Vessel Congestion Sets Two New Records in Southern California

After months of reported progress on reducing the backlog at the two largest ports in Southern California, the congestion has again spiked to record levels. The Marine Exchange of Southern California, which oversees the movement of vessels at the ports of Los Angeles and Long Beach, reports that new records were set for the number of vessels in port and at the anchorage and despite slight declines they expect the volumes to continue at these elevated levels in the coming days.

“We set two records over the weekend,” says Captain Kip Louttit, Executive Director of the Marine Exchange of Southern California. “Regular and contingency anchorages remain essentially full,” he reported in his daily update to the maritime community while assuring everyone despite the record levels the port system remained safe and secure. Louttit writes the port system is “as efficient as can be under COVID-19 conditions due to the great work of all port partners and every segment of the workforce.”

The first record came on Friday, August 13, when there was a total of 125 vessels in port at the San Pedro Bay port complex. By Monday, it had declined just slightly to 116 vessels with 59 on berth and 57 waiting offshore in the anchorage or drift areas. Within the ships, there were 28 containerships on berth at the two ports while an additional 35 were waiting offshore. The total of 63 containerships, however, was just slightly below the absolute record of 67 on January 30, 2021, and the 35 at anchor was below the peak of 40 on February 1, 2021. By comparison, in 2015 there was a record 28 containerships in the San Pedro Bay.

On August 14, the San Pedro Bay set a second record with a total of 68 ships in the anchorage, including the use of four drift areas. In January 2021, the port complex had set a record with 60 vessels in the anchorage compared with a record six years earlier of 48 total vessels in the anchorage.

For the second time this year, the Marine Exchange has also been forced to open drift areas because the primary anchorage and overflow areas are full. In January 2021, they opened the drift areas for the first time in seventeen years. Louttit explains that the drift areas are assigned working with the captain of vessels to chose a safe location at least two miles from shore and another vessel as well as the shipping lanes. Vessels are monitored in these locations for safety and offered positions at the anchorage when space becomes available.

Based on data from incoming vessels, the Marine Exchange reports that vessel arrivals are slightly below ”normal levels,” based on the 2018/19 pre-COVID level but remain high. By Thursday, August 19, 36 vessels are due, including 15 containerships, which is two fewer than the normal level of boxships. The number of vessels at anchor and in the drift area, however, is expected to decline with a total of 17 scheduled to go into the anchorage while 25 vessels are expected to shift to a berth.

The spike in the number of vessels is in part a reflection of the continued surge in imports as well as possibly some catchup from the disruptions recently at ports in Vietnam and earlier in the summer at Yantian, China. It is likely too soon for last week’s terminal closure in Ningbo, China to have a significant impact on traffic but should be reflected in the coming weeks as Southern California is a major destination on routes from Ningbo.

Two weeks ago discussing the volume of imports, officials at the Port of Long Beach described the levels as the “new normal,” noting that they had set records in 12 of the past 13 months for the number of containers handled in the port. The neighboring Port of Los Angeles in its Signal forecasting tool for imports shows peak volumes of 150,000 to 175,000 TEU a week currently with 24 of the vessels in the anchorage heading to Los Angeles. They are reporting, however, that the average waiting time in the anchorage has recently remained fairly steady at 6.8 days currently.

Reporting the forecast for retail imports, the National Retail Federation projected a peak in August before volumes would decline and plateau as retailers prepared for the end of year peak shopping season.

Current logistics situation under Covid-19 in terms of container shortage and survival of NVOCCs

Gone are the days when being an non-vessel operating common carrier (NVOCC) or shipper owned container (SOC) box operator you could buy containers in any region, as per the need of any particular project of specific move, from one port to another, without facing any obstacle in getting space from vessel operators, port congestions and other loading issues, like vessel delay, port skip and roll over problems; but today it is not a piece of cake for non-vessel Operators (NVOs), to even find out the availability of containers, competitive price and get the space smoothly, in various regions including China/Europe and South East Asia.

One of the major reasons for these sorts of issues is Covid-19, which was confronted in 2020, due to which many countries had to implement a lockdown, started from China and moved on to Europe, the US and then spreading to almost all countries. Travel and transportation restrictions, came into effect all over the world, leading to sales & procurement dropped drastically, and so did global trade.

Nowadays, container shortages have become a serious problem in the logistics industries, which not only affect the global shipping industry but also have a strong negative impact on manufacturers, traders and of course retail businesses.

