The Los Angeles Basin Pool has added 2,300 chassis through increased emphasis on repairs and shifting assets from other locations.
The Los Angeles Basin Pool, one of the primary sources of spot-market chassis used to haul containers to and from ports and rail yards in Southern California, is more than two-thirds of the way toward its fleet-augmentation target of 3,000 chassis, according to the company running the operation.
The additions are needed to relieve a severe imbalance of equipment among storage locations at the ports of Los Angeles and Long Beach that is contributing to cargo delays and truck backups at marine terminals.
Since late July, the LABP has injected 2,307 units into the pool by repairing chassis and relocating equipment from other parts of the country, Phillip Connors, executive vice president of Flexi-Van Leasing Inc., said in an interview.
Flexi-Van is responsible for managing the pool, which includes almost 37,000 wheeled frames. The Kenilworth, N.J.-based company contributes about 18,000 chassis to the pool, which also counts TRAC Intermodal and China Shipping as members.
The LABP is one of three chassis pools in the L.A.-Long Beach area, which experts estimate is home to about 100,000 chassis.
But Connors said adding the remaining 700 units to the fleet will take longer because they require more extensive repairs to meet federal highway safety standards than the initial tranche.
After culling the low-cost chassis repairs, “you finally get to the point that you are pulling out chassis that may take one mechanic more than a day to make roadworthy,” he said.
The pool partners, Connors stressed, are bringing in assets from existing inventories and not raiding pools in other parts of the country to address the Southern California challenges.
“We’re not stealing from Peter to pay Paul,” he said.
Flexi-Van, which has added about 1,479, container carriages to the LABP to date, has been moving many chassis from the Houston area to feed the Southern California market, Connors said. The initial order is for 1,000 chassis, with each one costing about $750 to reposition, he said.
Chassis providers hope to recoup the costs through their usage agreements, which Connors suggested may have to be adjusted in the near future. In addition to repositioning costs, lessors are faced with greater labor costs for mechanics, as well as rising prices for tires and parts.
“It doesn’t take a genius to figure out whether the current rates, when one looks at the cost, are sustainable,” the chassis industry executive said.
At a Federal Maritime Commission field hearing in Long Beach earlier this fall, Flexi-Van’s Bernard Vaughan said the company spends about $40 million per year on chassis maintenance.
Chassis leasing firms such as Flexi-Van and TRAC have two primary lines of business. They lease chassis directly to customers, such as trucking companies and shippers, for a period of time — typically one year. They also contribute to pools. Some are neutral pools, controlled by a single company with its own equipment, and some are shared fleets that allow a contributor’s customers to use any chassis without regard to the actual owner. Contributors can rent out as much equipment as they provide to the shared fleet. The pools cover a defined geographic area and usually have numerous pick-up/drop locations. There are about 13 to 15 facilities, for example, in the Los Angeles/Long Beach area. The pool manager keeps track of who is using which provider’s equipment for billing purposes, inspects returned equipment for damage, maintains equipment on behalf of the owners and ensures fluid traffic flow within the depots.
Flexi-Van has not had to feed its pools with new orders, but the inventory overhang from the recession is beginning to dwindle and the company will soon have to evaluate when to make additional capital expenditures, Connors said. The only time Flexi-Van currently orders new equipment is for customers with dedicated contracts.
Marine terminal operators and others say chassis are one of the root causes of massive port congestion in Los Angeles and Long Beach, but the situation has more to do with inefficient usage patterns, mismatches between where chassis are located and where they are needed, and seasonal demand peaks, officials say. Chassis imbalances can be traced back to decisions by steamship lines in recent years to stop providing equipment themselves. Chassis sold to leasing companies typically came with stipulations that the units be reserved for customers of the shipping line, creating a situation where a terminal may have chassis for steamship line A, but not for steamship line B. That forces drayage drivers to pick up a chassis at another terminal and bring it over to the terminal where it has to retrieve a container, eating into the driver’s daily driving limit mandated by the federal government.
The third-party chassis market is still transitioning to the most efficient model for ownership, pool locations, maintenance procedures and billing between parties in the supply chain.
An American Shipper story last week showed how chassis availability is reduced by out-of-service units and chassis that are sitting idle at terminals or shippers’ facilities.
Building up Southern California’s supply of available chassis is one of several solutions now being pursued by chassis providers and port authorities to address the chassis shortage so terminals can function more smoothly. In September, Flexi-Van and DCLI received permission from federal regulators to enter into a chassis-use agreement at the ports of Los Angeles and Long Beach, allowing for the establishment of a “gray” chassis pool and the interchange of chassis across multiple pools throughout the port complex. The pool-of-pools is designed to make more equipment readily available regardless of the source.
DCLI manages the GACP Pool, which includes equipment for the G6 Alliance of ocean carriers.
The Port of Long Beach is in the process of developing a stand-by fleet of more than 3,000 chassis that can be introduced to the market during peak periods to help relieve congestion. Few details on how the port authority fleet would function have been released so far, but it needs to work in harmony with the larger pool, Jon Gold, vice president of supply chain and customs policy at the National Retail Federation, said last week.
“The issue we’ve had all along is chassis owners working independently, so you have not had visibility into the entire system. Nobody knows where the chassis are. So, whatever the Port of Long Beach does, we want to make sure it ties into the larger gray pool,” Gold said during a panel discussion at the National Industrial Transportation League’s conference in Fort Lauderdale, Fla.
The chassis crisis is not unique to the San Pedro Bay ports.
Last week, chassis providers operating in the Port of New York/New Jersey agreed to start a gray pool next year to help address congestion.
L.A. chassis pool makes progress on equipment supply
