“The reason why demurrage fees are rising is the United States.” An unnamed shipping industry expert revealed to the 21st Century Business Herald that since the middle of last year, U.S. ports have continued to experience major congestion due to the epidemic. There is a large backlog of containers at the destination port and the turnover is poor, which has a chain reaction and aggravates the container shortage crisis in the market. In order to speed up the container turnover rate, shipping companies have recently shortened the container-free period or refused to apply for exemption, resulting in a significant increase in the demurrage and port demurrage expenses of many consignors.
A survey by Container xChange, an online container leasing and trading platform, shows that compared with 2020, demurrage charges at the world’s 20 largest ports increased by 104% in 2021, equivalent to That doubled to an average of $666 per container.
It is this fee that amplifies the “sea freight” that is at the forefront. However, upon closer inspection, are the shipping prices that frequently hit new highs distorted?
The longer the container is detained in port, the higher the cost, just like a snowball that gets bigger and bigger.
Where does demurrage come from
What exactly is “demurrage”? Demurrage (D&D) refers to demurrage and port demurrage.
Shipping experts explained to reporters that demurrage is not new, nor is it a new charge subject during the epidemic, but has appeared a long time ago. In order to speed up the circulation of containers and avoid backlogs, shipping companies have set free use periods for containers. Within this period, the goods occupying the container can be free of charge. After the period, you need to pay a fixed fee, which is the demurrage fee. Different shipping companies have different regulations on this. Under normal circumstances, the free box use period is 7 to 10 days. Demurrage is similar and is collected by the port. Containers can be stacked on the dock for free for a period of time. Generally, it is 7 days. In some ports, it is about 3 days. It depends on the port regulations.
According to the reporter’s access to a catalog of demurrage fees charged by major shipping companies, Orient Overseas, APL, COSCO Shipping and ONE all provide customers with a 7-day free use period. The three companies charge a demurrage fee of about 190 yuan per day for each 40TUE high container from the 8th to the 14th day, and 380 yuan/day from the 15th day, and 760 yuan/day for more than 40 days. The fee for ONE is slightly lower, only 160 yuan/day for 8-14 days, 320 yuan/day for 15-29 days, and 640 yuan/day for more than 29 days. Hapag-Lloyd is free for the first ten days, 400 yuan per day from 11th to 18th, and 680 yuan per day after the 19th.
CMA CGM is much more expensive. It only gives four days of free use, charging 228 yuan/day from 5 to 11 days, and 454.5 yuan/day from 12 to 15 days. , and for more than 16 days, the charge will be as high as 909 yuan/day.
Maersk related personnel sent a reply to the 21st Century Business Herald, explaining that Maersk provides a standard free container period for China’s import and export goods, ranging from 7 to 11 days at different ports. For the portion beyond the free container use period, customers will be charged a demurrage fee of RMB per container per day on a progressive basis. Maersk will provide 10 to 21 days for some import declarations, inspections and quarantines that take a long time, or for products with large volumes such as wood, wood pulp, ores, agricultural products, etc., as well as for major customers that have close business cooperation with the company. There is even a 30-day free box usage period.
The person said that Maersk currently only charges demurrage fees at three ports in South China: Nansha, Yantian and Chiwan. Demurrage charges at other ports in East China, North China and South China are settled directly between customers and terminals, and the company does not participate in collection. The free period and standard rates of demurrage are similar to those of demurrage.
No matter which shipping company, the longer the container is detained in port, the higher the cost, which is like a snowball. The purpose is to return the containers as soon as possible and speed up the operation efficiency.
Although this fee existed before, it rarely caused major disputes. Sometimes customers can apply for exemption from the shipping company. But the epidemic has changed things differently.
The “2021 Demurrage and Demurrage Benchmark Report” recently released by Container xChange, an online container leasing and trading platform, shows that from March 2020 to March 2021, At the world’s 20 largest container ports, the average demurrage charges charged by ports and shipping companies to customers more than doubled, rising 104%, to the equivalent of $666 per box, two weeks after a container was unloaded.
Among them, China’s demurrage charges are much lower than many other major ports, and seven of the ten cheapest ports are in China. By comparison, the average demurrage charge after two weeks of unloading at the Port of Long Beach in March was $2,638, the most expensive in the world. Second place went to neighboring Los Angeles at $2,593.
Container xChange co-founder Christian Roeloffs said, “Demurrage has always been an area of conflict between shippers and carriers, and as costs spiral, this tension Relations have reached a new level this year.”
This is why shippers in Europe and the United States have frequently requested government investigations recently.
The source of distortion lies in the US epidemic
FMC Chairman Daniel Maffei said in a statement: “Regarding container demurrage, the FMC’s priority remains to identify and take action against those who flout the FMC’s recent rules interpreting reasonable regulations and practices.”
