Current Affairs

October 28, 2021

Port Fees in California

Shippers Fear “Catastrophic” Fallout From “Crazy” California Port Fees

by Tyler DurdenThursday, Oct 28, 2021 – 03:01 PM

By Greg Miller of FreightWaves,

The cure is worse than the disease, say critics of an emergency plan of the ports of Los Angeles and Long Beach backed by the Biden administration. If you think port congestion is bad now, just wait for what comes next.

On Wednesday, two days after the ports of Los Angeles and Long Beach announced a surprise emergency fee for containers lingering too long at terminals, the National Shippers Advisory Council (NSAC) held its inaugural meeting. NSAC, created to advise the Federal Maritime Commission, is composed of 12 U.S. importers and 12 exporters. Members include heavy hitters like Amazon, Walmart, Target, Office Depot and Ikea.

Council members had a lot to say about the California port fees — none of it good.Port of Long Beach

‘I think it will be catastrophic’

Starting Nov. 1, the ports of Los Angeles and Long Beach will charge $100 per container for boxes dwelling nine or more days that move by truck and those dwelling six days or more that move by rail.

The fee will increase $100 every day. It will be charged to carriers, which will then almost certainly pass the fee along to shippers, meaning it will be the equivalent of an escalating demurrage charge.

“As far as the ‘hyper-demurrage’ announced in Los Angeles/Long Beach, I think it will be catastrophic,” said Rich Roche, vice president of international transportation at Mohawk Global Logistics, during the NSAC meeting.

“Chassis are already in short supply and this will artificially suck out the rest of the containers that may be sitting in there [at terminals] that didn’t need to be on a chassis and now they’re going to be parked somewhere. It’s probably going to wipe out whatever’s left in terms of chassis,” predicted Roche.

According to Steve Hughes, representing the Motor Equipment & Manufacturing Association, “I’m concerned that this new fee is going to cause even more problems than it’s going to solve. I understand the logic behind it and it makes some sense, but unfortunately, because we don’t have the throughput at the front gate, I think this can cause us more problems than we have already.”

Bob Connor, executive vice president of global transportation at Mallory Alexander International Logistics, said, “This absolutely came out of left field. I don’t see this charge doing anything but adding more cost, and freight rates being what they are, this is the last thing we need.”

Both Connor and Roche urged that someone in government “step in and put the brakes on this.”

Carriers to pass along fees to shippers

NSAC members speaking during Wednesday’s meeting emphasized that the Los Angeles/Long Beach charges will ultimately be paid by shippers.

Daniel Miller, global container lead at Cargill, dubbed California’s emergency charges “crazy fees” and said, “We know this is all going to come back to us. I had a couple of calls with carriers yesterday and they’ve already admitted that yes, they are going to come back to us.”

Rick DiMaio, senior vice president of supply chain operations for Office Depot, said, “All fines and fees flow to us, to the beneficial cargo owner.”

According to Ken O’Brien, president of Gemini Shippers Group, “What was done this week at the ports of Los Angeles and Long Beach is effectively an indirect tax on the American consumer.”

Connor reported, “When we heard about the new charge, we immediately reached out to some of our contacts at the FMC. From the conversation we had, it was pretty obvious that the FMC was not forewarned that this thing was coming.”

Connor said that his company asked its FMC contacts whether the ports had to give 30-day notice to carriers before implementing the charge, and whether carriers had to give 30-day notice to pass the charge along to shippers. Connor said that it was his understanding that the ports could implement the charge without that notice, but carriers would have to give 30-day notice to shippers.

However, that’s not the case if carriers already have language in tariffs allowing them to pass along port charges immediately. Ocean carrier HMM’s current tariff includes a clause that states, “The shipper shall be liable for payment of any charges or surcharges imposed on the carrier by any marine terminal, port authority, government authorities or other third party.”

In an online post explaining the clause, Stephen Nothdurft, vice president of the Midwest region at HMM, said, “This new charge [by Los Angeles/Long Beach] is going to be a pass-through for all of the ocean carriers. The carriers will hit the mark with the invoices. As it relates to HMM specifically, this was created based on the strong chance of such surcharges. Such fees have been blowing in the wind for quite some time, so any carrier would be astute to protect their interests.”

Do fees incentivize faster moves?

