Demurrage And Detention Charges Witness A 25% Dip Globally in 2023

Credits: Port of Melbourne

Average Demurrage and Detention charges experience a year-on-year decline of 25% in 2023, with a significant 14% decrease compared to the rates in 2020, as found by Container xChange’s annual Demurrage and Detention Charges benchmark report 2023, says an article published on Global Trade.

High fees

However, there are still 11 ports where Demurrage and Detention fees remain higher as compared to 2020. These ports include Antwerp, Jebel Ali, Ningbo, Port Kelang, Rotterdam, Shenzen, Singapore, Tianjin, Xiamen, Hong Kong, and Guangzhou.

In an exclusive webinar held in July’23, a powerful panel of speakers from Drewry, S&P Global, and Container xChange discussed the impact of these charges on shippers worldwide amidst the changing dynamics of demand and supply for containers on a global scale.

“There are multiple factors contributing to the inability of these ports to return to normalcy. The significant increase in energy prices, coupled with higher labour costs, and escalating land expenses and port fees, have all played a part,” stated Chantal McRoberts, Director, DSCA Advisory, Drewry.

“Furthermore, the implementation of new regulations, particularly those focused on green energy in EU ports, has added to the financial burden. Additionally, the introduction of rules requiring individualized shipment customs clearance, no longer consolidated under one bill of lading, has proven to be time-consuming, as seen in the case of Rotterdam.”, added McRoberts.

Christian Roeloffs, Co-Founder and CEO added, “Bleak expectations for a significant peak season with a substantial increase in volumes, prices, and the potential for congestion and associated charges are evident in our customers. However, a key factor in determining whether you must pay detention charges is the efficiency of your processes and monitoring. How quickly can you act and notify your agent or trucker if something goes wrong, such as a container being forgotten at the terminal. Timely communication is crucial in avoiding unnecessary charges. This holds true in any market situation.”

“Demurrage and detention should ideally be a free market. The number of free days and the charges should be negotiable between parties and carriers, just like any other free market scenario. However, perhaps what needs regulation is the clarity on when the clock starts. Establishing clear time stamps and determining who bears the burden of proof in cases of congestion, where a container cannot be picked up, would be crucial. Payment should only commence once the terminal is able to release the container. These aspects warrant attention and potential regulation.”, he added.

Shipping Industry Facing New D&D Challenges as U.S Regulators Prepare for Decisions

Demurrage and Detention (D&D) rates in the shipping industry have reached unprecedented levels, especially with the Federal Maritime Commission (FMC) set to make crucial decisions.

Commenting on the new regulations, Christian said, “The pending U.S foreign trade regulator’s decisions on new shipping line regulations “will significantly impact D&D practices” and could even reshape the landscape, bringing both challenges and opportunities.”

The D&D annual report highlights Drewry’s perspective that the FMC must strike a balance between the conflicting needs of cargo owners and shipping lines. Before the pandemic, shipping lines prioritized revenue generation, considering factors like cargo weight and equipment availability when making occupancy decisions. Regulating these market factors presents challenges for the FMC, especially since a substantial portion of US exports fall into low-income and heavyweight categories.

In April 2023, even before the official FMC decision, major carriers like Maersk, MSC, HMM, and Hapag-Lloyd contemplated waiving D&D surcharges on weekends and holidays when terminals are closed. Additionally, the Port of Houston stopped charging import container storage fees during closed terminal gates but raised daily rates in specific positions by 32% starting May 1.

Operational Challenges Likely to Impact D&D Charges Amid Uncertain Demand Recovery

Commenting on the shipping forecast for the upcoming holiday season, Eric Johnson Senior Editor, Technology JOC, S&P Global Market Intelligence, said, “In a very recent conversation with a Non-Vessel Operating Common Carrier (NVOCC) about their thoughts on a major trans-Pacific shipment, we came to know that they don’t expect the demand to recover until after the Lunar New Year next year. This matches what we’re hearing in general.”

“So, if we assume that’s the case, the focus shifts to operational issues at important ports that we need to consider avoiding delays or additional charges once the container is out of the terminal. It becomes more about specific factors in the field that could cause delays in returning containers on time, rather than relying on a big overall economic improvement to drive demand. With each passing day, it seems less likely that there will be a quick demand recovery.”

U.S. Ports Rank Highest in average Demurrage and Detention (D&D) charges

Out of all the ports worldwide, those in North America stand out as the most expensive when it comes to Demurrage and Detention (D&D) charges. Leading this list of costly ports are New York, Oakland, and Los Angeles, taking the top three spots.

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Source: Global Trade