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Focusing on Hidden Details can Save Charters Huge Sums in Demurrage Costs, Says Voyager Portal

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Focusing on Hidden Details can Save Charters Huge Sums in Demurrage Costs, Says Voyager Portal

Charterers can save hundreds of thousands of dollars of unnecessary demurrage costs by drilling down to the detail – and acting on what they find, says Voyager, the operations and demurrage management platform for bulk commodity shipping.

Two remarkable case studies demonstrate the value gained by customers using Voyager’s Statement of Facts (SoF) Parser and Demurrage Module. In both cases, hidden details in routine operations have been uncovered, leading to significant savings.

One customer is leveraging the Voyager technology to conduct root cause analysis of its port calls, specifically focusing on weather. At one specific port, the data showed that heavy winds were leading to an average two-hour delay per call – costing the company more than US$200,000 per year.

On reviewing its contracts, the company could see that delays due to weather were still entirely for the charterer’s account – even though it is common practice to share the cost of delays due to unforeseen weather conditions.

In the second case study, wasted time was the issue. SoF data showed that an ‘inspector/surveyor’ arrived at the side of the vessel at 13.15 and ‘gangway down’ was at 13.48, but ‘inspector on board’ was not logged until 14.15.

The time spent at the side of the vessel before coming on board might appear to be a tiny detail – but it represented US$625 in wasted time.

By using Voyager’s data and reports, the operator noted that the particular behavior of this surveyor, and of other providers, was happening for a significant portion of its voyages – costing an estimated US$137,000 over one year of operations.

The maritime sector is focusing intently on efficiency and cost optimization but one area that still has significant challenges is demurrage, said Voyager co-founder and COO Bret Smart.

demurrage The Port Authority of Valencia (PAV) has approved the concession of a space in the Port of Sagunto to ZELEROS to carry out a pilot for its hyperloop transport system.

Shippers Paid More Than $114M in Demurrage Fees in Feb and March 2022

National demurrage fees continue to climb as shippers search for capacity

Dray Alliance today released an outlook for April based on the activity within its container trucking platform from Feb-March 2022. Dray Alliance findings reflect the impact of the continued port disruptions and demurrage fees being incurred by shippers with containers sitting at the ports.

The demurrage issue has become a financial burden to those who have containers sitting at ports, particularly the Port of Los Angeles. Detention and demurrage penalties have soared since the start of the pandemic and as further supply chain disruptions have hit. According to Dray Alliance, drayage carriers have been turned away from picking up loaded imported containers because of unpaid demurrage charges — a major contributor to delays and slowdowns.

“Containers keep sitting at ports, and demurrage fees keep tallying up, not by choice but by the difficulty of how to retrieve them. This has caused a financial burden to all of those in the industry,” said Steve Wen, Co-Founder, and CEO, Dray Alliance. “In our experience working with the Port of Los Angeles, we have seen how data confirms the penalties being paid due to demurrage fees. These, added to the lack of truckers and ways to distribute cargo, are a continued contributor to port backlogs.”

A Forbes article cited The American Trucking Association, who reported that this sector is headed for a shortage of 160,000 drivers by 2030. Additionally they estimate the need for one million new drivers over the next 10 years. While container volume has increased to record highs, truck driver capacity has not matched the growth, resulting in appointment slots remaining finite, leading to an increase in demurrage penalties. As the March data shows, for all of the containers currently discharged at the Port of Los Angeles, 41% are incurring demurrage, meaning a total of 25,258 out of the 61,944 shipments are past due over five days after discharge.

“The carriers view these penalties – whether right or wrong – as a profitable part of their business,” said Brian Glick, CEO and founder of Chain.io, a systems integration platform that works closely with shippers and freight forwarders.

“So even if the Ocean Shipping Reform Act passes, they’ll become compliant with the law, but won’t work against their own self-interest. They’re a for-profit entity, and it’s hard to envision them willingly sacrificing a profitable part of their business for what’s perceived to be a moving target of playing fair,” he added, in a recent Supply Chain Management Review article.

Dray Alliance data from February 2022:

  • Average time from discharge to outgate was 5.8 days. Assuming four free days at the terminal, that’s 1.8 days of demurrage per shipment on average.

  • Depending on the terminal, the charges for one day of demurrage are anywhere from $175-$225/day; which escalated over time and equaled an average of $168.75 per day

  • During this month, the Port of Los Angeles moved 424,072.85 TEUs of loaded imports (212,036 feet).

  • Using this metric as the total number of containers, shippers paid $71.56M in demurrage fees through POLA in February 2022.

Dray Alliance data from March 2022:

  • Average time for discharge was 4.9 days, assuming four free days at the terminal, that’s 0.9 days of demurrage per shipment on average.

  • Utilizing a daily demurrage rate of $187.50, the average March shipment through the Port of Los Angeles incurred an additional $337.50 worth of demurrage.