The point of the “Hail Mary” Los Angeles/Long Beach fee plan is to forcibly unclog the terminals and get containers moving faster. The members of NSAC argued that these emergency port fees — as with traditional demurrage and detention fees — are not increasing container velocity given the current supply chain situation.

According to Miller, “I don’t think anybody on this committee would admit to using the port to let containers sit there because they want to. Everybody has the full intention to get these containers out, but they physically can’t.”

Adnan Qadri, director of global imports at Amazon, said, “In the past, the whole idea of detention and demurrage was incentivizing faster turns, returning of equipment and bringing fluidity into the network and the supply chain. But in its current state, the way supply chains are moving right now, I don’t think detention and demurrage are incentivizing anything.

“Folks are not sitting on returns because they want to. They’re sitting on them because they can’t get those containers returned. It is very difficult for us [Amazon] to wrap our heads around the idea of these detention and demurrage charges, which don’t drive any kind of positive behavior [given] the way the supply chain is currently set up. 

“What concerns me is that these charges aren’t driving any benefit to the current state we’re in,” said the Amazon executive.

Carriers’ demurrage and detention fees have faced heavy criticism over the past year. They are a focus of FMC regulators as well as proposed legislation to reform the Ocean Shipping Act. And yet, the Los Angeles/Long Beach plan, with the explicit blessing of the Biden administration, will have the same effect as demurrage.

Nothdurft said in his online post, “It’s ironic that the international community has been pleading to the government about the absurdity of demurrage/detention charges only to have said government administer more of the same.”

https://www.zerohedge.com/markets/shippers-fear-catastrophic-fallout-crazy-california-port-fees

October 28, 2021

Late Shipments

Furniture shipments are still delayed due to a foam shortage that’s slowly improving – as long as car production doesn’t ramp back up

ahartmans@businessinsider.com (Avery Hartmans) 1 day ago 1 Comment|


|


JEAN-FRANCOIS MONIER/AFP via Getty Images © Provided by Business Insider JEAN-FRANCOIS MONIER/AFP via Getty Images

  • Furniture shipments are still delayed due to a shortage of foam used in mattresses and couches.
  • The Texas freeze impacted foam manufacturing, and consumer demand for furniture remains high.
  • Production is now at normal levels, but furniture-makers could face competition from automakers.

Foam shortages are continuing to hamper the furniture industry, leading to delays that likely won’t be resolved until next year. https://products.gobankingrates.com/pub/84d1cf40-924a-11eb-a8c2-0e0b1012e14d

Consumer demand for products that include foam, like couches and mattresses, remains so high that the foam industry is struggling to keep up. The shortage, combined with shipping backlogs that are holding up raw materials and a truck driver shortage that’s delaying deliveries, means that some furniture that’s ordered now won’t even ship until 2022.

Russ Batson, executive director of the Polyurethane Foam Association, an industry group that represents foam manufacturers, told Insider in an email on Monday that while foam production has now returned to pre-pandemic levels, it’s “inadequate to meet strong consumer demand” for products, demand that spiked due to a rush in home-buying during the pandemic and a desire to trick out our spaces after spending so many months at home.

The foam industry has faced other challenges in 2021 aside from consumers clamoring for furniture. When unprecedented winter storms hit Texas in February 2021, the region experienced a deep freeze that damaged homes nad businesses and caused pipes to burst.

That weather also shut down the chemical plants that make propylene oxide, a key chemical in polyurethane foam – the same foam that’s used in mattresses, couch cushions, and seats in cars, the Houston Chronicle’s Diane Cowen reported earlier this year.

Bob Patell, the CEO of LyondellBasell, which produces propylene oxide along the Gulf Coast, said at a JPMorgan conference in March that the Texas freeze wiped out 10% to 14% of its annual petrochemical supply, according to the Chronicle.

As a result of the short foam supply, furniture makers in across the US were forced to cut production hours or raise prices. One San Francisco-based furniture manufacturer told Slate’s Aaron Mak in July that foam manufacturers were rationing in an attempt to give furniture-makers “something versus nothing.”

But now, even though production levels have stabilized, the furniture industry could soon face another challenge: increased competition for foam.