For a time, the shipping market was in a cold weather.Get up. Affected by this news last Friday, a large number of shipping stock prices plunged. In fact, this is not the first time that FMC has launched relevant investigations into charges such as demurrage fees. There was a precedent around 2007. On March 6, 2020, the US FMC set up a special team to investigate the reasons for high demurrage charges. But in the end nothing happened. According to the above-mentioned shipping expert, it is because no illegal fees were found.
“We hope to speed up the turnover of containers, reduce the detention time of containers at the client, and improve the efficiency of container utilization. This is in view of the large shortage of containers in Chinese ports caused by the global epidemic. It is particularly important.” A relevant person from Maersk explained to reporters that the container demurrage and port demurrage charges are based on this consideration. It is a behavioral charging project, which means that customers will not incur any fees if they complete the operation within a reasonable free period provided by the company. Taking import as an example, Maersk will provide customers with standard and special free container use periods for an average of 14 days in 2021, and the average container use period for customers is 9.2 days, which means that most customers will not have container delays. For port demurrage charges, only a small number of customers who occupy equipment for a long time due to their own reasons may incur higher charges.
Containers are indeed in short supply. It is understood that “the rental rate of the world’s top container leasing companies has reached a historical high of more than 99%.” Bohai Leasing staff told reporters It was revealed that in the first quarter of 2021, the company’s own and managed container fleet reached 3.92 million CEU, a year-on-year increase of approximately 4%, and the average container occupancy rate has reached a record high of 99.1%.
What is the reason for the skyrocketing demurrage charges now? “Actually, the source is still the United States itself.” The above-mentioned shipping expert told reporters that this round of significant increase in port demurrage fees was caused by the massive congestion in U.S. ports caused by the epidemic.
Affected by factors such as labor shortages caused by the spread of the overseas epidemic, serious congestion has occurred in ports in the United States and Europe since the fourth quarter of 2020, such as the Port of Los Angeles and Long Beach, which are the most congested in the United States. At the port, there are currently more than 30 container ships waiting to berth, and 85% of the ships need to anchor for at least 8 days before they can operate; container cargo can be detained at the terminal for up to 2 months. European routes generally call at multiple ports. Due to congestion in all major ports of call, the entire voyage time is lengthened.
Congestion at foreign ports, disordered logistics supply chains, and reduced efficiency have led to widespread delays in container liner shipping. Xie Xie, a researcher at the Water Transport Science Research Institute of the Ministry of Transport, pointed out that from the perspective of route accuracy, Looking at the flight rate data, the Asia-US East flight punctuality rate is as low as 6.74%, and the average flight punctuality rate of many major routes around the world is around 20%. Before the epidemic, the on-time rate data of liner companies fluctuated between 60% and 80%. The reason why the on-time rate is so low is that the COVID-19 epidemic continues to spread in European and American ports, which has seriously affected the operating efficiency of container ships and aggravated the contradiction between container ship capacity and empty container supply and demand.
In this case, the shipping company can only find ways to speed up the flow of containers. A staff member of a large freight forwarding company who did not want to be named told reporters that in fact, there is no so-called increase in demurrage charges and demurrage charges of various shipping companies, and they are still the same as before. “The current problem is that compared with before, the possibility of applying for exemption and reduction is getting smaller and smaller, and at the same time, there are fewer and fewer contracts with special free period clauses.” The freight forwarding staff revealed, especially the possibility of successful application for a single ticket Almost zero.
In the case of port congestion and slow container loading and unloading efficiency, containers that have exceeded the seven-day free use period will begin to be charged demurrage fees according to the original standards, causing the cost to double than before. . There is a debate in the legal community as to whether the shipping company should charge demurrage due to delays in picking up goods due to the epidemic. This is probably why the US government is investigating again and again.
The World Shipping Council (WSC) has warned that shipping lines have “stretched their butts” to cope with the extreme logistics times caused by Covid-19 disruption to supply chains, but unfortunately the epidemic Preventing ships from berthing and unloading cargo.
Maersk also stated that the “perfect storm” caused by the epidemic has led to “the interaction of many factors beyond the control of any one stakeholder.”
According to the Baltic Freight Index (FBX), freight rates from Asia to the U.S. East Coast were particularly strong, with prices rising by nearly $700 to $11,045/FEU on Friday, compared with It rose more than 200% during the same period last year. Freight rates from Asia to the US West Coast fell by US$500 to US$6,046/FEU, but were still nearly 151% higher than the same period last year.
The situation for shipping companies is likely to worsen in the coming weeks as the container shipping industry enters its peak season, but representatives of liner companies say they cannot be blamed. Freight rates are distorting, and the culprit is not the shipping companies. A staff member of a liner company pointed out to reporters that the freight rates of liner companies operating in China are actually registered with the Shanghai Shipping Exchange. All fees are clearly listed, and the freight rates are far less high than market speculation. “Those freight charges exceeding US$10,000 are definitely not released by us.” The above-mentioned person believes that the media and the government should investigate who is inflating freight rates in the market. </p
