Speaking at a webinar hosted by Container xChange on the subject Demurrage and Detention trends in 2022—and how to navigate them, analysts shared their container market outlooks and predictions for demurrage and detention costs going forwards.

“We’ve started to see shippers really struggle with these increasing fees for containers that have been stuck in port and returned late, a situation that for many shippers is really beyond their control,” said George Griffiths – Editor, Global Container Freight, S&P Global Commodity Insights.

“Many, many carriers and operators have introduced strict free time parameters, and as a result these charges for delays have been levied against the shippers. They’ve become a really significant cost centre for shippers. Previously, this was a transient cost, people didn’t really look at it. People didn’t really pay that much attention to demurrage and detention.”

The issue has become thorny as free days limits were cut and detention and demurrage costs rocketed to around $100 per day in the wake of the pandemic, said Griffiths.

“2021 saw a major major spike in these charges,” said Candice Buckle, Content Marketing Manager, Container xChange, sharing data from the company’s annual Demurrage and Detention benchmark report.

“In fact, the global average increase was 39% for standard containers alone… the charges for 20 distribution centres alone doubled in 2021. If we look at what the state is today in 2022, you’ll see that in a lot of areas the trend in 2022 is decreasing slightly. For some outlier ports, like Long Beach and Los Angeles and Shanghai, they actually increased so that that ended up with the value in 2022 still being higher than pre-pandemic value by 12%. So even today, the spike is still pretty pretty much there,” said Buckle.

Chantal McRoberts, Head of Advisory, Drewry Supply Chain Advisors explained the root of rising detention and demurrage charges.

“It’s disruption, disruption, disruption, driving an increase in detention and demurrage charges. If there’s a shortage of drivers, a shortage of physical people and vehicles to get the containers into the ports and out of the ports, it consequently increases the DND charges,” said McRoberts.

“I spend most of my time these days providing therapy to shippers, whether it be freight rates or detention and demurrage. Everybody is focusing on these cost items and unfortunately, if you’re a shipper right now, your CFO is looking at all the bills and invoices coming in and asking ‘why am I paying for this?’”

Looking ahead, the panel did not have much good news for shippers hoping for respite in the medium term.

“These are heavily congested ports and terminals, and they have been for a very long time. We’re tracking this to AIS data at Drewry and everything is still in the red. Nothing is moving into the amber and if it is, it’s at the upper end of the amber still about to tip into the red side. We’re seeing that still continuing at the large US ports,” said McRoberts.

While forecasting a softening in total detention and demurrage costs, McRoberts warned that if US port congestion continues and spills into secondary ports, costs will rise. The scenario is very location specific, she said.

On the freight rate side, both Griffiths and McRoberts forecast spot rates continuing to fall, but not to anything like pre-pandemic levels.

Asked how he expects the peak season to play out this year, Griffiths’ answer was straight forward. “I would just say – what peak season? We always say that rates go up quite a lot in this time of year but they’re just not at the moment,” he said.

Even with a slight easing in demand and vessels on voided sailings being used to clear up issues, the task of unravelling the disruption is massive.

“I firmly believe if nobody wants to ship anything on a container in the next six months, we still wouldn’t fix the issues that we’ve got in the market at this point. The market is really snarled up, and it’s gonna take a lot of effort to fix it,” said Griffiths.

Moderator Christian Roeloffs, Co-founder and CEO, Container xChange, added: “We’ve always compared it to a traffic jam. If there’s an accident and a traffic jam forms, even if the accident is cleared up it still takes a very, very long time for traffic to actually flow again… it’s not the case that you just resolve the blockage and then everything flows.”

McRoberts agreed that peak season was not going to be usual this year, “because of the massive inventory levels that have been building up. I think if you speak to a lot of shippers right now, they’ve got a lot in their warehouse that they need to move and demand is falling. So they’re feeling a little reticent about all of that,” she said.

Source: https://www.seatrade-maritime.com/containers/peak-season-what-peak-season

Striking subcontractors at South Korea’s Daewoo Shipbuilding and Marine Engineering yard have reportedly decided to accept management’s offers and end their prolonged strike and occupation of a VLCC tanker under construction at the yard. In a report first carried by Reuters and confirmed by Korean media, the subcontractor’s union has agreed to end its action if DSME agrees not to pursue legal cases against the union for damages.

Faced with increasing pressure from the government and with the potential of police intervention growing, the union and representatives of the shipyard resumed negotiations. Initial reports said the two sides remained far apart with DSME firm on its offer of a 4.5 percent wage increase in response to the union’s demands for up to a 30 percent increase. Recent reports said that the union was now seeking a 5 percent increase along with the agreement not to seek damages due to the strike.

South Korea’s news agency Yonhap is reporting that the police are prepared to move to end the strike at any time. The news agency said the police would respond if the current negotiations failed. Earlier, South Korea’s president Yoon Suk-yeol hinted at the use of police saying the time had come to end the illegal action.