When countries entered into lockdown, their economic activities were restricted, including the number of workers in ports/depots/warehouses/container freight station (CFS), which were minimized extensively, in turn, this ultimately reduced the speed of cargo/custom handling, and clearing.

On top of that, many small and medium sized factories temporarily closed in different locations in Asia, mainly China. An event that led to a large number of containers stopped and became long-aging units at terminals and inland depots with the uncertainty of the next move.

As the movement of cargo was limited, shipping lines reduced the number of ships, to stabilize the cost and to maintain the freight levels, considering their major cost factors with blank sailings, which is another headache for NVOs/customers, as they have limited options of sailings from vessel operators.

But the main question still remains: “Where are the containers and why is no one able to access them easily let it be an NVOCC/freight forwarder or even a shipper?”

If I consider analyzing this situation, being an NVOCC and based on my practical experience, I understand that in most of the cases the containers are lying at ports/terminals and inland depots, leading to port/depot congestions, the same situation persists for all major transshipment hubs, like Singapore / Jebel Ali / Hong Kong / Busan / Shanghai / Colombo, etc. Simultaneously, the majority of containers are also onboard vessels for long haul, especially from China/South East Asia to US/Europe, hence the largest container shortage is in Asia, while Europe/Mediterranean also faces a deficit.

Due to these circumstances, vessels started omitting some ports, which is one of the common reasons for vessel delays; even if containers are lying at port for loading to a vessel, but are not able to be shifted over for sail, it leads to roll over to next sailing, without any certainty, as vessels right now are not being operated according to their fixed schedules; this is also the reason why containers are being moved via 1 or 2  transshipment ports, as an alternative route, which simply swaps the short transit time to a longer one.

On the other hand, whilst shipping lines were reducing the number of vessels, they were not able to collect empty containers at all.

Considering all these current factors and due to limited container access, manufacturers have driven up the prices of new containers, and the traders who sell second-hand containers have already created a hype in prices; this is a phenomenon not only in Asia/Europe but almost everywhere; therefore, cargo worthy containers which an NVOCC could easily buy in US$800-US$1200 bracket before 2020, now come in the range of US$2200-US$2800, likewise container leasing rates have also skyrocketed by 30% to 50%.

Apart from manufacturers and container traders, carriers/vessel operators are also trying to secure their profit, which is affecting container shortages, particularly in Asian countries. Carriers prioritize long haul shipments generally from China to North America and Europe where they can make more profit, as compared to short haul shipments within Asia, that’s why there are no empty containers in some regions.

Vessel operators are announcing general rates increase (GRI) for their carrier owned containers (COCs) and slots up to twice a month. On some routes, they even apply it on weekly sailings but still do not make any assurance that they will accept bookings and space on a regular basis which causes the ultimate war of space between NVOCCs who are also compelled to buy the slots on dead freight basis but are still subject to containers availability.

There is no need, to stress the fact that this is one of the toughest times for those internationally engaged in the logistics industry and nobody knows when this situation will return to streamline condition as according to some organizations and resources they anticipate that it may continue until the end of this year.

Nonetheless, we all have to survive and try to sustain our services especially NVOs/forwarders, by accepting and facing the current situations in terms of reality. At this point, all we can do is to explain the current logistics problems and situations to our customers, to get their understanding and do our best by focusing on what we can control, rather than to look at something we are unable to control.

Though I am uncertain as until to when we will have to face this situation or when the pandemic will be eventually vanished, however being a part of an NVOCC as VMR Lines, I am confident of playing a positive role in offering our services in every way possible, even if it means reducing the volume of our services, to some extent, but never compromise on its quality; we are committed to giving our customers, partners, agents, carriers and venders our 100%.

Port of Valencia launches electrical substation for zero emissions

The Port Authority of Valencia (PAV) has announced the launch of a new electrical substation at the Valencia Port as part of its effort to achieve zero emissions by 2030.

Particularly, Valenciaport has published the procedure for awarding the contract for the construction of the connection for the electrical substation of the Spanish port with a budget of US$3,309,089 (€2,803,030).

At the same time, PAV is preparing the specifications for the construction of the electrical substation, with a base tender budget of more than US$7.7 million (€6,539,701.33) and a completion period of 24 months.

This new project will allow the ships’ engines to be connected to shore power while they are berthed at the port facilities, and it will serve different docks of the port, the northern container terminal and the public passenger terminal.

