Tag Archives: congestion

Counting the cost

Richard Butcher has written an interesting article on the large quantity of excess containers floating around the world today. Many of these containers are plugging up the yards of major and minor ports, causing longer delays in cargo handling. The space issue is important because with more space you can arrange inbound and outbound containers for easy loading and easy drayage to the customer or warehouse.

He makes a strong point— that containers are held as assets on the books of ocean carriers, and they don’t want to write off too many at a time. Obviously, the costs of holding them don’t outweigh the value of keeping them in the container liners’ eyes.

While managing the inventory of empty containers and aging them aggressively is a great idea, I don’t believe the container carriers have enough motivation to do much. It’s very true that we now have the software and technology for tracking and identifying these containers easily, and managing them one by one.

But empty containers are packaging materials, and already we have seen in domestic industries the close attention retailers and firms such as Amazon have paid to the waste caused by packaging. One of the reasons is the downstream cost of disposing of it.

Containers are also packaging waste, and should be if extra cost were added to storing them empty, it would induce carriers to cut down their stocks. We have evidence of this. Moves by ports to add detention costs to containers that sit idle for days have already induced carriers to move out their containers, even though in some cases the charges have never been enforced.

One difference between containers and the Amazon box you get with your shipment is that the container is reusable. Actually, the customer may reuse the Amazon box; I know I do. But that is relying on a chance event; after a while if I have nothing to ship, I may send it to our local recycling. Of course I pay for the recycling through my taxes, and Amazon doesn’t directly pay, nor do the charges show up in their books. This strategy is not effective for a major item like a container.

However, I propose that ports and yards, or perhaps political entities, such as the US or EU, or state governments, institute a recycling charge for containers left beyond the limit of days set. Containers left past that time would be carted off, cut up for scrap steel, and the costs of the removal and disposal be charged to the ocean carriers. I further propose that the scrap steel value be retained by the governments, perhaps for use in port and yard improvement projects; I don’t care much, since I don’t think it will be too big. It’s like condemning an unsightly property that is blighting a neighborhood.

This proposal would immediately place an accounting cost on ocean carriers. They would have to plan for how many containers would be lost through this process, and accrue the charges they are likely to receive for container disposal. This additional cost should certainly be enough to encourage efforts at tracking, removing containers from yards, and getting them back to exporting ports for reuse. Loss of the asset and paying for its loss will provide motivation for the ocean carriers to take care of their own waste.

If the US or EU would put such provisions into effect it might do the trick. These are the largest importing nations in the world, and they have the most empty containers around. But I think if they led, other nations around the world would follow.

China might not; it would put a dent in their container manufacturing business, which is mostly state-owned. But it would put a stop to the practice of buying new containers instead of recycling old ones, and charging the shipper for the new container.

Actually, since China is a major source of steel production, one could view the manufacture of containers as a form of ‘dumping’ at below the cost of manufacture. But trying to resolve this through the WTO would take forever, and have no certain outcome, like most of the past disputes on trade presented there.

Taxing the old empties and disposing of them would cut through the noise and begin placing the cost of the packaging and the ‘pollution’ it generates squarely on the ocean carriers. And it would force them to recognize the costs they are generating in their books, hurting their bottom lines.

Richard Butcher | Nov 14, 2022

Counting the cost

New California law designed to rein in detention and demurrage charges

California again takes the lead in denying demurrage and detention charges by marine terminals and intrmodal equipment providers, such as chassis providers, when return is prevented by actions outside the control of the users. Such conditions might include gates being unavailable for return, a provider diverting the equipment from the original intrchange location, and when the carrier documents an unsuccessful attempt to return the item, or because a vessel’s booking date is changed.

All these changes will be good for the business. They will force carriers and equipment providers to pay attention to the effects of congestion, and work to reduce it.

Congratulations to California for this law. Now let’s see how it works.

John Kingston Wednesday, October 5, 2022

New California law designed to rein in detention and demurrage charges – FreightWaves

Kern County Board greenlights 3 million TEU Mojave Inland Port

The LA and Long Beach Ports have gone ahead by obtaining approval from Kern County Supervisors for a large inland port in Mojave CA. It will provide a place where containers can be gotten off the limited space at the port, and deployed where they can be rerouted to other destinations.

Developing inland ports is a move we’ve been recommending for years now. By ‘we’, I mean my colleague Chris Clott and me. We wrote about it years ago in this paper. Then, we were thinking much farther afield than Mojave, perhaps Chicago or a midwestern site. Those were the days of the land bridge to Europe, which has been reduced and delayed by the congestion of the last year. There is probably still a need for an inland dry port farther on, but the Mojave location should help a lot.

With a capacity of 3 million TEU and access to rail and air as well as truck transport, it should help to reduce congestion at the Los Angeles and Long Beach Ports.

Mojave is inland and to the north of Los Angeles and the ports, about 119 miles and two and a half hours away. There’s a rail connection, as well as some excellent interstate freeways to the door. It should be ideal for both Northern transport toward the Bay Area and north, and Eastward transport toward Las Vegas and beyond.

We’ll see when it will be open for business.

We’ll help you visualize with a map.

August 16, 2022 By Jack Donnelly

Board greenlights 3 million TEU Mojave Inland Port – Port Technology International