Paper Shippers Focused on Capacity

Paper shippers focused on finding solutions to the tight capacity in the rail and trucking sectors dominated the TAPPI Shipping, Warehousing, and Receiving Conference in New Orleans, Louisiana, earlier this month. Shippers across the board said they were searching for capacity solutions given the increasing pricing and limited availability of capacity. Truck and rail logistics managers are working to stem large cost increases, in a pro-carrier marketplace. At least one shipper reported having to pay significant deadhead miles for shipments into Florida because of the lack of revenue freight for their carrier on the return leg.


Shippers that have rail options were largely unimpressed with the carriers’ offerings, noticing the extended transit times and poor condition of the boxcar fleet. A paper shipper said that railroads did not appear to be willing to help the paper industry move its increasing traffic levels through either rates or service performance. In some cases, shippers are making boxcar repairs themselves instead of bad ordering the equipment to keep the car in service and be able to load it for shipments. Paper shippers are largely running flat out and have significant orders that must be moved to customers in a timely fashion to open up warehouse space and keep customers from running out, along with keeping their own production at a high level.


Some shippers have had to move product by truck to get product to shippers that urgently needed it and could not risk rail delays. Paper shippers are uniquely positioned to use rail if they can because of the additional capacity that boxcars provide relative to trucks. Rolled paper customers generally must use highly-rated trailers with additional cross members to support the weight of large paper rolls. This, along with the weight of the rolls themselves relative to the on-highway weight limit that trucks must abide by, limits the payload capacity of trucks compared with the 286,000lb weight limit of railcars.


Shippers do not report seeing any light at the end of the logistics tunnel given their production rates are expected to remain robust through the balance of 2018. Truck capacity is expected to remain tight over that same period, potentially leaving paper shippers to explore rail intermodal options. But rates for that service have increased nearly as much as truck and are expected to remain closely tied to truck rates, giving shippers only limited relief from their supply chain heartburn as rail carriers continue to struggle to provide service. Intermodal train speeds have stabilized, but remain nearly 2mph below the 10-year historical average and well below the 2016 and 2017 levels shippers became accustomed to.

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