National demurrage fees continue to climb as shippers search for capacity
Dray Alliance today released an outlook for April based on the activity within its container trucking platform from Feb-March 2022. Dray Alliance findings reflect the impact of the continued port disruptions and demurrage fees being incurred by shippers with containers sitting at the ports.
The demurrage issue has become a financial burden to those who have containers sitting at ports, particularly the Port of Los Angeles. Detention and demurrage penalties have soared since the start of the pandemic and as further supply chain disruptions have hit. According to Dray Alliance, drayage carriers have been turned away from picking up loaded imported containers because of unpaid demurrage charges — a major contributor to delays and slowdowns.
“Containers keep sitting at ports, and demurrage fees keep tallying up, not by choice but by the difficulty of how to retrieve them. This has caused a financial burden to all of those in the industry,” said Steve Wen, Co-Founder, and CEO, Dray Alliance. “In our experience working with the Port of Los Angeles, we have seen how data confirms the penalties being paid due to demurrage fees. These, added to the lack of truckers and ways to distribute cargo, are a continued contributor to port backlogs.”
A Forbes article cited The American Trucking Association, who reported that this sector is headed for a shortage of 160,000 drivers by 2030. Additionally they estimate the need for one million new drivers over the next 10 years. While container volume has increased to record highs, truck driver capacity has not matched the growth, resulting in appointment slots remaining finite, leading to an increase in demurrage penalties. As the March data shows, for all of the containers currently discharged at the Port of Los Angeles, 41% are incurring demurrage, meaning a total of 25,258 out of the 61,944 shipments are past due over five days after discharge.
“The carriers view these penalties – whether right or wrong – as a profitable part of their business,” said Brian Glick, CEO and founder of Chain.io, a systems integration platform that works closely with shippers and freight forwarders.
“So even if the Ocean Shipping Reform Act passes, they’ll become compliant with the law, but won’t work against their own self-interest. They’re a for-profit entity, and it’s hard to envision them willingly sacrificing a profitable part of their business for what’s perceived to be a moving target of playing fair,” he added, in a recent Supply Chain Management Review article.
Dray Alliance data from February 2022:
Average time from discharge to outgate was 5.8 days. Assuming four free days at the terminal, that’s 1.8 days of demurrage per shipment on average.
Depending on the terminal, the charges for one day of demurrage are anywhere from $175-$225/day; which escalated over time and equaled an average of $168.75 per day
During this month, the Port of Los Angeles moved 424,072.85 TEUs of loaded imports (212,036 feet).
Using this metric as the total number of containers, shippers paid $71.56M in demurrage fees through POLA in February 2022.
Dray Alliance data from March 2022:
Average time for discharge was 4.9 days, assuming four free days at the terminal, that’s 0.9 days of demurrage per shipment on average.
Utilizing a daily demurrage rate of $187.50, the average March shipment through the Port of Los Angeles incurred an additional $337.50 worth of demurrage.
In March, the Port of Los Angeles moved 509,953 TEUs of loaded imports (254,977 FEUs).
Using FEU’ s as the total number of containers, shippers paid $43.03M in demurrage fees through POLA in March 2022.
Headquartered near the Port of Long Beach, the Dray Alliance platform provides complete container management, including automated status notifications, real-time GPS tracking and document management and analytics for every container. In December 2021, Dray Alliance completed a $40M Series B round led by global venture capital group Headline.
About Dray Alliance
Dray Alliance is a venture-backed startup that is focused on building a container trucking platform to deliver shipping containers from ports to warehouses. Its technology connects container shippers with a network of vetted truck drivers through a mobile app. By leveraging API integrations with the ports and data from the mobile app, Dray Alliance’s platform allows container shippers to manage and track all container deliveries in a single web portal and make truckers more efficient. The company has raised a total of $55M in venture capital and working capital financing, and is already working with over one hundred enterprise customers, delivering thousands of containers a month. Steve Wen is the Co-founder and CEO of Dray Alliance, and was named to Forbes’ 2022 30 under 30 list. Please visit drayalliance.com for more information.
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