Containers

Are conditions improving?

Lars Jensen from Vespucci Maritime looks into the container dwell issue

As of November 12 in the morning a count of container vessels outside Los Angeles/Long Beach showed 80 vessels waiting. This means there has effectively not been any improvement in the congestion seen from a vessel perspective since the beginning of October.

The latest proposal that vessels now have to wait 150 nautical miles offshore will of course in itself not alleviate the problem, but will mainly serve to remove some of the air pollution away from the immediate shoreline around Los Angeles and Long Beach.

A key to being able to resolve the vessel bottleneck is to clear the immense amounts of containers with high dwell times. The new fee structure penalising cargo with a dwell time of nine days or more appears to be making some improvement.

Data from November 10 shows Los Angeles and Long Beach combined having a decline of 31% in containers with a dwell time of nine days or more compared to November 1. That is a significant improvement – but still also leaves 48,600 containers with a dwell time of nine days or more. The data put forth from Long Beach does not detail the split into dwell duration, but if we apply the split used by Los Angeles and assume a similar split in Long Beach that implies 9,800 containers with a dwell time of nine to 12 days and 38,800 containers with a dwell time of 13 days or more.

If this split is the same on November 15 that implies a fee of $63m for the long-dwelling containers. A very strong incentive of course, but the challenge is in the practical realities of being able to physically move the containers.

Also, we have seen significant declines in spot rate levels on the transpacific – although to be fair we have seen similar declines in percentage terms in the past as well. Hence it is clearly a decline, but not a particularly large decline.

Given that the vessel queues are the same and that the dwell time problem is still not resolved, the decline in rate levels can therefore not be explained as an indication of improvement of congestion issues on the destination side. The rate decline must therefore reflect market conditions at origin. And here we find that the first week of November had a very large increase in capacity both measured week-on-week as well as year-on-year. Hence it would appear that the decline is driven by too much capacity at origin – and this, incidentally, sets the scene for a surge of vessels arriving into the congestion ports in the coming weeks. ●

“The rate decline must reflect market conditions at origin”