In addition, the substation project will boost the port’s decarbonisation process as it will play a significant role in the reduction of emissions and operational costs for ship calls.

The infrastructure involves the installation of two transformers in two stages, with a total apparent power of 60 Mega Voltamperes (30 MVA each).

Moreover, the new electrical substation has the support of the European Commission through the Connecting Europe Facility (CEF) Committee, which is financing the project EALINGWorks Valenciaport, such as the preparation of the port’s electrical grid for Onshore Powel Supply (OPS) to container ships, ferries and cruise ships in both the container and the passenger terminals.

The carbon footprint of the Port of Valencia has been reduced by 30% from 2008 to 2019, while this project aspires to achieve zero emissions at the port by 2030, “two decades ahead of the objectives that Spain, Europe and international organisations have projected for 2050,” according to PAV.

Ever Given owners, Suez Canal Authority hammer out compensation deal

Owners of the 20,000 TEU containership Ever Given, which has been stuck in Egypt for months following its grounding in the Suez Canal, have reached an agreement in principle with the canal authority over the compensation claim.

“Together with the owner and the ship’s other insurers we are now working with the SCA to finalise a signed settlement agreement as soon as possible. Once the formalities have been dealt with, arrangements for the release of the vessel will be made,” the UK Club said.

The agreement has been reached following long and arduous working sessions between the two sides which have lasted for over 15 days.

Details on the amount of compensation the two parties agreed upon were not disclosed.

The deal is being announced on the back of a new offer proposed by Japanese company Shoei Kisen Kaisha to SCA to settle damages caused by the ship’s infamous March grounding.

Initially, the Suez Canal Authority sought a compensation worth $916 million, which the owners turned down as too high. Subsequently, the claim was reduced to $550 million, provided that $200 million is paid in advance, while the remaining $350 million is paid as letters of guarantee issued by an “A class” bank in Egypt.

The deal comes after the ship spend almost three months anchored in the Great Bitter Lakes, awaiting for the legal dispute between the duo to be resolved.

Busan Port Authority to begin study on impact of vessel pollution

The Busan Port Authority (BPA) has begun a joint study with the Korea Institute of Ocean Science and Technology (KIOST) on the impact of pollutants generated from vessels on air quality.

The Port said it concluded a memorandum of understanding (MoU) with KIOST and the Busan Metropolitan City Public Health and Environment Research Institute from April 2020 to identify the current status and characteristics of fine dusts coming the facilities and vessels.

From June 2021, the BPA is planning to measure the emissions from operating vessels using the KIOST’s OP -FTIR equipment and analyse the impact of the pollutants on the port area in Busan.

Major contents of the joint study will include measuring emissions concentration of operating vessels using the long-distance OP-FTIR equipment and calculating the amount based on the measurement and analysing the impact of operating vessel emissions on the port area in Busan.

Based on the study, BPA and KOST will be able to identify the impact of operating vessel emissions on the port area, which are considered to be the major cause of air pollution in the port area and use the data to establish measures to improve the port air quality.

BPA CEO Nam Ki-chan said, “We are pleased to conduct a joint study with KIOST, located in the Busan Marine Industry Cluster, to contribute to the community development and shared growth.

“We will work to identify the cause of air pollution in the port area and come up with measures to reduce air pollution.”

Ever Given remains stuck in Egypt as legal battle over its release drags out

A court in Ismalia, Egypt rejected the appeal of the owners of Ever Given, a containership that ran aground in the Suez Canal in March, against the ship’s arrest order.

The Japanese shipowner Shoei Kisen Kaisha filed an appeal before the Ismalia court in Egypt against the arrest of Ever Given and its cargo back in April.

The appeal was dismissed earlier this month and the Ismailia court of the first instance in Egypt upheld their original order that the vessel and her cargo can only be released from arrest upon the owners’ payment of the SCA’s full claim.

On Saturday, the Ismailia Economic Appeals Court in Egypt hosted a validation hearing of the Suez Canal Authority’s claim arising from the Ever Given’s grounding, and the Ever Given owners’ further appeal against the arrest order.

“In a reserved judgment issued today (May 22), the court rejected the owners’ appeal but accepted the owners’ objection that the Appeals Court was not competent to hear the validation proceedings, which were referred back to a court of first instance for further hearing on Saturday 29 May,” the UK P&I Club, the liability insurance provider for the owner, said in an update.