Batson of the PFA warned earlier this year that couch and mattress companies are lucky, in a way, that they’re not seeing foam diverted to automakers. As car companies grapple with an ongoing semiconductor shortage, they’re making fewer vehicles – consulting firm AlixPartners estimated last month that as many as 7.7 million fewer vehicles will be made this year. Fewer cars means automakers require less foam to put in vehicle seats.

But Batson told Insider this week that furniture-makers may need to brace for an even tighter supply of foam.

“When the auto industry sorts out its more complex supply chain challenges,” he said, “that will exert additional pressure on foam supplies.”

https://www.msn.com/en-us/money/markets/furniture-shipments-are-still-delayed-due-to-a-foam-shortage-thats-slowly-improving-as-long-as-car-production-doesnt-ramp-back-up/ar-AAPYRiZ

October 28, 2021

Late Shipments

Furniture shipments are still delayed due to a foam shortage that’s slowly improving – as long as car production doesn’t ramp back up

ahartmans@businessinsider.com (Avery Hartmans) 1 day ago 1 Comment|


|


JEAN-FRANCOIS MONIER/AFP via Getty Images © Provided by Business Insider JEAN-FRANCOIS MONIER/AFP via Getty Images

  • Furniture shipments are still delayed due to a shortage of foam used in mattresses and couches.
  • The Texas freeze impacted foam manufacturing, and consumer demand for furniture remains high.
  • Production is now at normal levels, but furniture-makers could face competition from automakers.

Foam shortages are continuing to hamper the furniture industry, leading to delays that likely won’t be resolved until next year. https://products.gobankingrates.com/pub/84d1cf40-924a-11eb-a8c2-0e0b1012e14d

Consumer demand for products that include foam, like couches and mattresses, remains so high that the foam industry is struggling to keep up. The shortage, combined with shipping backlogs that are holding up raw materials and a truck driver shortage that’s delaying deliveries, means that some furniture that’s ordered now won’t even ship until 2022.

Russ Batson, executive director of the Polyurethane Foam Association, an industry group that represents foam manufacturers, told Insider in an email on Monday that while foam production has now returned to pre-pandemic levels, it’s “inadequate to meet strong consumer demand” for products, demand that spiked due to a rush in home-buying during the pandemic and a desire to trick out our spaces after spending so many months at home.

The foam industry has faced other challenges in 2021 aside from consumers clamoring for furniture. When unprecedented winter storms hit Texas in February 2021, the region experienced a deep freeze that damaged homes nad businesses and caused pipes to burst.

That weather also shut down the chemical plants that make propylene oxide, a key chemical in polyurethane foam – the same foam that’s used in mattresses, couch cushions, and seats in cars, the Houston Chronicle’s Diane Cowen reported earlier this year.

Bob Patell, the CEO of LyondellBasell, which produces propylene oxide along the Gulf Coast, said at a JPMorgan conference in March that the Texas freeze wiped out 10% to 14% of its annual petrochemical supply, according to the Chronicle.

As a result of the short foam supply, furniture makers in across the US were forced to cut production hours or raise prices. One San Francisco-based furniture manufacturer told Slate’s Aaron Mak in July that foam manufacturers were rationing in an attempt to give furniture-makers “something versus nothing.”

But now, even though production levels have stabilized, the furniture industry could soon face another challenge: increased competition for foam.

Batson of the PFA warned earlier this year that couch and mattress companies are lucky, in a way, that they’re not seeing foam diverted to automakers. As car companies grapple with an ongoing semiconductor shortage, they’re making fewer vehicles – consulting firm AlixPartners estimated last month that as many as 7.7 million fewer vehicles will be made this year. Fewer cars means automakers require less foam to put in vehicle seats.

But Batson told Insider this week that furniture-makers may need to brace for an even tighter supply of foam.

“When the auto industry sorts out its more complex supply chain challenges,” he said, “that will exert additional pressure on foam supplies.”

https://www.msn.com/en-us/money/markets/furniture-shipments-are-still-delayed-due-to-a-foam-shortage-thats-slowly-improving-as-long-as-car-production-doesnt-ramp-back-up/ar-AAPYRiZ

October 22, 2021

Import Delays

A Record $22 Billion Worth Of Cargo Is Now Stuck On Container Ships Off California

by Tyler DurdenFriday, Oct 22, 2021 – 08:31 AM

By Greg Miller of FreightWaves,

There was fleeting hope that Southern California port congestion had turned the corner. The number of container ships waiting offshore dipped to the low 60s and high 50s from a record high of 73 on Sept. 19, trans-Pacific spot rates plateaued, the Biden administration unveiled aspirations for 24/7 port ops, and electricity shortages curbed Chinese factory output.

