International Cargo Terminals operate as Container Freight Stations (CFS’s). CFS’s are bonded facilities specializing in consolidation and deconsolidation of less-than-containerload (LCL) import and export cargo. Typically, CFS’s are located near seaports, inland distribution cities and rail ramps offering accessibility and convenience for customers moving interior point intermodal (IPI) freight.
As the first wave of the pandemic spread across countries in 2020, restrictions and shutdowns imposed by most nations led to a sharp decline in both world industrial production and the goods trade. The slowdown of manufacturing, particularly in China, coupled with a contraction in consumer demand worldwide had ocean carriers blanking sailings and consolidating shipping routes to focus on major ports in the first half of 2020. Consequently, global shipping capacity was reduced by -12.9% y/y reports maritime intelligence company eeSea (see Figure 1).
“The tightness in warehousing space for the 3PL industry in the U.S. has exponentially increased lease rates. In some areas, it has tripled over the last three to four years and it’s getting increasingly difficult to find a warehouse facility that fits a CFS operation. Almost everything being constructed currently is for e-commerce such as Amazon and the like, along with warehousing and distribution. These developments are being built with little thought to requirement for the amount of doors needed as well as container and chassis parking,” observes Thorkild Hove, senior vice president, at ICT. “However, ICT has long-term leases in place, including ownership of our CFS in Atlanta, and because of that, we are cushioned from the headwinds challenging the market,” he adds.
Rising inflation and excess inventory levels have muted the demand for goods but U.S. ports are still struggling with congestion and a trade imbalance. “Compared to the surge in 2021, inbound volumes into the U.S. have moderated but it continues to be relatively high with disproportionately more imports than exports,” notes Michael Tiernan, vice president of operations at ICT.
Import containers are not moving out of the ports at a fast enough rate that is needed to keep up with the amounts coming in off container vessels. Data from FourKites shows import dwell times at U.S. West Coast Ports are at 7.8 days, -16% lower than the beginning of the year. Congestion has shifted Eastward and dwell times on the East Coast are at 6 days, up 16% since the beginning of 2022 (see Figure 2). “Containers are dwelling on terminals longer while sitting on chassis which consequently keeps much-needed equipment out of circulation,” Mr. Tiernan points out.
The growth in imports through the U.S. East and Gulf Coast ports is adding to the number of empty containers accumulating at ports such as New York and New Jersey. According to the Port of New York and New Jersey’s (PANYNJ) published data, loaded imports grew 36% in the first half of 2022 versus the same 2019 period, while exports fell -10%. “There used to be about 60,000 empty shipping containers sitting up at the port on average. There are now over 200,000 empties which have built up around the port complex since January,” says Mr. Tiernan.
With empty containers lingering on chassis, it renders them non-operational for that duration. “ICT is constantly looking for additional ways to free up chassis to be utilized for quicker turnarounds,” says Mr. Tiernan and cites an example. “As ICT/Shipco, we are able to utilize our import inventory to enhance our outbound product, such as street turning as many empties as possible to accommodate export shipments.”
“Our proximity to the three major terminals of the PANYNJ gives our ICT Elizabeth, NJ facility an advantage in terms of quicker drays and faster turn times. We also have a lower carbon footprint, being only a short dray away,” shares Mr. Hove.
With container terminals overfilled with containers, truckers are not able to get access to shipments. “Ocean carriers are charging shippers late fees for failing to pick up loaded containers and return empty boxes quickly enough. The storage of containers is now being forced back on to shippers and drayage truckers,” warns Mr. Tiernan. “We are communicating extensively to help customers avoid detention and demurrage fees.” A benchmark report by Container xChange found that detention and demurrage (D&D) charges imposed by container lines on U.S. shippers are the highest globally in 2022.
Mr. Tiernan adds that inefficiencies in drayage operations are complicating the situation. “Not only is port access restricted by available appointments for slot capacity, but ocean carriers are also limiting where an empty container can be dropped off. Thousands of truckers are all lining up to get the empties returned. That just creates so much more chaos and traffic. Not all truckers will be successful in returning the container even if they have secured an appointment. When the port or the ocean carrier has reached their quota for containers being returned, truckers will be turned away. It can take four to eight days to get another return slot.”
The biggest challenge is the length of time it takes to make a move according to Mr. Tiernan. “Typically, a driver can execute three to four container moves per day out of the port. Due to the various challenges and delays, efficiency has more than halved, to about one to one-and-a-half container moves per driver per day,” he explains.
