Ports of LA，LB to levy charges to ocean carriers - will it help to reduce congestion?

While the underlying principle of this measure reflects initiative on the part of the ports, we believe that there are many layers to this problem which will need attention from all decision makers and stakeholders. It is important to reflect on the problem of the record volume and congestion problem at these ports and identify who could possibly play a key role in reducing the congestion. The intermodal stakeholders like the truckers and rail transport play a vital role in delivering the boxes on time. As much as they are important to the situation, they are beyond the capacity and control of the carriers and these charges to the carriers will likely not increase trucking supply.  

 

What we foresee resulting from this decision is an added burden passed on to the shippers from the ocean carriers who are the customers of the carriers. Hence, there will be limited impact of this measure on the improvement of cargo movement and congestion at the LA and LB ports if we look at it in isolation.

These charges are typically referred to as demurrage charges (demurrage = within terminal, detention = outside of terminal). According to a report published by Container xChange in July this year titled ‘Demurrage and Detention Benchmark 2021’, both demurrage and detention increased in 2021 compared to 2020. Across the world's 20 biggest ports, the average demurrage and detention charge doubled, going up +104 after two weeks. That's equivalent to $666 for each container across ports, shipping lines and demurrage & detention combined. 
 

A combination of global covid lockdowns, blank sailings by container lines early in 2020 and a surge in US consumer demand for retail imports from Asia saw boxes starting to build up across the US since the latter half of 2020. 
 

However, after struggling to keep up with the influx of containers, the port was hit with equipment scarcity. And then, ports such as Los Angeles ended in a similar situation as the many ports across China.  
 

Taking a closer look at Los Angeles, we see that the average demurrage and detention charge has increased by +42% from 2020 to 2021. Across the biggest carriers operating in Los Angeles, CMA CGM is behind the highest boost of the demurrage and detention charges with a +167% increase over that same period. In a close second, we find Maersk with an increase of +161%. In actual dollars, the hike in fees will cost you an additional $1227. 

Source: Container xChange

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