IANA panel: Intermodal chassis squeeze easing, but it’s far from over

The great chassis squeeze in intermodal transport is not done yet, according to a panel of executives at the annual IANA meeting.

LONG BEACH, Calif. — The great chassis squeeze of 2021-22 isn’t over and likely will leave in its wake a changed market for the equipment so vital for intermodal movements, according to a panel of industry executives. 

That was a key takeaway from the panel on the second day of the Intermodal Association of North America’s annual exposition. While the worst may be behind the industry, things aren’t all that much better, several of the panel members said. 

The disruption in the market has taken a staid corner of the supply chain and put it through a wrenching change, said Ronald Widdows, the CEO of FlexiVan, which leases chassis.

“Customers didn’t have to think about chassis,” said Widdows, talking about earlier markets. “It came with the container.”

But that’s changed, according to Widdows.

“If you’ve gone through the experience of the last two years, you get it now,” he said. “The awareness is that if I need a set of wheels and it’s not there, the effect is not just on my supply chain, but it threatens the business model.”

According to Daniel Walsh, the president and CEO of industry leader TRAC Intermodal: “We’re seeing a freeing up of the market and product is starting to move. [The industry is] still dealing with inventory that is temporarily dislocated.”

TRAC partnered with a chassis producer to provide more supply earlier this year. 

Volume will be “easing” through the fourth quarter of 2022 and into 2023 “but still will be remaining reasonably robust,” Walsh said. 

However, Dave Manning, the president and CEO of the North American Chassis Pool Cooperative (NACPC), was less confident about a significant rebalancing of the market anytime soon.

Current chassis utilization is 90%, Manning said, and that tight number is running up against the fact that “over the next few weeks customers are asking for thousands and thousands of chassis. I think it’s going to be a lot longer than just a few months. It’s going to be late 2023 before we catch up with the backlog and the indications are now that we’re into 2024.” 

Part of the squeeze on supply, according to CCM CEO Mike Wilson, is that too many chassis are experiencing excessive dwell at various places in the system.

“If the chassis is doing what it is supposed to do (transporting a container), that is one thing,” Wilson said. “But if it is just sitting out there under a container somewhere, that isn’t good.”

Mike O’Malley, the senior vice president of government and public relations for DCLI, noted an aspect of the excessive dwell: Even though companies are getting paid for the chassis they have out in the market, it can hinder servicing customers.

“We are in the odd position of having to ask our customers for the asset back,” O’Malley said. “[When that request is made,] we’re asking them to stop paying us.” 

Wilson said he expected excessive dwell time to be a “significant factor that we should see alleviate over the next three to six months. Those chassis will start to come back into the system.”

Looming in the background to the tight chassis market is not just that all elements of the supply chain have been disrupted. But the supply of chassis into the U.S. also was hit with a steep tariff regime. Those tariffs, handed down by the Department of Commerce, were levied approximately 220% against Chinese manufacturers.  

Manning said the annual supply of new chassis had been running at about 40,000 units, with roughly 75% of that coming from China. “The tariffs shut that off,” he said.

The tariffs did what they were supposed to in that a renewed domestic supply was created. But Manning described the amount of new supply as just a “thimbleful.” Just obtaining parts for building a chassis is a three- to four-month wait, Manning said. 

But he expressed optimism about the supply of domestically made chassis after manufacturers get through the ramp-up. As far as when, it isn’t soon.

“I think it will be through 2023 before we see a supply-demand balance,” Manning said.  

The drop in Chinese imports has led to strains in the supply chain. Doug Hoehn, the president of chassis and containers at Milestone, said the company went from one supplier to seven quickly.

“We are looking to buy chassis from multiple locations,” Hoehn said. “It changes everything for us.”

While the tariffs and changed role of the Chinese have created short-term disruptions, Hoehn said the long-term impact is positive.

“It’s good for the market as we continue to bring in new participants who can bring in new ideas,” he said. 

A potential lasting impact to chassis supply coming out of the last few years might be the decline of the traditional chassis “gray pool.” Under that model, numerous suppliers contribute chassis to a pool located near a key port or logistics hub, and truckers can use any of them.

But with the uncertainty that has hit the market in the last two years, that model is under pressure. 

“[Increasingly], we’re looking at a direct interface with our customers,” said Walsh, noting that the models of the past have issues with inefficiency, but the possibility of change still exists. “As (pools) evolve, continuing to offer interoperability will be important to ensure solid fluidity in the market.” 

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