The supply chain delays are not only about vessels delays and idling vessels in major ports and the huge influx of import containers piling up, points out Mr. Hove. “It is also about shortage of draymen and drivers, as well as in our case, freight forwarders using Shipco/ICT’s services who do not have the manpower to customs clear the goods in time, do not have the staff to find the less-than-truckload (LTL) truck power. Even then, if they find it, the LTL truckers do not have the capacity. This has been going on since last year, but we do see some improvement in the flow of goods through our CFS’s.”
ICT’s strong relationship with its drayage partners means customers have another layer of security for their cargo moves. “We have been able to secure increased volume commitments because of our long-standing partnerships with drayage providers,” says Mr. Tiernan.
Shippers looking to bypass initial West Coast congestion and inland capacity constraints, as well as avoid potential disruptions from a West Coast port strike have shifted vessel backlogs to East and Gulf coast ports. Meanwhile, a report by the American Shipper says the recent fall in port queues could represent “the final unwinding of COVID-era congestion as inflation takes hold", or it could simply indicate “the relative calm before the peak-season, post-Shanghai-lockdown storm”.
Atlanta GA
ICT recently opened a second warehouse in Atlanta on September 1, 2022. Measuring 137,000 sq.ft (approximately 12,700 sq.m) in size, the facility will be used for import/export transload as well as warehousing/storage and distribution for our customer base in Atlanta, says Mr. Hove. “Part of the warehouse, approximately, 18,000 sq. ft., will also be housing Shipco’s expanding airfreight operation in Atlanta with full TSA clearance to screen export airfreight. Not only is the new warehouse in the immediate vicinity of our current CFS, both warehouse are in very close proximity to Atlanta airport. We are adding yard switchers, as well as electric forklifts to run an efficient and clean operation there,” Mr. Hove highlights.
Elizabeth, NJ
ICT has also secured two offsite yards for its Elizabeth, New Jersey operations. “With two additional offside yards to store loaded as well as empty containers, we are able to hold an additional 190 pieces of equipment helping with resilience against demand shocks, especially at a time when capacity is almost non-existent,” Mr. Tiernan shares. “Further, we are expanding our transload capabilities by adding an additional 5 acres of parking and warehouse space right across the street. This will add more than 24,000 square feet of space (approximately 2,200 sq.m) with an additional 54 doors and 150 container and trailer parking spots. It will be in operation as of February 1, 2023,” he details.
To strengthen operations in the CFS and extend capabilities, ICT has invested in vertical storage systems at its New Jersey facility. “We do have space to grow, which is key. Over 3,000 rack positions have been added for the import product, concluding the first phase of our expansion. In September, we are installing an additional 2,000 racking positions for exports,” says Mr. Hove.
“This large million-dollar investment is not only in racking. New electric and environmentally sound forklift equipment including reach-trucks and new inventory/location system has given ICT a major competitive advantage in handling our customers cargo safer and more efficiently. It has been a game changer for our operation in Elizabeth and we are now capable of handling more cargo but able to keep a good flow of truck-traffic through our yard.
“The installation of the import racking was done expertly and in the middle of the highest volume throughput in the history of ICT, but by doing this on the weekends and working 24/7, we managed to get through it and the benefits are now showing. Our customers and the truckers picking up the cargo from our facility are much happier now,” says Mr. Hove.
“ICT is a comparatively young operation, starting in 2008 with our Miami, Florida location. We have since expanded with five additional locations. Four are in the U.S., being Atlanta, Georgia; Elizabeth, New Jersey; Kearny, New Jersey; Long Beach, California; as well as our Busan, Korea operation. The facilities we operate are truly complementing Shipco’s LCL growth which has also helped ICT establish our presence in the markets where we are now. Just as Shipco has a proven reputation for exceptional service, that same level of brand quality is also woven into our DNA. Working in tangent, ICT provides a seamless single-point solution for customers requiring services outside of their ocean freight moves,” says Mr. Hove.
Speaking about ICT’s sustainable operations, Mr. Hove says, “We continue to lean into green initiatives at our facilities which include investments in new electric operating machines, LED lighting in addition to 5,500 solar panels at our Elizabeth facility. We are committed to using our resources responsibly while reducing our carbon footprint.”
“The growth we have sustained over the past 14 years is a testament of the trust our customers have in ICT. There is a great potential for further growth in the years to come and we are dedicated to providing our customers with secure, convenient and efficient services,” says Mr. Hove.
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