The hidden cost in trade: empty container management

The commercial practices of shipping lines and the performance of some empty container parks (ECP) in Sydney are causing significant cost increases in empty container management, according to transport advocacy group Container Transport Alliance Australia (CTAA).
CTAA director Neil Chambers has warned: “These additional costs are causing major difficulties for container transport operators in Sydney, and need to be remedied soon.”
Empty container park (ECP) capacity
A focus of immediate attention are delays and a lack of operational capacity at DP World Logistics Australia Parks 1 & 2 in Botany Road, Port Botany. Large volumes of empty container returns are being directed to this facility by shipping lines, including to meet rail demand for empty export containers.
“We are aware that DPW Logistics is recruiting, inducting and training more forklift and operational staff, but this will take several weeks to occur, Mr Chambers said. “A facility of its size should be achieving at least 30 container moves per half-hour truck arrival window. However, their current operational capacity constraints mean that they are only achieving around 10 to 15 moves regularly.”
Transport operators are having to stage more and more empty containers via their yards prior to being able to gain suitable slots for de-hire. This adds significant costs to the transport task through:

  • Added truck travel to/from yards, then separate later trips to/from the ECP.
  • Container lift off/on costs.
  • Added administration in managing time delays, fleet allocation, de-hire notification processing, and container detention avoidance management.

Mr Chambers observed: “Transport operators have become ‘satellite’ container logistics staging facilities, even for empties. Without this, the container logistics chain in Sydney would be dysfunctional. But, this comes at a cost with commercial consequences.”
Empty re-directions and limited alternatives
Building on the pressures applied by intense competition for available truck arrival slots are the number of empty container ‘redirections’ made by shipping lines and a lack of alternative return options.
Sydney is the ‘redirection capital’ of Australia, with an average of 85 redirection notices per month – double the number in Melbourne.
“This occurs because shipping lines want empties returned to specific places, including to railhead facilities for export use and direct return to the wharf. This saves the shipping lines their own costs of handling empties through traditional empty container parks and being responsible for the cost of repositioning the boxes themselves,” Mr Chambers said.
“The difficulties for transport operators arise because little notice of these redirections occurs, meaning that transport operational planning has become a lot harder, and futile truck trips can occur when containers are rejected from their original return location if the redirection notice is missed or is sent at the last minute.”
Some shipping lines also don’t allow any alternative returning options, which can restrict truck utilisation efficiencies, add to truck kilometres travelled, and contribute to facility congestion and truck queuing.
Lack of EDI flow of data
An increase in the flow of electronic data between shipping lines, their ECP service providers and technology platforms such as Containerchain would greatly assist with information visibility in the container logistics chain, and would help to reduce landside costs.
Unfortunately, only 61% of the empty container movements in Sydney have corresponding EDI data loaded into the technology platforms. This compares with over 90% in Fremantle and 80% in Melbourne, for example.
When EDI data is lacking, allocators must process container return electronic information manually, truck drivers must be supplied with paper or electronic versions of the delivery order (DO), and ECP gate staff must process trucks and drivers manually. All of these issues lead to delays and added costs.
“There are two major shipping lines that simply don’t provide any electronic information about empty containers – OOCL and Evergreen. Several others provide the information less than 40% of the time – COSCO (Five Star Shipping), Ocean Network Express (ONE), and Hyundai Merchant Marine.
“We’d like to see a commitment from these shipping lines, and the others, to try to increase the EDI exchange of data on empty container return instructions in Sydney towards 100%.”
Container detention liability
The current delays and inefficiencies in Sydney mean that there is more risk of the import container detention policies of the shipping lines being breached.
“Transport operators need to reinforce their business rules with customers about adequate notice of containers being ready for empty return (normally two working days), and should not accept any container detention claims caused by delays outside of their direct control.
“Also, importers and forwarders should be proactive in seeking an extension of time from shipping lines for the return of empty containers when delays threaten a breach.
“CTAA Alliance companies are seeking meetings with DPW Logistics, other ECP and with shipping lines through Shipping Australia Limited (SAL) to try to find sustainable solutions,” Mr Chambers said. “We also continue to liaise with NSW Ports and with the NSW Government about the current difficult situation.”

