The railroads are continuing to make a challenging shipping environment even more difficult. Thus far we have dealt with strikes, major service delays, equipment shortages, and very tight capacity. Next up are some fairly major lane cuts on cross-country moves between the Union Pacific and CSX.
What’s happening?
Intermodal network changes are coming within the CSX and Union Pacific railroads that will further raise costs on cross-country moves. In an effort to revamp their “railroading philosophy” and increase efficiency, CSX will only accept block trains from the UP in Chicago, meaning that they are eliminating steel wheel interchanges in Chicago and are cutting service in low volume markets such as upstate NY. Full trains will only go to the following four metros via CSX from interchange in Chicago: Springfield MA, Chambersburg PA, Northwest OH, and the Kearny NJ ramps.
When does this occur?
The changes are effective on September 17, 2018.
Who will this impact?
197 origin/destination cross-country pairs will be affected by this. The UP has already notified shippers that UMAX interline service would end for these lanes. Knichel Logistics’ pricing team is currently working on which shippers will be affected and will be providing alternative shipping options. All impacted shippers will be notified by August 17th, giving a month of advance notice before the changes take place.
As an example, one of the destinations that will be cut off is the Baltimore area. One option is to utilize the Harrisburg ramp (however that area is power constrained) and dray to Baltimore. Another alternative could be doing a crosstown interchange in Chicago from the UP and then continuing on to Baltimore via the CSX from their ramp. This option, however, involves both an additional drayage fee in order to move the container from the UP ramp to the CSX ramp, and it will more than likely involve a crossover fee for outgating the container from a UP ramp and ingating to a CSX ramp. Another issue here is the inevitable power issues that will continue in Chicago due to everyone else attempting their own crosstown moves.
Things to consider...
Again, one of the major issues everyone is dealing with currently is drayage power. The drayage leg has already been a challenge this year in most metros – shifting significant volume to just the four metros that have been selected will exacerbate the power issue. Two of the four are already extremely constrained as is: Chambersburg and Northwest OH. At the very least, be prepared for a difficult market in the Ohio Valley come mid-September.
As has been the case since last fall, rates are going to go up due to these changes. Navigating alternatives to the lack of rail options is going to involve either a switch to highway, which will be costlier, or paying crossover fees to reposition containers from UP ramps to CSX ones and then paying longer dray hauls to get boxes to their final destinations. We also anticipate that transit times will increase.
Keep in mind that these changes do not alter the markets that Knichel Logistics serves – we merely have to get more creative in finding cost effective ways to work around the frequent shake-ups along with the continually tight capacity and power issues that have been going on for the past year.