Yonhap also noted a softening in the tone of the president’s remarks on Thursday. At the beginning of the week, Yoon voiced harsh criticism over the now 50-day long strike. This morning he said the people wish the strike to come to an end. He said a quick resolution would be helpful to everyone.

While the union representing DSME’s full-time employees has also been critical of the strike, the workers said they would stand with the strikers if the police attempted to move in to end the occupation. They have said there must be a negotiated settlement while also saying the occupation should end.

DSME continues to say that the strike has cost the company more than $400 million. On Wednesday, a spokesman told Reuters that the shipyard was delaying deliveries for eight vessels under construction for anywhere from two to five weeks.

Concerned by the prolonged strike, Business Korea reports that South Korea’s largest shipbuilder, Hyundai Heavy Industries Group convened a meeting of its divisional presidents to discuss the business environment in shipbuilding. They reported that the company said what has been a booming period is evolving into a crisis. They pointed to the impact of rising costs, global inflation, and the war in Ukraine as creating challenges.

Business Korea reports that Hyundai is also commencing contract negotiations with the unions at its three shipyards. In a first-ever move, the three unions have come together with a unified demand for a 7.5 percent wage increase as well as several smaller concessions.

Source: https://www.maritime-executive.com/article/union-offers-to-end-dsme-shipyard-strike-after-days-of-pressure

Thunderball has offer £0.09 per share for Lamprell which values the company at £38.8m, assuming the exercise of full rights under a share issue plan.

Blofeld holds a 25.5% stake in Lamprell and is associated with the yards joint venture partners in Lamprell Saudi Arabia. Sami AlAngari, a person acting in concert with AlGihaz.

Blofeld in wholly-owned Osama AlSayed the controlling shareholder and chairman of Jeddah-based Asyad Holding Group.

As part of the offer Maverick Investments, a company controlled by the AlSayed family and AlGihaz has extended a bridging loan facility of up $145m to Lamprell Energy, which is available to be drawn down in tranches.

Lamprell faces “urgent and severe liquidity constraints” with funding obligations of $95m due by end July. It also has medium-term financial commitments of $164m.

The bidder plans to take Lamprell private, delisting from the London Stock Exchange on completion of the takeover. “Operating as a private company with a simplified corporate structure and a reduced regulatory burden, Lamprell will be able to benefit from the elimination of the numerous costs associated with maintaining a UK public quotation as well as the removal of the short-term financial expectations of the market,” it said.

The bidder said it believed in: “Lamprell’s high quality pipeline has the potential to convert into a high margin backlog and believes that the market segments in which Lamprell operates are underpinned by positive long-term fundamentals.”

Source: https://www.seatrade-maritime.com/finance-insurance/lamprell-board-recommends-464m-takeover-offer

Florida-based Eastern Shipbuilding Group has filed a protest over the U.S. Coast Guard’s decision to award the next hulls in the Offshore Patrol Cutter series to a different yard, Austal USA’s new steel shipbuilding division.

In 2016, Eastern Shipbuilding Group won a contract for the first OPC hull and up to eight follow-on vessels, with potential to build up to 25 in total. The yard’s bid of $420 million per unit helped it to win over higher-cost options from more established military shipbuilders. After a devastating Category Five hurricane swept over its facilities in 2018, the Coast Guard agreed to modify the contract timeline and recompete it after four vessels. ESG invested heavily in repairing and upgrading its facilities, and all four awarded hulls are in varying stages of construction.

However, the Coast Guard announced in early July that it has awarded the contract for the next 11 OPCs to Austal USA, the Australian-owned aluminum specialist known for the Independence-class Littoral Combat Ship series. The decision effectively sunsets ESG’s participation in the OPC program after the delivery of its first four vessels, while providing Austal a new long-term source of revenue as the LCS program nears its end.

Eastern has decided to appeal the $3.3 billion contract decision, citing several potential areas of concern. In a complaint to the Government Accountability Office, ESG highlighted the cost and performance record of certain previous Austal contracts, Austal’s lack of prior experience in steel construction, and the potential cost/schedule program risk these factors might create for OPC. These considerations, according to ESG, should have outweighed Austal’s lower bid price per unit, since the RFP for the contract put a heavier weight on schedule, risk and past performance than on price.

“Austal’s purported lower price is overwhelmed by the substantial risks associated with an award to Austal, a new entrant to the steel shipbuilding industry with a record of well publicized cost overruns and performance issues,” asserted ESG.

ESG also protested an alleged Coast Guard leak of ESG’s proprietary pricing data, as well as Austal’s decision to hire a former Coast Guard commander with inside access to ESG’s information to work on the Austal proposal-writing team.

In a statement, Austal said that it expects to prevail in the dispute.

“We are confident in the integrity of the solicitation process and that the United States Coast Guard’s selection of Austal USA as the Stage II OPC shipbuilder will be upheld. We will remain focused on delivering world-class ships to our customers,” a spokesperson for the firm said.

Source: https://www.maritime-executive.com/article/esg-protests-award-of-offshore-patrol-cutter-contract-to-austal