Congestion at West Coast ports drags railroads on new journey across country

Continued rail congestion in west coast ports has created an opportunity for east coast ports, container shipping companies and rail operators to establish new business relationships.

In January, shipping company Hapag Lloyd, Norfolk Southern, the Port of Virginia and Union Pacific worked together to create a trade triangle where freight bound for the West Coast would be brought into the Port of Virginia and loaded onto railcars from Norfolk Southern. The containers would then be loaded onto a UP rail car in Chicago bound for the West Coast.

“At the end of the first quarter, we started to see the service grow,” said D’Andrae Larry, vice president of international intermodal group at Norfolk Southern. “Since then, we have seen this service grow continuously, so the first thing was to get this service accepted by the market.”

Larry said the idea came from Hapag Lloyd, which was looking to move trade from the west coast more efficiently.

“The market continues to think about ways to find options. We think there are plenty of opportunities out there,” Larry said.

A Norfolk Southern freight train hauled by locomotive 7565, a GE ES44DC Evolution Series diesel locomotive.

Medianews Group/Reading Eagle Via Getty Images | Medianews Group | Getty Images

This service also moves containers from west to east, allowing Union Pacific to move its own containers. Pacific Northwest shippers say they are using this new commercial service because they can get their containers out of the Port of Virginia. They also redirect containers to Gulf ports.

Another innovation Norfolk Southern is using to further balance imports and exports is its Dual Mission rewards program, which incentivizes truckers to drop off and pick up containers in a single trip. Truckers receive a $200 bonus each time they complete a dual assignment.

“The market has accepted this program,” Larry said. “We are hoping to achieve 50% or more double assignments. We started in Chicago and Kansas City and saw more pickups. It’s not just the impact of having more drivers show up at your terminal for move containers efficiently. It also helps reduce carbon in those markets because there are fewer trucks on the road.”

Meanwhile, rail delays are not improving on the West Coast. Logistics officials are measuring 12-day rail delays at the ports of Los Angeles and Long Beach. For containers moved by a combination of truck and rail, the lead times are 30 days. Congestion on the rails is also impacting domestic rails, with delays. A logistics service provider told customers that the wait for a container pickup at a rail yard in Dallas was 40 to 50 days. Other rail yards in Kansas City and Memphis are also filled with containers.

In an effort to relieve congestion at Norfolk Southern’s main terminal in Memphis, the railroad has opened two lots outside the terminal to handle up to 2,000 shipping containers.

Larry says the congestion will further spur the evolution of trade routes across the country.

“We believe the demand for ocean freight on the East Coast will continue to be strong and the market will continue to look for ways to meet that demand,” Larry said. “As the market takes us down new paths or new opportunities, we want to be there for it and keep innovating new solutions,” he said.

The CNBC Heat M Supply Chainap the data providers are the artificial intelligence and predictive analysis company Everstream Analytics; the global freight booking platform Freightos, creator of the Freightos Baltic Dry Index; the logistics provider OL USA; the FreightWaves supply chain intelligence platform; the Blume Global supply chain platform; third-party logistics provider Orient Star Group; the marine analysis company MarineTraffic; marine visibility data company Project44; shipping data company MDS Transmodal UK; Ocean and Air Freight Rate Market Benchmarking and Analytics Platform Xeneta; leading research and analytics provider Sea-Intelligence ApS; worldwide crane logistics; and air, DHL Global Forwarding; freight logistics provider Seko Logistics; and Planet, provider of daily satellite images and global geospatial solutions.

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