  • In March, the Port of Los Angeles moved 509,953 TEUs of loaded imports (254,977 FEUs).

  • Using FEU’ s as the total number of containers, shippers paid $43.03M in demurrage fees through POLA in March 2022.

Headquartered near the Port of Long Beach, the Dray Alliance platform provides complete container management, including automated status notifications, real-time GPS tracking and document management and analytics for every container. In December 2021, Dray Alliance completed a $40M Series B round led by global venture capital group Headline.

About Dray Alliance

Dray Alliance is a venture-backed startup that is focused on building a container trucking platform to deliver shipping containers from ports to warehouses. Its technology connects container shippers with a network of vetted truck drivers through a mobile app. By leveraging API integrations with the ports and data from the mobile app, Dray Alliance’s platform allows container shippers to manage and track all container deliveries in a single web portal and make truckers more efficient. The company has raised a total of $55M in venture capital and working capital financing, and is already working with over one hundred enterprise customers, delivering thousands of containers a month. Steve Wen is the Co-founder and CEO of Dray Alliance, and was named to Forbes’ 2022 30 under 30 list. Please visit drayalliance.com for more information.

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NEW REPORT: DEMURRAGE & DETENTION CHARGES MORE THAN DOUBLE IN A YEAR

Demurrage and detention charges imposed on shippers by container lines have soared at unprecedented rates globally over the last year, according to the Demurrage & Detention Benchmark 2021 report published today by Container xChange, the world’s leading online platform for the leasing and trading of shipping containers,

However, the hikes are hugely inconsistent, with large differences apparent both by port and by carrier.

Across the world’s 20 largest container ports, the report found that average Demurrage and Detention (D&D) fees levied by container lines on customers two weeks after a box was discharged from the vessel more than doubled across ports and shipping lines between March 2020 and March 2021, climbing 104% or the equivalent of $666 per container across all container types.

None of the world’s top 20 ports by throughput saw a decrease in D&D fees over the period.

On average, D&D charges (see definitions below) in March this year were $720 per box across standard container types two weeks after the box discharge from the vessel.

“Demurrage and detention prices have always been an area of conflict between shippers and carriers and that tension has reached a new level this year as costs have spiraled,” said co-founder of Container xChange Christian Roeloffs.

“The key to minimizing D&D is to create transparency around the fees. With shippers informed about the costs associated with D&D, they’ll be able to make business decisions and enter negotiations informed of the accurate costs and per diems. We hope this report gives all parties increased transparency.”

Methodology

To compile the report Container xChange collected more than 20,000 data points from publicly available sources. These were used to compare D&D rates imposed on customers by the world’s ten largest shipping lines across the world’s top-20 container ports. The data was then compared against data collected by Container xChange in March 2020.

The ten leading Chinese ports experienced a +126% increase in average D&D charges from March 2020 to March 2021. Qingdao saw the biggest rise in D&D rates, up 194% year-on-year, followed by Dalian where shippers suffered an average increase of +187%.

However, D&D charges in China remain far lower than in many other leading ports with seven of the top 10 cheapest ports located in the country. By contrast, average D&D fees two weeks after discharge at the Port of Long Beach in March were $2638, the most expensive in the world. In second place was neighboring Los Angeles at $2593.

“In the US, the Federal Maritime Commission is now looking into the practices of the container shipping industry and searching for ways to ensure that container users, many of whom feel they have been charged unfairly by carriers for D&D, can be refunded,” said Dr. Johannes Schlingmeier, CEO & Founder of the container leasing and trading platform. “Certainly, D&D rates have been accelerating, adding to the burden on shippers and industry on top of record container rates and global container shortages.”

Rotterdam had an average D&D rate in March of $756, Singapore was $615, and Antwerp was $709.

At the bottom of the spectrum was Busan (South Korea) with average D&D charges of only $132 in March this year. The next cheapest after the South Korean port were the Chinese ports of Dalian and Tianjin both with averages of $201.

Variations by carrier within ports

D&D charges do not just vary by port, they also vary by shipping line within each port. At the port of Los Angeles, which has been central to the chaos evident on the trans-Pacific container trade over the past year, average D&D charges increased by +142,7% from March 2020 to March 2021. CMA CGM’s D&D rates increased the most, up 167% over the period. Maersk was a close second, with its customers seeing a 161% increase in D&D charges.

By contrast, COSCO, unlike the other carriers in the Port of Los Angeles, lowered its average D&D fees by 15% over the period from $1417 in March last year to 2020 to $1213 in March 2021.

In Hamburg, meanwhile, the cheapest carrier in March this year was CMA CGM, which charged $258 in D&D after two weeks. Yang Ming was the most expensive line with rates of $1612.

Globally, the cheapest combination of carrier and port was COSCO and the Port of Busan in South Korea. The most expensive combination was CMA CGM at the ports of Long Beach and Los Angeles.