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Intermodal congestion seen in Q4 shows no signs of easing: J.B. Hunt

J.B. Hunt’s volume fell 3 percent year over year in the fourth quarter, even though the company grew its container fleet 5 percent in the same period. Photo credit: Ari Ashe/JOC.com.

Shippers are not unloading containers quickly enough and trains are moving slower than in the past, which restricted capacity to haul customer cargo in the fourth quarter, J.B. Hunt Transport Services said Tuesday during its Q4 earnings call.

New capacity is on the way from an order of 12,000 containers the company placed last year, but delivery of the new boxes is behind schedule because of port congestion in Los Angeles and Long Beach, with the containers stuck on vessels anchored outside the harbor.

J.B. Hunt’s intermodal volume fell 3 percent year over year in the fourth quarter despite owning approximately 5,600 more containers compared with one year ago. Volume fell because box turns are down as customers dwell on containers longer than ever before. Box turns refer to the average revenue-paying jobs per container, per month, a metric used to track how quickly shippers return containers. The company’s box turn ratio was 1.65 in the fourth quarter, down from 1.8 one year ago, and 1.88 in the same period of 2019.

“We did see improvements in the quarter and parts of the network, specifically the speed in which customers were able to turn our equipment, but those improvements were effectively offset by further deterioration in other parts of the network, namely rail velocity,” Darren Field, president of J.B. Hunt intermodal, said on the call.

Intermodal train speeds were down for J.B. Hunt’s railroad partners — BNSF Railway and Norfolk Southern Rail. Compared with a year ago, BNSF’s average train speed fell from 34.2 to 33.2 miles per hour and NS’ speed dropped from 26.6 to 24.0 miles per hour.

“We had customer business that we could have onboarded in the fourth quarter that we weren’t able to because of a slowdown in velocity and capacity,” Field said. “Predicting the exact timing of improvement in the network fluidity is difficult, particularly in light of some of the more recent disruption caused by new COVID cases impacting our own and our customers operations.”

New containers stuck in limbo

J.B. Hunt took possession of only half of the 12,000 containers ordered last spring because of port congestion in Los Angeles and Long Beach after expecting it would receive most, if not all, of the boxes in 2021.

“We have a meaningful percentage of those 6,000 that are literally on vessels at anchor or waiting to unload,” Field said. “I think it’s a fair assumption we will just spread those 6,000 more or less evenly over the first half of this year.”

Nearly 1,000 of those containers have arrived this month at Los Angeles and Long Beach, and the Port of Everett in Washington, according to Ocean Audit and PIERS, a sister product of JOC.com within IHS Markit.

Field would not rule out another container order in 2022, but declined to provide details. J.B. Hunt already owns nearly 105,000 domestic containers, more than double the amount of its nearest competitor, Hub Group, and slightly more than the total containers owned by every North American Class I railroad combined.

“In the event rail velocity can’t improve, then certainly we have to go buy more equipment in an effort to grow at the same pace,” Field said. “I don’t have an answer for you on how many [containers] we would like to have.”

While J.B. Hunt executives are hopeful the supply chain congestion will ease on the ocean and rail networks soon, no one knows for sure when it will happen.

“I would say throughout all of 2020 and 2021, when we would make a prediction, typically, we were wrong,” Shelley Simpson, chief commercial officer, said on the earnings call. “Although I would like to be optimistic, this latest round of COVID has caught everyone by surprise. So, I can’t say that I feel optimistic about the supply chain challenges going away in the near term.”

COO Nick Hobbs said there are more company drivers with COVID-19 than at any time during the pandemic, which makes it difficult to keep all the trucks moving.

Contact Ari Ashe at ari.ashe@ihsmarkit.com and follow him on Twitter: @arijashe.