The reality is that the port congestion crisis in Southern California is not getting any better.Container ships off Los Angeles/Long Beach on Wednesday. Map: MarineTraffic

The time ships are stuck waiting offshore continues to lengthen. There are simply too many vessels arriving with too much cargo for terminals, trucks, trains and warehouses to handle. There were 103 container ships at Los Angeles/Long Beach terminals or waiting offshore on Wednesday, an all-time high.

Offshore, the number of ships at anchor or in holding patterns is once again nearing record territory. According to the Marine Exchange of Southern California, 70 container ships were waiting off Los Angeles and Long Beach on Monday, 67 on Tuesday and 71 Wednesday (not including other cargo ships that are loaded with boxes).Chart: American Shipper based on data from Marine Exchange of Southern California. Data bi-monthly April-Nov 2020; daily Dec 2020-present

Massive value of cargo stuck offshore

Marine Exchange data shows that ships waiting offshore on Tuesday — including container ships, general cargo vessels and other ships carrying containers — had aggregate capacity of 512,843 twenty-foot equivalent units. To put that in perspective, that is 10% more than the Port of Los Angeles imported during the entire month of September.

Assuming ships are at capacity, how much cargo value is out there in the “floating warehouse”? What’s in each box, and its value, varies dramatically — it can be worth a few thousand dollars or several hundred thousand dollars. But Port of Los Angeles stats provide a good guide.

The total customs value of the Port of Los Angeles’ containerized imports in 2020 was $211.9 billion. Given that imports totaled 4,827,040 TEUs, this equates to an average of $43,899 per import TEU. (Several other sources also estimated average cargo value at around $40,000 per TEU.)  

This suggests that the cargo currently waiting off the ports of Los Angeles and Long Beach is worth around $22 billion, roughly the equivalent of the annual revenues of McDonald’s or the GDP of Iceland.

Imports trapped on ships for over a month

Data from the Signal platform shows that wait time from anchorage to a berth in Los Angeles rose to an all-time high 13 days on Wednesday, up 65% from the beginning of September.Chart: American Shipper based on data from Los Angeles Signal. Note: Average is 30-day trailing average.

But the average wait time doesn’t tell the full story. Ships have been sitting in San Pedro Bay for more than twice that long.

Most of the vessels that still have no terminal berth assignments despite extended wait times are small ships operated by Chinese players such as BAL Container Line that entered the trans-Pacific market for the first time this year. Some of the ships stuck in the queue have been chartered at exorbitant rates, raising the question of whether charterers accounted for such lengthy delays.

American Shipper was contacted by a U.S. manufacturer who has over 100 containers of goods trapped aboard the Chinese-owned Zhong Gu Jiang Su. The ship has been waiting offshore for over five weeks, since Sept. 13, and has yet to obtain a berth assignment, according to the Marine Exchange master queuing list.

The U.S. manufacturer, who booked through a freight forwarder, spoke on condition of anonymity. “This is really impacting our production,” he said, noting that the trapped goods are “a major component” in his company’s manufacturing process.

“We can’t get any type of help or get any type of escalation from anyone,” he said. He was told that the ship operator “hadn’t negotiated with the terminals for a berth” before arrival, which led to the extended delay.

Among the Chinese-linked ships with no berth assignment stuck in the queue, the Martinique has been waiting the longest, since Sept. 9. Loadstar reported that it is on charter to Transfer, which is owned by a Chinese logistics provider that is in turn partially owned by Chinese e-commerce giant Alibaba.

The BAL Peace has been waiting without a berth assignment since Sept. 25, as has the S Santiago.

According to Alphaliner, BAL is chartering the S Santiago for around $125,000 a day. An industry source told American Shipper the rate was $135,000 per day. So far, that ship has been waiting — and not loading any more revenue-generating cargo — for 26 days straight.

https://www.zerohedge.com/economics/22-billion-worth-cargo-now-stuck-container-ships-california

October 22, 2021

Import Delays

A Record $22 Billion Worth Of Cargo Is Now Stuck On Container Ships Off California

by Tyler DurdenFriday, Oct 22, 2021 – 08:31 AM

By Greg Miller of FreightWaves,

There was fleeting hope that Southern California port congestion had turned the corner. The number of container ships waiting offshore dipped to the low 60s and high 50s from a record high of 73 on Sept. 19, trans-Pacific spot rates plateaued, the Biden administration unveiled aspirations for 24/7 port ops, and electricity shortages curbed Chinese factory output.

