Container restrictions from the railroads due to high levels of congestion at the ports are causing disruption to service for intermodal providers like J.B. Hunt Transport Services (NASDAQ: JBHT).
The company earlier this week issued a service advisory extending through Saturday as its partners BNSF Railway (Berkshire Hathaway, NYSE: BRK.B) and Norfolk Southern (NYSE: NSC) unwind the glut of boxes and trailers backed up in the key intermodal markets of Los Angeles and Chicago.
“Severe ramp congestion is impacting the intermodal network in Chicago and Southern California, delaying both inbound and outbound loads,” according to the statement. Both railroads have implemented “gate restrictions and closures for standard service level shipments” in efforts to “expedite the recovery.”
BNSF has limited the number of shipments that can be ingated for all destinations at terminals in Los Angeles and San Bernardino, California. Chicago gate restrictions include most destinations west and south, including Seattle, Portland, Oregon, Denver, Phoenix, Houston and Mexico.
Norfolk Southern has closed two-way service at its 63rd Street terminal in Chicago to and from Pittsburgh, Toledo, Ohio, and Buffalo, New York.
“As a result of railroad restrictions and closures, J.B. Hunt’s ability to pick up freight in the lanes listed above is expected to be impacted through Saturday, December 19,” the statement read. The notice said a representative will “communicate load-specific delays, along with alternative rail and highway routing options.”
The delays and service outages have been brought about by increased online spending as well as an ongoing inventory restocking effort by retailers. Container shipments should be declining this time of year as most holiday-related cargo has already been shipped. However, the traditional seasonal slowdown hasn’t happened as intermodal traffic on the railroads has remained steady, at a high level, since mid-September.
In fact, total intermodal units climbed 3.6% sequentially to more than 308,000 in the latest week that ended last Saturday, according to the Association of American Railroads. Intermodal traffic was up 11% year-over-year over the last four weeks.
The intermodal disruption in Los Angeles and Chicago is likely to impact other intermodal carriers as well, including Knight-Swift Transportation (NYSE: KNX) and Schneider National (NYSE: SNDR).