Tag Archives: FMC

FMC commissioner red-flags Congress on China’s container monopoly

I am glad to see that the FMC has been looking at the container manufacturing situation. Their findings are clear– the Chinese virtual monopoly is harmful to most shippers in the aggregate. Prices have been artificially kept high.

What to do about it is another question.

Should the US try to create its own container manufacturing industry through subsidies? Chinese subsidies to the three state-owned container manufacturers are large, because the firms create lots of jobs. That’s an important thing for the Chinese government, and they are unlikely to back down on it.

I think one question to address is whether Chinese container manufacture is a more sophisticated way of ‘dumping’ steel. There is a minimum of added work in making a container out of a specialized steel product. One could imagine some sort of sanction for selling steel at below-market prices. Perhaps this would create some sort of tariff. I think a quota would be out of the question since there are so few sources of new containers.

Carl Bentzel, an FMC commissioner who wrote the report, doesn’t go into the question of recycling empty containers back to where they are most needed. There’s an excess of empty containers in the US because of our huge imports. These constitute a form of ‘pollution’ in the US.

To the extent that ocean carriers do not transport the containers back to places that are net exporters, they are contributing to degradation of the environment in the US. We can see that effect near several ports, where State governments are brokering deals to find extra space to store the empties. We already saw huge congestion, first in West Coast ports, due to empties being left in the terminal yards, and preventing finding space for newly imported containers full of shipments. Ocean carriers, who own most of the containers, were skipping ports and not loading the empties. Loading empties takes crane moves and other activity in the terminal, and not taking them meant more moves could be used for paying cargo.

My calculations show that it costs very little more to buy a new Chinese container for a shipment from say Shanghai to Los Angeles than it does for an ocean carrier to bring an empty used container back to China. And a new container may be more desirable than a used one, because it does not require the same level of inspection and cleaning that the used empty one does.

I think another arm of the solution is to get ocean carriers to ‘recycle’ the empty containers to exporting locations. Perhaps the FMC could require them to take a certain number each month, based on the number of TEUs imported in a lagged period. Such a rule would guarantee that US ports would not need to spend millions housing empties that ocean carriers are ignoring.

Another weapon is the detention charges threatened by Long Beach and Los Angeles ports on empty containers. Though the huge charges ($100 for the first day after a free period, followed by $200 for the second day, $300 for the third, and so on) were never applied to any container, the threat was enough to get empty containers moved out. From that point on the congestion at LA and Long Beach eased. The threat was sufficient. Soon, East Coast ports will feel the burden of the empty container buildup. Rather than finding space at an additional cost, a similar detention and demurrage charge should be considered.

The problem will be worse at the East Coast ports. One reason is that there are fewer calls there, thus fewer opportunities to load empties. If the ocean carriers blank sailings, it may be hard to get rid of the empties.

Some empty containers are needed in the US for agricultural exports. US ag products are in worldwide demand, but it is inconvenient to load them into containers. I think it is a good idea to commission special loading yards for ag products and route empty containers there. These need to be convenient drop-off points for ag products coming from inland, by truck or rail, and offer container loading services. Using empty containers for ag products is highly desirable. Several ports, including Oakland, have made arrangements to do this, and I hope ways can be found to take advantage of the facilities. Similar ag loading stations could be created nearer to major West Coast ag centers such as Washington state and Los Angeles. That would help a bit with the empty container dilemma.

However, it is a lot more expensive to ship ag products in containers than in bulk ships. Only high-quality products that cannot be mixed with lower quality goods can be handled that way, putting a ceiling on the number of containers required. Currently around 10% of soybean exports move by container instead of bulk. If that could be increased 5% by making it easier to ship in containers I would be surprised. Most soybeans for animal feed, the majority of US export production, can be moved in bulk ships without fear of mixing, and that is probably a lot cheaper, when the customer requires large quantities.

If unused empty containers can be viewed as a form of pollution, which is exacting a cost on communities and ports, perhaps there would be more effort to get ocean carriers to clean it up.

John Gallagher Wednesday, March 30, 2022

FMC commissioner red-flags Congress on China’s container monopoly – FreightWaves

FMC probe into D&D claim against Hapag-Lloyd could set industry precedent – The Loadstar

This Detention and Demurrage claim filed by a carrier against Hapag-Lloyd could be interesting to watch. All this activity takes place at the Port of Long Beach and nearby.

For one thing, the claim involves reefer containers, usually overweight, which require special triple-axle chassis to handle. It also involves breaking down the containers and restuffing them into domestic-style reefers for inland transit. The drayage firm, OAE, finds that they are often charged detention even if they can return the empties within 2 days.

From a supply chain perspective, OAE is clearly providing an important service; they are moving containers from the yard, and are quickly returning them to the carrier for reuse. Both of these are aids to reduce congestion. They also are aids to the shippers, getting cargo further along its route. And there is a recognized need for reefer containers, perhaps even more than for general merchandise containers.

So it would seem that Hapag-Lloyd might be prepared to look the other way regarding D&D charges, except when something goes wrong, such as a lost container or something. Other issues that can occur include a lack of gate appointments for return. With the congestion at Long Beach we see now, gate appointments could be in short supply. To what extent is that the fault of Hapag-Lloyd? Do they have an obligation to use a terminal that can accept the containers they are sending through it?

By Nick Savvides 10/01/2022

FMC probe into D&D claim against Hapag-Lloyd could set industry precedent – The Loadstar

NITL claims alliances create ‘super-carrier distortion’ to liner shipping market

Liner shipping alliances were created years ago when there wasn’t enough containerized cargo for many competing ocean container carriers (sometimes called liners). They have evolved through time, a bit, but still allow several ocean carriers to band together to serve a particular route.

For instance, from Shanghai to LA and return, an alliance might provide weekly service. The companies then rotate in providing that ship for the service. If you book with one of thecompanies, you don’t know whose ship will be carrying the cargo, but it will be one of the members of the alliance. If everything goes smoothly and there are no delays, it should notmatter to the shipper whose ship they are on.

Alliances go by clever names such as THE Alliance (Hapag-Lloyd, ONE, & Yang Ming). Here’s a summary of facts about alliances, including who’s in each.

But when disruptions occur, as now, and ships don’t sail on schedule either because they are postponed by the line, or because of congestion in either the loading port or the unloading port, it becomes a problem.

The article outlines some of the complaints. Alliances have to be authorized by the specific counbtry they dock in. There is actually a bill in the US Congress to suggest that the FMC (Federal Maritime Commission) be given stronger powers to investigate problems and push the alliances to provide fair service to all customers.

By Nick Savvides 06/09/2021

NITL claims alliances create ‘super-carrier distortion’ to liner shipping market – The Loadstar