LA-LB delays doubled turnaround time, cost lines $150 million, Drewry finds

LA-LB delays doubled turnaround time, cost lines $150 million, Drewry finds

Turnaround time is measured in days
Source: Drewry Maritime Research (www.drewry.co.uk), derived from Marine Exchange of Southern California (www.mxsocal.org).

HONG KONG — The average ship turnaround time at the Los Angeles-Long Beach port complex in the fourth quarter was twice that experienced by carriers in August, with the congestion during the three month period costing carriers an estimated $150 million, or $1.5 million per weekly service, according to analysis by Drewry.

In itsContainer Insight Weekly, the London-based maritime analyst said the cost estimates should be considered a “worst case scenario” since between the trouble starting in May last year and ending a few weeks ago, some periods were worse than others and not every ship voyage would have encountered the same delays.

“But we are prepared to stick our neck out and say that the industry lost in the region of $150 million in the fourth quarter as a consequence of the congestion. Annualised, that would equate to $600 million, which to put things in perspective would buy 60 gantry cranes or build a two million TEU per annum capacity terminal from scratch,” Drewry said.

The analyst has created a “turnaround indicator” to assess the impact of the congestion delays, mining data from the Marine Exchange of Southern California (Marine Exchange) to establish its findings. Based on its calculations, Hong Kong-based carrier OOCL was worst affected by the congestion, with APL least affected, despite being the largest user of the port complex.

Instead of using a per-ship calculation, which would have had limited meaning as ship size and the container exchange per vessel determines turnaround time, Drewry divided each carriers’ average ship size by the average time spent in port. This enabled the analysts to then calculate the implied time in days it would take each carrier to turnaround the overall average size of ship (6,086 TEU) calling at LA-Long Beach in the period under review.

Data obtained from the Marine Exchange shows that the number of containerships anchored has been rising steadily since the start of the year with 23 waiting for a berthing window at the end of February. Drewry drilled deeper into the Marine Exchange data and the results revealed that some carriers suffered significantly more than others, while one carrier actually benefited from the congestion.

For the purpose of the analysis, Drewry limited the time period to the fourth quarter 2014 in order to establish a rough industry-wide assessment of the congestion costs using the statement from NOL that Southern California port congestion added $15 million to the liner division APL’s core EBIT loss in the last three months of 2014.

The Marine Exchange data showed that the average vessel turnaround time (the interval between the time of arrival either at anchor or berth and the time of departure) at LA-Long Beach during the fourth quarter was 126 hours, or 5.25 days. It showed that the average ship turnaround time doubled since August, when it was 2.5 days and 3 days in Los Angeles and Long Beach respectively, according to CargoSmart, a shipment management software solutions provider.

Around 55 percent of all containerships calling at LA-Long Beach from October through December were turned around in 5 days or fewer, while 13 percent of ships stayed for 10 days or more, Drewry found.

“The 10,000-TEU CSCL East China Sea had the longest stay, waiting an incredible 32 days to get back on its way after its arrival on 21 December,” the Container Insight Weekly report noted.

Looking at the scale of the disruption, Drewry found that APL was actually one of the least affected by vessel anchorage and long delays, while OOCL, CSCL, NYK and Hanjin took more than their fair share of the pain. The analyst felt it was possible those carriers with fewer ships anchored achieved this by slowing down the vessels on the approach to LA-Long Beach.

It was taking just under four days to turn around a notional 6,086 TEU APL ship in the fourth quarter but if that same notional ship belonged to OOCL, it would have taken just over eight days, Drewry found.

So far APL is the only carrier to have placed a financial figure on the costs accrued by the West Coast congestion, and Drewry suggested other carriers should do the same as greater transparency would increase their chances of recouping the extra costs from customers.

The analyst outlined the various cost components of the congestion:

- Waiting time at anchor per day,
- Additional vessels chartered to keep service on track and allow for vessels out of synch and not working,
- Extended time in port working the vessel resulting in delays quay side and quay rent increases, demurrage charges not collected from shippers,
- Boxes out of the system and not being utilised for revenue earning jobs,
- Export loads not loaded with no revenue on the backhaul,
- Empties not loaded and not re-positioned back to Asia and areas of demand,
- Missed port calls, and
- Boxes not discharged at scheduled ports having to be railed to receivers at lines’ expense.

Contact Greg Knowler at gknowler@joc.com and follow him on Twitter: @greg_knowler.

Comments

$150M is a drop in the bucket compared to what importers and exports lost in additional transportation costs and lost sales.