Now that the crunch for chassis has abated from pandemic-fueled shortages, firms can return to business as usual, right? Not so, says Dan Walsh, president and CEO of Trac Intermodal, a North American marine chassis provider based in Princeton, Recent Jersey.
FreightWaves recently chatted with Walsh to debate forecasts for chassis demand. Expect e-commerce, the necessity for supply data visibility and shifting manufacturing patterns in Asia to play a job, based on Walsh.
FREIGHTWAVES: Is there any reason that the chassis shortage that we saw a pair years ago won’t occur again?
WALSH: I’d say three things in response to that. The very first thing that I’d say is that within the period ’21 to ’22, we actually did see a singular combination of market dynamics: a worldwide pandemic, mainly the cessation of all imports after which a large volume surge. And I believe all that put pressure on all parts of the provision chain. Respectfully, what I’d say is it wasn’t a lot that there weren’t enough chassis to service the quantity, it was more that there have been plenty of points in the provision chain where activity became so congested that nothing moved.
You would take into consideration, for instance, the variety of chassis that were stuck outside of retail warehouses with containers on them because there was not sufficient labor or space within the warehouse to unload those containers and deck the assets in order that they may very well be put back into circulation. And that manifested itself in prolonged turn times — almost double or triple what they’ve been up to now. And that just put pressure on everybody in the provision chain to get the assets moving efficiently.
I believe those market conditions are relatively unlikely to occur again. But I believe they may. And so the query is: What have we done within the event that they do occur [in order to] to reduce the impact? And the very first thing that I’d say in response to that’s that we’ve continued to take a position. Actually, we’ve accelerated our investment within the chassis fleet. That features us adding latest assets, refurbishing and upgrading our existing assets and continuing to innovate around our product offering in order that we support our customers. And I believe that’s the important thing thing when there’s been a market correction. We haven’t stopped investing.
So I believe that puts us in superb stead by way of asset availability. If we do see a rise in demand, from where we’re in the intervening time, I believe there will probably be a rise in demand more likely within the second half of 2024. For those who take a look at the primary half of ’24 [compared with] ’23, current projections show an 8% increase, but I actually think it is perhaps higher than that within the back half.
FREIGHTWAVES: What growth rate assumptions do you propose your enterprise around on condition that intermodal has lost share to the highway but there has also been a number of investments by the domestic intermodal providers in taking delivery of containers and likewise investments by the Class Is in rail terminals?
WALSH: There’s been a number of collaboration and partnership between all participants in the provision chain to attempt to ensure that that we offer data in a standard way so that individuals have higher visibility into assets and might optimize their utilization.
The opposite thing that I’d say with respect to chassis is that it was really just confirmation of something we’ve been saying publicly for a very long time — that there is no such thing as a one size suits all with respect to the chassis provisioning model. There isn’t any silver bullet. You’ll be able to’t pick one model and say, “Let’s apply it in all places on this planet, in all places in North America, every port, every rail” and have it work effectively. You’ve gotten to cater to local market dynamics, including geography regulation, business activity — all that form of stuff.
Our preferred model is the grounded neutral pool, which supplies us higher control of the assets to ensure that that they’re moving around quickly and provides our customers unlimited selection.
FREIGHTWAVES: You had mentioned potential intermodal growth within the second half of 2024. What growth rate assumptions do you may have and the way do you propose your enterprise around them?
WALSH: We be ok with demand. I believe that’s the important thing takeaway. Going forward, we feel superb about growth. And I say that for a few reasons. For those who take a look at the period between 2001 and 2020, U.S. real GDP increased at a rate of 1.8%. At the identical time, containers grew 3.6% and chassis grew 3.2%, which suggests a GDP multiple of two.1 times and 1.8 times, respectively.
That’s relevant [because] when you imagine in ongoing GDP growth in the US, based on what’s happened up to now, you’re going to see growing demand for containers and chassis. We imagine strongly within the North American economy, and we expect it is going to proceed to grow at around perhaps 1.7%, 1.8% in the approaching period. And as such, we expect that our growth will probably be well north of three% in the approaching years. So what’s vital is that we proceed to take a position in and optimize our fleet so it’s available. And as I discussed before, we’ve spent north of a billion dollars within the last decade, ensuring that that’s happening. We feel superb in regards to the coming growth out there and the approaching demand for our product out there.
FREIGHTWAVES: Everyone still talks about nearshoring and the extent that which may actually occur in North America. Would that affect Trac in any respect and the way you conduct your enterprise?
WALSH: I believe it’s actually an emerging market dynamic that we’d like to contemplate. But I believe, really, the query is whether or not or not we still imagine in trans-Atlantic trade and globalization. And I believe that the worldwide provision of assets is so deeply entrenched within the North American economy that it is going to proceed.