The club said that talks between the Suez Canal Authority and the owners of the ship resume.

Meanwhile, the canal authority continues to seek damage claims worth $916 million for the grounding, citing costs arising from the salvage of the ship, dredging works as well as the losses represented by the sinking of one of the boats during the rescue work, which claimed the life of one rescue worker.

SCA also wants to be compensated for the impact of the traffic suspension in the waterway during the grounding period as numerous ships opted for alternative routes due to the incident.

Chairman of SCA Osama Rabie has reportedly offered to lower the claim to $550 million, slightly lower than the $600 million offered earlier this month for a potential out-of-court settlement, Reuters reported citing a TV interview at a local media outlet.

According to the report, Rabie said a $200 million deposit could be enough to secure the ship’s release, with the rest payable separately.

However, when Offshore Energy-Green Marine reached out to the owners for a comment on the matter earlier this month, the UK Club explained that the reduced amount had not been reflected in the SCA’s claim filed at court.

Ever Given’s owners still have not been provided with evidence that would support a claim of this size, which remains exceptionally large,” the statement read.

Separately, during the hearing the owners’ defense team said that SCA was responsible for the accident as it allowed the containership to sail under unfavorable circumstances.

To remind, Ever Given was faced with poor visibility resulting from the bad weather conditions as a dust storm was passing through the country.

The legal team said there were disagreements between SCA pilots and its control centre over whether it should enter the canal, adding the ship should have been accompanied by at least two tug boats suitable for the ship’s size.

As informed, Shoe Kisen is seeking damage compensation of $100,000 for the losses related to the ship’s arrest.

SCA has refuted all the claims from the shipowners’ defence team in its statement

Ports in California to receive $250 million from American Rescue Plan

Ports in California will receive approximately $250 million as part of the state’s allocation of funding from the American Rescue Plan, according to the California Association of Port Authorities (CAPA).

In a statement, CAPA said funding, announced by California Governor Gavin Newsom, will help the state’s ports recover from the dramatic losses in revenue during the worst moments of the COVID-19 pandemic.

Newsome said the money will be invested in California’s ports “that have lost tremendous amounts of revenue and need to be more competitive in terms of their positioning to the world around us”.

California Association of Port Authorities Vice President & Executive Director for the Port of Oakland Danny Wan pointed out the important role ports had played in the pandemic.

“Over the course of the past year, California ports have stepped up to meet the challenges caused by this historic public health and economic crisis because we understand that our continued operation is critical to the health and welfare of communities across our state.

“These funds will play a critical role to ensuring California’s ports can help our state rebound and put Californians back to work.”

Due to the pandemic, some of California’s ports have faced over 50% declines in revenue compared to last year, according to CAPA.

Despite major losses due to the pandemic, California seaports had not received state or federal relief up to this point, it claimed.

Lieutenant Governor Eleni Kounalakis, California’s Representative for International Affairs and Trade, said the state is home to “the most sophisticated network of ports” in the US. “

“They [the ports] are the lifeblood of our economy and will be an integral part of our state’s recovery from the impacts of COVID-19.”

Ports on the US West Coast have suffered severe congestion since the beginning of the pandemic, caused by the resumption of Chinese exports and a boom in consumer demand.

Consequently, the ports of Los Angeles, Long Beach and Oakland have routinely broken traffic volume records.

During a press briefing with the Port of Los Angeles on 13 May 2021, Danial Maffei, Chairman of the Federal Maritime Commission (FMC) called upon the US Government to spend more on digital infrastructure and improve the country’s supply chain capabilities.

Saudi Ports Authority to support shipping lines with storage fee exemptions

The Saudi Ports Authority, Mawani, announced an initiative to support international shipping lines stranded at the south end of the Suez Canal on the Red Sea coast, extending the services of Jeddah Islamic Port for ship transfers and container offloading.

Contributing to the support of the global logistics sector and maritime trade, measures include an extended period of exemption from storage fees for transhipment containers – from 30 days to 60 days – for a duration of three months.

The initiative underscores Saudi Arabia’s commitment to mitigating the impact on global supply chains, in addition to affirming Saudi ports’ readiness to adapt to shifts in the international transport market and the associated challenges.

The support also reasserts the advanced capabilities of Jeddah Islamic Port and its capacity to accommodate the estimated number of containers on these vessels without affecting the port’s operations.