Who should pay the cost of empty containers?

The policy of shipping lines directing empty containers to be de-hired to wharf terminals and at-wharf receival facilities continues to increase. These policies will deliver significant cost savings to all shipping lines utilising these practices, however, their application has resulted in additional costs for container transport operators that should be recovered in the commercial marketplace.
Major foreign container shipping lines are now regularly dictating direct empty return to terminals across Australia include OOCL, ANL (CMA-CGM), Hamburg Süd and COSCO. Practices of the shipping lines and their container terminal stevedores differs in each Australian capital city port, but nonetheless create additional business costs for container transporters.
“While the cost drivers may vary slightly from shipping line to shipping line, port to port, and even stevedore to stevedore, the impact to container transporters is the same: a hit to an expense line in their P/L. That is not sustainable for any business,” observed CTAA director Neil Chambers.
CTAA companies have identified a number of situations where the significant additional operational costs are incurred, including:

  • Empty container staging via yard: de-hiring directions to wharf facilities invariably require transport operators to ‘stage’ empty containers via their transport yard so that they can line up available time slots with their vehicles undertaking wharf work. The container lifts and administration involved in this staging activity is a significant cost burden for transporters as is the additional cartage leg required.
  • Inability to backload: in some ports, stevedores work closely with transport operators to align import delivery slots with empty container de-hiring direct to wharf. However, in other ports and at some at-wharf return facilities that are separate from the container terminals, there is no ability to align the return of empty containers with import delivery slots. This results in an inefficient cost structure for transporters where backloads cannot be performed and therefore they must run trucks empty one way.
  • Lack of flexibility in de-hiring location: in many instances when an alternative de-hiring location is requested for operational reasons, this is not forthcoming from shipping lines despite recent public announcements to the contrary.

Many empty container Pparks (ECP) that handle containers for nominated shipping lines are instructed not to receive containers that have been directed for wharf de-hiring. This lack of flexibility in de-hiring location adds to truck kilometres travelled and restricts the ability to achieve truck utilisation efficiencies.

  • Empty container redirections with little notice: at the discretion of shipping lines and/or container stevedore terminal operators, empty containers destined for wharf de-hiring are redirected to other return locations. These sudden operational changes cause planning difficulties for transport operators who must readjust their fleet and job allocations at short notice, resulting in additional administrative costs, additional truck kilometres travelled, and potential de-hiring delays.
  • Financial penalties imposed by stevedores: empty containers de-hired directly to the terminals are not booked using Containerchain but rather are booked through 1-Stop. As such, the current stevedore charging regimes mean that transporters run the risk of being penalised for no-show or wrong time-zone penalties imposed by stevedores, even related to the direct de-hiring of empty containers. These penalty regimes do not exist to the same extent at traditional ECP.
  • Container detention delays: the added timing delays that can be caused by the need to de-hire empty containers to wharf may mean that the container detention time restrictions imposed by shipping lines may be breached.”

A new shipping line initiative to designed reduce their costs is, what the industry has dubbed, ‘empty return to ship’.
Mr Chambers explained: “As an example, Maersk is requiring some empty containers to be treated as export containers that must be delivered to terminals for designated ships and discharge ports. This involves the corresponding need for the transport operator to compete with full exports to book an export slot, and for transporters or their import / forwarder clients to complete an export Pre-Receival Advice (PRA) through 1-Stop Connections.”
“CTAA believes that the additional costs associated with this shipping line direction, including the costs of the completion and lodgement of the PRA, should be recovered by transporters in the commercial marketplace.”
CTAA has advised container transport operators to continue to ensure their true additional costs are clearly articulated to shippers (importers / freight forwarders).
CTAA believes it is up to shippers to seek corresponding reductions in the terminal handling charges (THC) levied by Shipping Lines to balance any cost shifting from the lines to the landside operators.

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