As the COVID-19 pandemic rages on, experts anticipate that the shipping industry could see a loss of $25-$30 billion this year. These losses would need to be at least partially offset or the landscape of global transportation could drastically change (i.e. bankruptcies, M&A).
The industry is waiting to see when container volume will begin to flow again. As cargo movement restrictions are lifted around the world, the disruption in the supply chain means storage space will continue to be at a premium. Millions of misplaced and held containers will be distributed to locations where they can finally be utilized.
In an effort to alleviate a severe lack of storage capacity at terminals and surrounding warehouses, steamship lines are beginning to offer cargo storage before, during, and after cargo has arrived at the final discharge port. These cargo storage programs vary by steamship line. While one program may require the delay in transit to be declared at the time of booking, another will allow it during transit. In addition, storage points are different depending on the size and location.
In order to make the best decision for your company, you need to be aware of the different options available for steamship line storage. Below we are providing information on the cost structure, as well as highlighting some of the advantages and disadvantages, of these “delay in transit” programs.
Demurrage, detention, per diem, and other charges can add up very quickly in the shipping industry. The cargo storage programs offered by some steamship lines can potentially save your business a lot of money. Generally, the pricing structure for these storage programs are on a tiered basis. There is an initial “free period” which lasts from 10-14 days. The second tier has a nominal fee (around $25-35 per day, per container) and the time frame fluctuates from carrier to carrier. The third tier cost usually doubles that from the second tier. It is important to note that each storage location may have diverse tiers and charges.
Steamship lines are motivated by the customer demand, as well as the desire to keep the global supply chain fluid. There are multiple potential advantages of participating in a delay in transit program including:
● Cost Savings – The charges incurred on a daily basis are significantly lower than demurrage, detention, and per diem. This could save hundreds of dollars for the consignee.
● Strategic Movement – The cargo would begin to move to its final destination once the demand for it is known, allowing the steamship line to decrease its number of blank sailings.
● Force Majeure – The potential for force majeure is drastically reduced under these programs since the cargo is moving from a storage point to its final destination. This helps insulate against potentially costly diversion and delivery charges that occur with force majeure.
While the advantages of these storage programs are certainly worth consideration, there are also disadvantages that should be understood. These disadvantages which could cause strain on both costs and cargo availability include:
● No Guarantee of Costs – Even though the daily fees are lower, there is no cap to how much can accrue over time. With no monetary incentive, steamship lines could become unmotivated to rush the delivery of cargo. In addition, it is unknown when an importer would actually receive the goods under these programs.
● Port Congestion – Experts predict terminals may have capacity issues once cargo starts moving again. If the discharge terminal declares force majeure, cargo would have to be diverted.
● Charges Still Exist – While storing cargo under these programs does save money initially, the possibility of demurrage, detention, and per diem still exists once it arrives at the destination terminal.
Steamship lines are listening to their customers and working to provide options based on the feedback they receive. Today, perhaps more so than at any other time, it is prudent to know all the options available when it comes to moving and storing cargo. Before entering into a contractual agreement, it is wise to verify the offerings and criteria of the delay in transportation programs.
The experts at TLR are monitoring the global supply chain and cargo movement trends and activities on a daily basis. Please feel free to contact us with any questions at BD@shiptlr.com.