The reality is that the port congestion crisis in Southern California is not getting any better.Container ships off Los Angeles/Long Beach on Wednesday. Map: MarineTraffic

The time ships are stuck waiting offshore continues to lengthen. There are simply too many vessels arriving with too much cargo for terminals, trucks, trains and warehouses to handle. There were 103 container ships at Los Angeles/Long Beach terminals or waiting offshore on Wednesday, an all-time high.

Offshore, the number of ships at anchor or in holding patterns is once again nearing record territory. According to the Marine Exchange of Southern California, 70 container ships were waiting off Los Angeles and Long Beach on Monday, 67 on Tuesday and 71 Wednesday (not including other cargo ships that are loaded with boxes).Chart: American Shipper based on data from Marine Exchange of Southern California. Data bi-monthly April-Nov 2020; daily Dec 2020-present

Massive value of cargo stuck offshore

Marine Exchange data shows that ships waiting offshore on Tuesday — including container ships, general cargo vessels and other ships carrying containers — had aggregate capacity of 512,843 twenty-foot equivalent units. To put that in perspective, that is 10% more than the Port of Los Angeles imported during the entire month of September.

Assuming ships are at capacity, how much cargo value is out there in the “floating warehouse”? What’s in each box, and its value, varies dramatically — it can be worth a few thousand dollars or several hundred thousand dollars. But Port of Los Angeles stats provide a good guide.

The total customs value of the Port of Los Angeles’ containerized imports in 2020 was $211.9 billion. Given that imports totaled 4,827,040 TEUs, this equates to an average of $43,899 per import TEU. (Several other sources also estimated average cargo value at around $40,000 per TEU.)  

This suggests that the cargo currently waiting off the ports of Los Angeles and Long Beach is worth around $22 billion, roughly the equivalent of the annual revenues of McDonald’s or the GDP of Iceland.

Imports trapped on ships for over a month

Data from the Signal platform shows that wait time from anchorage to a berth in Los Angeles rose to an all-time high 13 days on Wednesday, up 65% from the beginning of September.Chart: American Shipper based on data from Los Angeles Signal. Note: Average is 30-day trailing average.

But the average wait time doesn’t tell the full story. Ships have been sitting in San Pedro Bay for more than twice that long.

Most of the vessels that still have no terminal berth assignments despite extended wait times are small ships operated by Chinese players such as BAL Container Line that entered the trans-Pacific market for the first time this year. Some of the ships stuck in the queue have been chartered at exorbitant rates, raising the question of whether charterers accounted for such lengthy delays.

American Shipper was contacted by a U.S. manufacturer who has over 100 containers of goods trapped aboard the Chinese-owned Zhong Gu Jiang Su. The ship has been waiting offshore for over five weeks, since Sept. 13, and has yet to obtain a berth assignment, according to the Marine Exchange master queuing list.

The U.S. manufacturer, who booked through a freight forwarder, spoke on condition of anonymity. “This is really impacting our production,” he said, noting that the trapped goods are “a major component” in his company’s manufacturing process.

“We can’t get any type of help or get any type of escalation from anyone,” he said. He was told that the ship operator “hadn’t negotiated with the terminals for a berth” before arrival, which led to the extended delay.

Among the Chinese-linked ships with no berth assignment stuck in the queue, the Martinique has been waiting the longest, since Sept. 9. Loadstar reported that it is on charter to Transfer, which is owned by a Chinese logistics provider that is in turn partially owned by Chinese e-commerce giant Alibaba.

The BAL Peace has been waiting without a berth assignment since Sept. 25, as has the S Santiago.

According to Alphaliner, BAL is chartering the S Santiago for around $125,000 a day. An industry source told American Shipper the rate was $135,000 per day. So far, that ship has been waiting — and not loading any more revenue-generating cargo — for 26 days straight.

https://www.zerohedge.com/economics/22-billion-worth-cargo-now-stuck-container-ships-california