As railroad strike looms, tech companies redirect chips to trucking

A container delivery truck heads into one of the Port of Long Beach terminals in Long Beach, California.

Frederic J. Brown | AFP | Getty Images

Tech companies supplying economy-critical semiconductor chips have begun shifting freight shipments from railroads to trucks with a nationwide railroad strike looming. Measures are underway, DHL Global Forwarding told CNBC, to avoid any pre-strike rail preparations that would force freight rail companies to prioritize freight.

Tech cargo sent to trucks includes semiconductor chips critical to the high-tech and automotive industries.

“This is technology freight from California,” said Goetz Alebrand, ocean freight manager for the Americas at DHL Global Forwarding. Alebrand said there was now more truck capacity than there had been when a railway strike was first threatened in September due to fewer container ships entering US ports.

“There are more trucks and chassis, but that doesn’t mean there are enough trucks to carry all rail freight on trucks,” Alebrand said.

According to federal security measures, rail carriers begin prepare a strike seven days before the strike date. Carriers are beginning to prioritize securing and moving safety-sensitive materials like chlorine for drinking water and hazardous materials in rail dismantling.

Ninety-six hours before a strike date, chemicals are no longer transported. According to the American Chemistry Council, data from the railroad industry shows a fall of 1,975 wagons chemical shipments during the week of September 10 when the railways stopped accepting shipments due to the previous threat of a strike.

One would expect the Association of American Railroads to publish its planning stages, similar to what it announcement in September.

Alebrand said a customer’s cargo is not characterized as perishable or hazardous, it is waiting to be moved. On average, it takes about two to three days to clear a day’s backup. The September pre-strike containers that were held for around 48 hours took six days to clear.

Delays caused by a railroad strike would only add to the late fees that shippers pay the railroads for late goods.

“DHL Global Forwarding has advised customers of the serious impact a rail strike could have on their operations, including delays and related detention and demurrage charges,” Alebrand said. “Our first priority has been to make them aware of this situation so that they can prepare for the risk of delays in receiving the goods,” he added.

DHL Global Forwarding also reviews container locations and, in the event of an emergency, moves import boxes out of marshalling yards where possible, and reviews all import and export flows using rail to check if trucking is an option in the event of a strike, Alebrand said.

Areas of concern for DHL include Dallas and Fort Worth, which receive cargo from the Port of Houston. The Port of Houston has handled historic cargo volumes like trade moves away from west coast Gulf ports and East Coast ports for fear of a strike among west coast port workers. The other inland port where DHL sees congestion is El Paso, a major destination for goods entering and leaving Mexico.

“Congress is back in session next week,” Alebrand said. “We are now waiting to see what happens.”

A strike by railway workers could start on December 9 if no agreement is reached between the unions and the railway companies. Congress can intervene using its power through the Commerce Clause of the Constitution to introduce legislation to stop a strike or lockout, and to set the terms of agreements between unions and carriers.

We are taking every measure to avoid a rail work stoppage, says Association of American Railroads CEO

Leave a Comment

Your email address will not be published. Required fields are marked *