With Warehouses Full, Shippers Are Holding Product On Chassis

Warehouses and distributions are so full that some shippers are holding product on chassis, leading to increased prices passed on to consumers and further snags in the US supply chain, especially inland rail ramp pools.

Paul Brashier, vice president of drayage and intermodal for ITS Logistics, told CNBC in an interview this week that the practice of leaving containers on chassis both prevents those chassis from being use to move new containers and leads to increased per diem charges and fees for the shipper — which are then passed on to the consumer.

The fees shippers are charged for the dwelling chassis “can lead to tens of millions of dollars in penalties,” Brashier told CNBC, adding that per diem charges will likely tick up in Q2 and Q3. “These are on top of charges for warehousing, which are still at historic highs. Late fees and warehouse fees are passed onto the consumer, which is why we are not seeing products fall as much as they should.”

The increase in fees will also likely impact earnings, Brashier told the network. His firm is telling clients to consider pop-up storage and grounding operations to “reduce reliance on storing freight in ocean containers.”

The solutions may seem drastic, but when viewed against the current backdrop of historically tight supply and low vacancy in the industrial sector, they come into sharper focus.  According to fourth quarter 2022 research from Savills, net absorption of industrial product totaled 536.6 million square feet, with vacancy averaging just 4%. The market is still “historically tight” despite a year-end pullback, according to the firm’s researchers. And earlier this year, Prologis predicted US warehouse development starts will drop to a seven-year low, declining by 60% to less than 175 million square feet this year.