Port Dwell Fees Postponed Again as Container Rates Drop

Date: Wednesday, November 24, 2021
Source: Sourcing Journal

Although supply chain congestion has been the theme of 2021 and doesn’t appear to be ending anytime soon, there may be a glimmer of hope on the horizon: declining container prices. And in the wake of the backlash to the advent of container dwell fees at Southern California gateways in October, both the Ports of Los Angeles and Long Beach have yet again postponed the fines until Monday.

From August to November, the average container price at the Port of Los Angeles dropped 10.7 percent, while rates at the Port of Long Beach similarly dipped 10.5 percent, according to data from online container trading and leasing marketplace Container XChange. And in the Port of Savannah, 40-feet high container costs dropped 11.8 percent from September to November.

Container XChange expects container prices to level off at “a new normal” of at least twice the pre-pandemic cost by the end of 2022, according to CEO and co-founder Dr. Johannes Schlingmeier.

Overall, the average one-way leasing pickup charges on containers shipped from China to the U.S. have slowed down after a September peak of $1,912 per container to $1,785—a 6.6 percent decrease.

The logistics service provider also said that U.S. ports in general are showing “very high” container availability index (CAx) values when compared to 2019 and 2020 values.

The CAx is an index developed to monitor the availability of containers in certain ports through the import and export moves of full containers. A CAx value of 0.5 means that the same number of containers leave and enter a port in the same week. CAx values of greater than 0.5 means that more containers enter, while CAx values of less than 0.5 establish that more containers leave a specific port. The CAx is calculated based on the tracking data of what Container XChange says is millions of containers, collected from shipping lines, depots and terminals.

For example, the CAx at the Port of Long Beach is 0.88 for the week of Nov. 22-29, which is the highest since the year 2019. On the same week over the past two years, the index values stood at 0.67 in 2019 and at 0.68 in 2020. Both the Long Beach and Los Angeles ports have consistently shown CAx values higher than 0.80 since the beginning of the year, the service said.

And while the Port of Oakland showed a range of CAx values between 0.36 and 0.65 throughout 2020, this range has skyrocketed to fluctuate between 0.70 and 0.96 in 2021. Over in the Port of Savannah, the index currently stands higher than its West Coast counterparts at 0.94, well ahead of the 0.81 in 2020 and 0.84 in the year 2019 during the same week. The situation is similar at other marine gateways including Seattle and Tacoma, Wash.

The firm says that values consistently above 0.70 indicate that these ports have been importing an increasing number of containers for a long period, also negatively impacting the exports.

On a global scale, approximately 78 ports recorded CAx values higher than 0.50.

“The United States being an import destination of containers, has witnessed extraordinary number of vessels this year as the demand grew exponentially, especially in the North America region,” Schlingmeier said in a statement. “This has crippled the supply chain because the ports and the supporting ecosystem has not been prepared adequately. We need measures to collectively improve the situation at these ports, which has had a domino effect on other ports and on the global supply chain.”

The dwell fees dangled at the West Coast ports, a newly established queuing system, and the Port of Savannah’s new “popup” container yards breaking ground in Georgia and North Carolina are some of the measures currently being implemented by major U.S. ports.

The decision to push back the dwell fees after the original one-week extension was made after a meeting Monday between the U.S. port envoy, John D. Porcari, industry stakeholders and port officials. Originally set to take effect Nov. 15, the ports first delayed the $100-a-day fines to Nov. 22.

Since the container dwell fees were first announced on Oct. 25, the two ports have seen a combined 33 percent decline in cargo left on the docks for extended periods. According to a joint statement, the executive directors of both ports “are satisfied with the progress thus far” and will review the situation next week when the latest data rolls in.

As of Monday, the Port of Los Angeles had 24 vessels at anchor, according to its Port Optimizer tool. The Port of Long Beach had 34 vessels at anchor, the company’s operations dashboard said.

The decline in languishing cargo is promising, as October marked a record month for container dwell time. Containers waited an average of 7.64 days at the marine terminals for trucks at the U.S.’s two largest ports last month, up from almost 5.94 days in September, according to recent data from the Pacific Merchant Shipping Association. Nearly half of all unloaded containers had waited for more than five days, the association said.

On the other hand, dwell times for containers leaving the terminals by rail in October improved to 3.9 days from 5.5 days in September, resulting in the most efficient month this year.

Under the temporary policy approved by the ports’ harbor commissions and developed in coordination with the Biden-Harris Supply Chain Disruptions Task Force, U.S. Department of Transportation and multiple supply chain stakeholders, ocean carriers can be charged for each import container that falls into one of two categories.

In the case of containers scheduled to move by truck, ocean carriers could be charged for every container dwelling nine days or more. For containers moving by rail, a fee could apply to ocean carriers whose containers idled for six days or longer.

The ports plan to charge ocean carriers in these two categories $100 per container, increasing in $100 increments per container each day until the container leaves the terminal.

Current dwell times are a far cry from pre-pandemic totals. On average, containers for local delivery remained on container terminals under four days, while containers destined for trains dwelled less than two days.

Any fees collected from dwelling cargo will be reinvested for programs designed to enhance efficiency, accelerate cargo velocity and address congestion impacts.

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