Effects of Drop in Container Throughput

Effects of Drop in Container Throughput

The consequences of the 2008 decline in container throughput at the nation's seaports reached beyond marine ports and terminals, affecting containership fleet capacity, railroads and commercial trucks that service the seaports, and the inland warehouses and distribution centers that provide logistical support for the entire multimodal freight supply chain. First, because of the decline in global demand for containership services, the estimated number of container vessels idled at seaports worldwide soared by March 2009 to a record high of more than 450 ships with a carrying capacity of 1.4 million TEUs (AXS-Alphaliner 2009). These idle container vessels accounted for approximately 11 percent of the world containership fleet. The capacity of idle container vessels worldwide nearly tripled from the beginning of 2008, when it was estimated to be about 210 ships and 550,000 TEUs.

Second, with the overall decline in containerized exports and imports, the number of intermodal2 shipping containers and truck trailers transported nationwide on railcars by the nation's Class I railroads3 in 2008 was 11.5 million units, down 4 percent from 12 million in 2007 and from a record high of 12.3 million in 2006. About 60 percent of rail intermodal traffic consists of merchandise imports and exports (AAR 2009). In 2008, the number of international intermodal containers moved by rail from the seaports totaled 7.8 million, a decrease of 7 percent from 2007 (Intermodal Association of North America 2008). The imports arrive on ocean vessels and are long-hauled by railcars to destinations across the county, and the exports originate all across the nation and are headed for destinations around the world.

In one example of the severity of the declines, the leading Class I railroad for handling intermodal shipments from west coast ports, Union Pacific (UP), reported that the major economic downturn during the fourth quarter of 2008 compounded already declining intermodal volumes experienced earlier in the year and resulted in fewer intermodal shipments (Union Pacific Corp. 2009). UP's intermodal traffic from west coast intermodal terminals was 1.5 million container units in 2008, down 7 percent from 1.6 million units in 2007. In particular, at the Intermodal Container Transfer Facility in Los Angeles, UP's intermodal traffic dropped 13 percent during the same period.

There were similar declines in trucking services in the second half of 2008, resulting in record lows for overall freight trucking activity. In December 2008, according to the American Trucking Association (ATA), trucking activity nationwide was down 13 percent from December 2007. Trucking services declined for 6 consecutive months, from June through December 2008 (ATA 2009).

Nationwide freight activity for all modes, measured by the Freight Transportation Services Index (TSI), declined 3.0 percent in 2008. According to the TSI, this decline was the third consecutive annual decline and the largest since 2000 (USDOT RITA BTS 2009). The freight TSI measures changes in the output of services provided by the for-hire freight transportation industries and consists of data from for-hire trucking, rail, inland waterways, pipelines, and air freight.

Globally, 1 maritime container in every 10 is bound to or originates in the United States.

Third, the slowdown of economic activity within the United States, the reduction in consumer spending on foreign goods, and the decline in demand for freight transportation services resulted in excess inventory for certain imported products moved by ocean vessels, especially foreign automobiles. By March 2009, the parking lots of the nation's top auto ports had thousands of new car imports that could not be moved out. Auto dealers could not take delivery of them because of the drop in consumer demand and the lack of bank credit to finance their inventories (Leach 2009). The Port of Baltimore, the top auto-handling port in the United States, had about 57,000 new cars at its terminals and the port had to store some at the nearby Baltimore- Washington International Marshall Airport (Dennis 2009). Storage of imported autos at U.S. seaports further reduces demand for train and truck services to transport them to dealerships, dampens the market for third-party logistics services, decreases overseas car manufacturing, and ultimately increases the number of ocean vessels that are idled.

2 As used in this report, the term "intermodal" refers to the traditional rail and truck combination only. This involves using rail for the long-haul portion of the shipment and trucks for the shorter distances at both ends of the shipment. The term also could be used to describe shipments transported by multiple modes, including ocean vessels.

3 Class I railroads are line-haul freight railroads with 2008 operating revenues exceeding $360 million.