actions such as the electronic logging device (ELD) mandate could hinder relief for the shipping and supply chain industry. We should see an easing in the demand for transportation equipment, but when? The timing of this correction is up for debate. While we may start to see some relief in 2022, manufacturers of tank trailers, tank chassis, and chassis equipment have indicated a longer timeline and predict that the supply of chassis won’t begin to noticeably ease until after the first quarter of 2023.
The Current Status of Intermodal Chassis Equipment Availability?
Intermodal and liquid bulk chassis equipment, while not at peak pandemic levels, are still in high demand. There is still a backlog of containers at shipyards and tankers and freighters are lined up at ports waiting to off-load. These delays and inefficiencies result in higher costs for everyone. The shortages stem from the pandemic boom in freight volumes, a shrinking labor force, increased storage times, chassis equipment shortages, and the implementation of the ELD mandate.
ELDs reduce drivers’ loads, reduce the time a driver spends behind the wheel, and extend the time that chassis sit unused. The Journal of Commerce (JOC.com) reported that the average sit time of cargo/chassis in warehouses or railramps has recently doubled. Static time has increased from three to four (3 – 4) days to over eight (8) days, adding to the scarcity of available chassis.
For manufacturers and fleet managers, long lead times to obtain chassis equipment and parts has reduced the output of manufacturing facilities and extended the time out-of -service for repairs of damaged equipment. Obtaining steel, axles, air brake components, and suspension systems has been challenging for American manufacturers. And, as if Covid shutdowns in countries exporting parts and raw materials to the USA wasn’t enough, the Russian/Ukraine conflict has further limited access to materials and increased the time and cost of shipping parts while simultaneously raising fuel prices.
What Effect will the Biden Administration have on Chassis Availability?
On June 16th, 2022, President Biden signed the bipartisan Ocean Shipping Reform Act. This Act is designed to promote U.S. exports while reining in ocean carrier market power. The rule empowers the Federal Maritime Commission to oversee international ocean carriers and provides enforcement tools to crack down on practices harmful to American businesses and consumers. President Biden, speaking at the Port of Los Angeles, stated, “People at home trying to make it paycheck to paycheck are wondering, ‘What in God’s name do nine (9) shipping companies have to do with it?’ Well almost everything you’re doing — to what you’re eating, to what you’re having to drive, to what you need in your home — is related to the supply chain, which comes from abroad.”
Provisions in the Ocean Shipping Reform Act which will have a direct impact on chassis supply and chassis leasing availability include:
- Shipping Exchange Registry
- Street dwell time statistics
- Emergency authority to address supply chain congestion
- Chassis pool best practices
- CDL license testing
- Review of potential discrimination on hazmat transport
- Using inland ports to store and transfer containers
However, the chassis leasing industry will not see an immediate improvement from the provisions in this bill. While emergency orders may be enacted as soon as 60 days, most provisions will require data collection, draft and final rulemaking, and implementation which could take from one to three (1 – 3) years.
GEP(R) in April 2022 reported that tariffs, antidumping, and countervailing duties on steel and chassis imports have prevented 25,000 – 30,000 pieces of new equipment from entering into the United States. Even after Japan received an exclusion from the tariff in February. The situation remains in flux when as recently as June 29th, 2022 The New Dem Reps submitted a letter to President Biden requesting expansion of the exclusions for Section 301 chassis tariffs stating that, “Several ports and rail yards across the country have reported chassis shortages, which delay containers from being mounted on trucks then transported to the shipper and receiver. The importance of chassis in supply chain logistics cannot be overstated.”
Chassis Equipment Outlook
As of 2021, the transportation and logistics industry had grown by 400 percent. In an attempt to meet the elevated demand for chassis equipment, manufacturers are working hard to increase the production of new equipment and “catch up” from nearly two-quarters of production backlog. They have to contend with numerous challenges.
According to Journal of Commerce (JOC) sources the projected 2022 chassis manufacturing output in the United States could be as high as 120,000 units, but other manufacturers believe this to be an optimistic number with the actual production at 80,000 or less. Manufacturers cite long lead times for parts and the difficulty finding labor willing to work in a factory as the main reasons.
The current consensus is that chassis supplies will remain tight through the first quarter of 2023. For the remainder of 2022, the chassis leasing and related industries will need to work efficiently and maximize fleet utilization and plan ahead to obtain parts for equipment repairs. Reduced demand from higher prices, government intervention, and industry cooperation will be essential for the chassis leasing industry to improve equipment availability in early 2023.
- Ashe, Ari. “TPM22: Marine chassis shortage to last into 2023.” The Journal of Commerce. 4 March 2022, l Accessed 17 July 2022.
- Raimondo, Tai Statements on 232 Tariff Agreement with Japan
- President Biden Signs Cantwell-Championed Ocean Shipping Reform Act
- Gallagher, John. “Biden to Ocean Carriers: ‘The Rip-Off is Over.’” American Shipper. 10 June 2022, Accessed 19 July 2022.
- Gallagher, John. “Congress is Voting Soon to Overhaul the Shipping Industry. Here’s Everything You Need to Know.” American Shipper. 10 June 2022, Accessed 19 July 2022.
- “Going the Distance: Managing Freight Costs and Delivery Delays in 2022.” Foley & Larder LLP. 23 June 2022, Accessed 17 July 2022.
- “What’s Causing the Chassis Shortage in the U.S. and How to Manage It?” GEP. 8 April 2022, Accessed 18 July 2022.
April has been working with Penn Intermodal’s Sales and Operations teams to educate clients on the benefits of leasing chassis for bulk liquid storage and transport since 2012.