Located on the commercial maritime artery that connects the Far East, Europe and the Horn of Africa, Jeddah Islamic Port ranks first among the Red Sea ports, with a capacity of 130 million tonnes across 62 berths equipped with the latest technologies and to international specifications.

Egypt to hold Ever Given, its crew until $916M claim is paid

The giant containership Ever Given, which hit the headlines after getting stuck in the Suez Canal last month, has been seized by the canal authority.

Namely, the Suez Canal Authority (SCA) is seeking $ 916 million in damages for the costs incurred by the ship’s blockage of the waterway.

The ship will be held until the claim is paid, with its crew of 25 members unable to leave the vessel.

Taiwanese shipping company Evergreen, the charterer of the vessel, said that any payments that are being demanded will be addressed by Shoei Kisen, the owners, and the liability insurance provider UK P&I Club in London.

The P&I club has insured the company for third-party liabilities that might arise from an incident such as this – including damage caused to infrastructure or claims for obstruction. The vessel itself and its cargo will have been insured separately.

“Despite the magnitude of the claim which was largely unsupported, the owners and their insurers have been negotiating in good faith with the SCA. On 12 April, a carefully considered and generous offer was made to the SCA to settle their claim,” the UK Club said on Tuesday.

During the meeting between the shipowners and SCA no consensus was reached. The following day (13th April), SCA immediately filed an application to arrest the vessel and this has been granted by the court.

“We are disappointed by the SCA’s subsequent decision to arrest the vessel today. We are also disappointed at comments by the SCA that the ship will be held in Egypt until compensation is paid, and that her crew will be unable to leave the vessel during this time.”

The UK Club added that SCA did not provide a detailed justification for this ‘extraordinarily large claim.’

As informed, the claim includes a $300 million for a ‘salvage bonus’ and a $300 million claim for ‘loss of reputation’.

This doesn’t include the professional salvor’s claim for their salvage services which owners and their hull underwriters expect to receive separately.

The P&I aspects of the claim are relatively modest, with the exception of the claim for loss of reputation, which is disputed, the club explained.

Reacting to the ship’s arrest, Evergreen said that it was informed by the Japanese shipowners that Ever Given had been officially arrested by the Court in Egypt on April 13, 2021.

“In order to lift the arrest order as soon as possible, Evergreen is urging all concerned parties to facilitate a settlement agreement to be reached. Meanwhile, Evergreen is investigating the scope of such a court order and studying the possibility of the vessel and the cargo on board beingtreated separately,” the company said.

“Evergreen assures to do its utmost to complete the mission entrusted by its customers with all due dispatch and to keep all adverse impacts to minimal level.”

To remind, the 20,000 TEU containership, flagged in Panama, ran aground on March 23 blocking the waterway for hundreds of ships for six days.

The ship was finally refloated and towed to the Great Bitter Lakes region for its technical examination on March 29. Ever Given remains at anchor in the Great Bitter Lakes.

The grounding resulted in no pollution and no reported injuries.

The Suez Canal resumed commercial operations shortly after and was able to clear the backlog in the following few days.

Meanwhile, as the ship undergoes technical survey, local investigators boarded the boxship to talk with the crew on the potential causes of the grounding.

Previous reports indicate that gusting winds and poor visibility caused by a dust storm were the likely causes of the grounding. The owner refuted claims assigning grounding to a blackout due to a loss of power.

Furthermore, the flag state, Panama, has also launched an inquiry into the incident.

The UK Club said that owners have cooperated fully with the SCA throughout their investigation into the cause of the grounding, which is now complete.

As disclosed, the vessel’s Voyage Data Recorder (VDR) data and all other requested information have been provided to the investigators.

“When the grounding occurred, the vessel was fully operational with no defects in her machinery and/or equipment and she was fully manned by a competent and professional master and crew. Navigation was being conducted under the supervision of two SCA pilots, in accordance with the Suez Canal Rules of Navigation,” the insurer insists.

Furthermore, ABS, the vessel’s classification society, completed their surveys on 4 April 2021 and issued a certificate of fitness to allow the vessel to move from Great Bitter Lake to Port Said.

Ever Given is expected to undergo re-inspection in the port before completing her voyage to Rotterdam.

“The UK Club is working with all parties involved. Our priority is the fair and swift resolution of this claim to ensure the release of the vessel and cargo and, more importantly, her crew of 25 who remain on board,” the P&I club pointed out.

The owners plan to continue to negotiate with the SCA.