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Whiplash effect of inland congestion causing
big issues across Canada
The congestion issues at intermodal rail hubs in eastern Canada are a direct result of drayage capacity shortages at those facilities, and there seems to be no relief in sight. The simple fact is there are fewer drivers in Toronto and Montreal to handle the volume, creating a serious backlog and ongoing congestion issues. On a year to date basis, total truck visits to these facilities declined by 18.5 percent, verifying the problem, which first surfaced in Toronto in May, and has now extended to Montreal.
As the cargo backlog increases at Toronto and Montreal railyards, additional charges, borne by shippers, are becoming more common and unavoidable. As volume levels into ports remain steady, terminal yards are regularly full, and reservations to return empty containers are not always available. The inability of terminals to accept empty equipment returns can lead to demurrage fees from the steamship lines and detention fees from drayage carriers that are holding the empty containers in their yards for several days or even weeks.
This backlog is leading to less chassis equipment being available to utilize for collecting full containers from the yards for deliveries, thus causing delays in deliveries and potentially leading to storage charges at the railyard as well.
Unfortunately, congestion in the rail system has been going on for weeks, and there is no clear end in sight. While some inland relief container yards are being utilized to clear backlogs and restore fluidity in the supply chain network, the ports, rail operators and drayage groups are all stretched to the limit, and it is unlikely that the system will unclog any time soon.
A lack of drayage capacity in Toronto and Montreal for receiving cargo from all Canadian ports of arrival is increasingly putting upstream pressure on these first points of arrival. As a result, rail dwell times are elevated at marine terminals and the inland movement of cargo is delayed considerably.
Cargo volumes this year highlight the fact that inland bottlenecks, not container volumes, are the cause of the ports’ woes. Vancouver’s container volume was down 13.7 percent in January through May compared to a year ago, according to the port. Prince Rupert data shows the port’s volume was only up 1 percent through the first five months of the year.
Because of the congestion at their inland facilities, the railroads are metering, or managing, how many trains they are deploying to ports such as Vancouver and Prince Rupert. This is causing rail containers to back up at the marine terminals because of reduced train capacity.
Although the whiplash effect of inland rail congestion on West Coast ports has been pervasive in the U.S. in the past year, it has not been a serious problem in Canada until recently.
Elevated dwell times because of delays in Toronto and Montreal, have also resulted in certain ports opening near-dock surge yards to hold containers for temporary storage. The idea behind this is to prevent rail congestion at the port from worsening, but it does not solve the problems which originate inland.
Neither the ports nor the railroads are ready to forecast a return to normal. The drayage and warehouse capacity constraints in Toronto and Montreal have become so chronic that we are now in a situation of a potential back up for some time, until this issue is resolved. In terms of solutions, a return to proper levels of drayage capacity is an obvious requirement and one hopes the drayage industry will react to this need accordingly. At the same time, inland rail terminals also must look to improve efficiencies, as these issues have compounded the situation as well.
For more information, contact David Lychek, Director – Ocean & Air Services.
Air & ocean freight market update
Ocean Freight
The unprecedented COVID pandemic-led boom in ocean freight pricing seems to have peaked and rates are now on a downward trend, against the backdrop of a potential global recession, driven by surging energy prices and rapid inflation. The boom in demand for consumer products has also calmed, as spending on travel, leisure and services made a strong revival this past year. Due to this boom, freight rates jumped roughly 10-fold in 2021. At the same time, supply chain disruptions, port backlogs and sheer cargo volumes left importers scrambling for space on container ships.
After the chaos of 2021, retailers tried to seize the moment and anticipate uncertainty by importing more goods earlier than usual – except this year, there were no delays and the demand for consumer goods did not materialize. Many importers are now dealing with overstock and have curtailed further purchasing.
Analysts see shipping rates falling further for the remainder of the year and through next year, especially as new ships are deployed over the next two years. These new vessels are expected to result in an estimated net fleet growth of over 9% from 2023 to 2024. This increase in capacity, aside from putting downward pressure on rates, should also promote overall stability in the market, as the ability to ship cargo is less compromised than it has been recently.
Airfreight
While the downward trend in the ocean freight market seems evident, the air cargo sector remains chaotic and difficult to predict. Ongoing disruptions due to compromised staffing resources, the war in Ukraine, industrial action, natural disasters, reports of record inventory levels in the U.S., high inflation, and more COVID-related lockdowns in cities in China – the ‘factory of the world’ for so many products – promise more air cargo market volatility for the remainder of 2022.
In terms of rates, sluggish demand for air cargo since the start of this year is pushing down shipping costs. Airfreight rates increased steadily from 2019 to late 2021, however, since the start of 2022, an overall downward trend has been observed. That said, overall air cargo rates remain slightly higher than one year ago, and are still considerably higher than the 2019 pre-pandemic levels.
Despite continuing transportation and supply chain chaos, global air cargo capacity in August recovered 7% from the same period last year, thanks to the surge of international summer travels in the northern hemisphere. It also continued to narrow its recovery back to the market capacity level seen in 2019, now just 9% away.
For more information, contact David Lychek, Director – Ocean & Air Services.
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The covered Ponte Vecchio bridge
spans over the River Arno. |
Name the city that is home to the Ponte Vecchio bridge
- More than 15 million visitors explore this city each year.
- The first city in Europe to pave its streets.
- Believed to be the birthplace of Gelato.
- Leonardo Da Vinci and Michelangelo were born here.
- Masterpieces, including Michelangelo’s David, Botticelli’s Allegory of Spring and The Birth of Venus, and Titan’s Venus of Urbino are housed here.
- Opera originated here in the late 16th century.
- The city’s cathedral took 140 years to be completed.
- Luxury fashion brand Gucci was founded here in 1921.
See the answer
For more information about shipping freight to or from this city, contact Debbie McGuire, Director – Freight Solutions.
Make your freight forwarder part of the purchasing process
Save time and money by giving your freight forwarder a copy of your Purchase Order as early as possible. With that single step, your forwarder can:
- Provide input on the best routing to expedite your order and cut transit times.
- Follow up and make you aware of any complications or delays.
- Ensure equipment and space are available, and in the process avoid delays or having to employ other options to meet delivery requirements.
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Barbara Mulatinho,
Team Leader – Customs Consulting Services (Canada) |
At Your Service: Barbara Mulatinho, Team Leader – Customs Consulting Services (Canada)
Barbara Mulatinho joined our Customs Consulting Services Team at head office in June 2018, where she was responsible for processing CUSMA/USMCA certificates and certifying new products, with a goal to take on additional tasks.
In June 2022, Barbara was promoted to the role of Team Leader – Customs Consulting Services (Canada). Barbara is responsible for a variety of compliance activities (HS tariff classification, database maintenance, client consulting, etc.) in addition to processing claims, Advance Rulings and mentoring team members.
Barbara can be reached by phone (905) 882-4880, ext. 1259 or by email. |