There are some things which might be happening that are of interest. For instance, when you think in regards to the movement of producing and production in Asia, particularly away from China and into, say, India and so forth, then potentially you’ve got a Suez Canal delivery option, which is more East Coast-centric. And I believe that may very well be interesting by way of how that volume comes into the US, which we imagine will proceed to grow and will probably be distributed between the assorted ports and locations. So, East Coast growth over the West Coast and the way will that play out?
I believe that nearshoring is something that we actually have to be cognizant of, particularly given the statements made by President Biden across the criticality of certain industries — microchips, for instance, and deeming that a national security issue. There is perhaps ongoing activity where other industries are designated that. But I do think globalization will proceed to grow. I believe that there’ll proceed to be trans-Atlantic moves and it’d just alter somewhat how the products are distributed in North America.
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FREIGHTWAVES: Is there coordination between the quantity of containers that an organization like J.B. Hunt is taking delivery of and the quantity of chassis that you simply take delivery of?
WALSH: No, not specifically. I mean, in that general context that I talked about before, that when you take into consideration GDP growth, then the expansion of containers and chassis are very tightly correlated to GDP. So so long as GDP is growing, we imagine that there’s a really tight correlation between GDP growth and demand for chassis and demand for containers. For those who imagine that the GDP goes to proceed to grow, then you definitely can imagine that chassis and container demand goes to proceed.
FREIGHTWAVES: For purposes of planning the marine chassis fleet, are you expecting a shift back to more share of imports for the West Coast ports or do you see some other trends in port market share gains around North America?
WALSH: It’s a very interesting phenomenon, I believe. Just go to the information first in ’23: East Coast ports were higher than the West Coast ports in total import volume in the primary half [of 2023] by 3%, right? And that’s excluding Canada and Houston. But now we’re beginning to see signs of more freight returning to the West Coast. And when you take a look at the Global Port Tracker from the National Retail Federation, they’re projecting that LA/Long Beach import volumes within the second half of ’23 will grow by 6.4% in comparison with the identical period in 2022.
What I believe goes to occur, in summary, is a number of the volume that went away from the West Coast goes to return, but not all of it. Again, you may have this initial indication that a number of the changing locations for manufacturing inside greater Asia may open up the viability of the East Coast ports, and I believe that’s something that individuals must regulate. But the information suggests that the West Coast goes to grow from where it’s, even though it won’t get back all the things that shifted away. I also think that on the West Coast, a number of the issues that were of concern — uncertainty with respect to the ILWU [labor] agreement, etc. — a few of those have been managed away.
So I believe there’s a better degree of certainty in the intervening time. I believe a number of the things that were outstanding and were causing people to take a more in-depth look — coupled with congestion issues — are beginning to dissipate. And on the back of that, you’re seeing a few of that volume return. But I also think, historically, when it shifted away, not all of it has gone back. And that’s why you’re seeing the expansion of Recent York and Recent Jersey, the South Atlantic over recent years particularly.
![](https://www.freightwaves.com/wp-content/uploads/2023/09/14/TRAC_Intermodal_1-600x338.jpg)
FREIGHTWAVES: Is there anything that you simply’d wish to mention that is perhaps good for readers to learn about?
WALSH: With respect to e-commerce, I do think that it will proceed to have a large impact on our supply chain. In my view, what e-commerce reflects is changing consumer behavior and changing consumer expectations. The buyer wants stuff faster, they need it delivered to their home they usually want the power to send it back without spending a dime. I believe COVID accelerated the event of e-commerce by 10 years. And when you take a look at the sales in e-commerce in the primary quarter of 2023, it’s 15.4% of total sales. And it continues to grow: growing 2.1% within the second quarter of 2023 and seven.5% yr on yr. So I believe that’s going to proceed to place pressure on us to be faster, to be more efficient and to be more conscious of the shopper.
Also, our retailers are going to proceed to be focused on the shopper interface and the way they’re managing that, particularly through technology. After which the back-end logistics requirements that go together with that I believe are going to proceed to shape the provision chain going forward. In order that expectation from the patron which has shifted goes to translate into acute improvement expectations for all of us in the provision chain.
The one other point that I desired to say was about retail inventory. You’ve seen the retail inventory-to-sales ratio remain relatively flat since March 2023, showing that the market has leveled off. Personally, I believe that metric is a superb forward indicator. I don’t think we’re through the destocking of the inventory. I believe it’s going to be a muted peak season this yr, but I believe that may correct in ’24 and that may drive volume growth when retailers start pulling product towards them and putting it back on the shelves. There was a lot activity in that space and a few of that inventory remains to be being disposed of, but I believe we’ll be through most of that [inventory] as we head into the second half of ’24 and volumes will probably be lifted because of this.
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Related links:
- TRAC Intermodal and ZEBOX form partnership
- Trac Intermodal partners with American Made Chassis to supply more chassis
- Moving volumes easily: TRAC Intermodal CEO’s 3 keys
- TRAC Intermodal study highlights chassis pool partnership for expedited shipping
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