11/12/2020

To our Valued Customers,

 

Congestion in Melbourne’s landside container logistics chain has reached critical levels, driven by exceptionally strong import volumes and a backlog of empty containers not evacuated from the Port of Melbourne by shipping lines.

 

October 2020 was a record month for total container throughput (full and empty) with 284,958 Twenty Foot Equivalent Units (TEU), 4.5% above the same month last year. In October, full imports were up 9.8% and full overseas exports were up 9.4%. Worryingly however, the evacuation of empty containers was down 14% (Port of Melbourne Stakeholder Update - 24 November 2020). November’s container trade volumes through the Port have continued the peak trend, with one week exceeding the previous record for container trade of over 72,000 TEU.

 

Empty container evacuations also continue to lag, while the disruption to some export trades (for example, logs and wood products to China) means that certain container types have been returned to and are now languishing for longer periods in empty container parks. The result is that the number of containers discharged from vessels (full or empty) through the Port of Melbourne is well exceeding the number of containers loaded out (full or empty), leading to a negative discharge / load ratio. Congestion at empty container parks and direct terminal return options has ensued.

 

Why Aren’t Enough Empties Being Evacuated?

It is likely that as shipping lines try to clear the backlog of empty containers in Sydney, vessel space is diminished to evacuate empties from Melbourne. Melbourne cops the “double-whammy” unfortunately. If the vessel rotation is Melbourne before Sydney, the vessel is still laden with Sydney full imports, meaning less space is available to uplift Melbourne empties. Alternatively, if the port call rotation is Sydney before Melbourne, the vessel has been loaded out with Sydney empty evacuations ahead of Melbourne empty evacuations.

 

Not all shipping lines are experiencing the chronic build-up of empty stock, but enough of the large volume lines are, leading to a high level of containers dwelling longer in almost all empty container depots in Melbourne.

 

Shipping lines, in conjunction with their stevedore terminal providers, are encouraged to increase empty evacuations from Melbourne above what is being achieved currently. There is a shortage of empty container stock in Asia as the COVID pandemic response has shifted trade dynamics globally. It is in the best interests of the shipping lines to move the empty stock away from Melbourne – they know that – we know that – it is a matter of making it happen. 

 

No Slots – Poor Service – Extended Delays

Container transport operators are now finding it exceedingly difficult to gain booking slots at some empty container facilities to de-hire import or pick-up export empties. This is coupled with a blow-out in truck servicing times at some empty container parks.

 

Oceania Container Services (OCS) in Brooklyn has severe and dangerous truck queuing on public roads, sometimes over 2 hours in duration. Notification slots are not available for up to 48 hours due to restrictions placed by OCS on gate-in slot capacity, despite the ECP returning to pre-COVID operating hours of 6am to 10pm weekdays.

 

COSCO / China Shipping directs all its empty container park destined volumes to this ECP wholly owned by them. OOCL container volumes are also being directed to OCS. The current volume demand is equivalent to trying to pour 10 litres of water into a five-litre bucket!!

 

According to CTAA Alliance company data, the average truck turnaround time at OCS has blown out from 32 minutes in August to 61 minutes in December (to date). CTAA has suggested to OCS collaborative actions and operational amendments to improve the interface. These include extended operating hours, greater gate-in capacity, working with larger volume transport operators on after-hours’ opportunities for multiple de-hire or export pick-ups, limiting empty bulk runs to the wharf to night shifts where possible, and the need for OCS to proactively manage truck queuing and truck arrivals well outside of their slot arrival window.

 

Yet, not enough actions have been taken to alleviate the extreme delays during the peak. Shipping lines also instruct importers and their transport providers to undertake Direct Return of empties to stevedore terminals (DRE). In the case of Patrick Terminals in Melbourne, this involves interfacing with CargoLink, a separate empty return facility adjacent to Patrick’s East Swanson Terminal. The operating hours of CargoLink are limited, slots are unavailable at times, and, according to CTAA Alliance company data, the average truck turnaround times have increased from 16 minutes in July to over 44 minutes in December. Truck servicing times for empty returns to the other stevedore terminals in Melbourne average between 34 minutes to 41 minutes, and transport operators face the risk of significant penalties imposed by the terminals if trucks are delayed and cannot make their allocated time slot. In contrast, average truck turnaround times at well-operated empty container parks are between 8 to 16 minutes, there’s no draconian penalty regime, and there’s a degree of flexibility applied to truck arrival acceptance.

 

All empty container parks and stevedore terminals in Melbourne have increased their arrival slot booking fees by a considerable amount recently. This has left transport operators wondering in some cases what improvements in capacity, throughput efficiency and productivity have been achieved?

 

Costs to Transport Operators

Terminal and empty container park congestion comes at a huge cost to container transport operators. Empty containers must be staged through transport yards due to the delays, and the current build-up of empties awaiting de-hire clogs yards and lessens the ability of transport operators to process full import and export containers effectively. Multiple handling of containers costs money. The additional cost per container of empty staging through yards, added administration and yard planning, more truck kilometres travelled, and truck queuing delays, is estimated to be between $90 to $300 per container, depending on the level of delay. The base operating costs (with no profit margin) of a semi-trailer is approx. $95 per hour, while a higher productivity freight vehicle (Super B-double or A-double) can be over $130 per hour. Every minute of delay caused by other parties in the logistics chain costs transport companies in added vehicle operations alone between $1.40 per minute to upwards of $2.20 per minute. One semi-trailer, with one 40’ empty container loaded, stuck in a queue for an hour longer than reasonability expected, costs the transport company an additional $95.00. These additional costs are difficult, if not impossible, for transport operators to absorb, when such added costs represent between 12% to 28% of base market rates for container cartage in Melbourne.

 

Unrealistic Container Detention Timeframes & Claims:

Time restrictions imposed by shipping lines for the return of empties are more likely to be exceeded given the current congestion and delays. Many shipping lines start the container detention “clock” from the time the import container is discharged from the vessel, irrespective of whether it is physically available for collection from the stevedore terminal. The imposition of container detention fees after 5, 7 or even 10 days, in the current circumstances, is unrealistic. It is equally unrealistic to expect transport companies to be liable for container detention claims liability passed to them when the delays in de-hire are outside of their control. A lack of slot and gate-in capacity at the terminals and empty container parks employed by the shipping lines contributes to the delays. Yet, most shipping lines will only consider container detention relief on a “case-by-case” basis, leading to a significant landside administrative burden largely triggered after the event when the detention invoice is received.

 

It is imperative therefore that when delays threaten a breach of the container detention contractual clauses, importers and forwarders – the customers of the shipping lines - should be proactive in:

• Seeking an extension of the “free time” for the return of the empty container; or
• Requesting a suitable de-hire alternative from shipping lines to avoid delays and added costs.

 

The current congestion issues in Melbourne, triggered by surging import volumes and a slow-down in empty container evacuations through the Port, need to be addressed by all stakeholders.

 

On behalf of our Alliance companies, CTAA continues to liaise with the Victorian Government, the Port of Melbourne, and all industry stakeholders, to try to find solutions. We will keep you updated with further information, as it arises. Should you have any questions or queries, please feel free to contact our Transport Team.

 

Keeping you updated,

BRi Transport Team

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