Ports left choking on empties
Alex Hughes reports on strategies to reduce empty container backlogs that clog up the quay
Empty containers are an annoying fact of life for many container terminals. While they undoubtedly generate much needed revenue, they can also take up valuable stacking space, as DP World Southampton recently found out to its cost.
In the autumn of 2018, the DP World terminal at the Port of Southampton had to overcome the challenge of accommodating a larger-than-usual number of empty containers. Aart Hille Ris Lambers, DP World's UK commercial director, explains that many of its shipping line customers had been over their empty allowance, resulting in the terminal's empties park being full, with excess empties overflowing into the regular stack. This, in turn, blocked space for normal import and export boxes.
“Empty containers were only one factor that contributed to our stack levels getting very high in early September,” says Mr Lambers. “The normal flow of empties at the time was also disrupted due to lines not shipping out enough empties while a higher than normal number of empties were returning to the terminal.”
This latter problem was partly the result of normal pre-Christmas peak season flows and partly because UK inland depots were full, meaning all empties were being returned to the port without delay.
“In itself, the empties would not have been a problem. However, this was combined with numerous delayed vessels, which caused a much larger-than-normal number of imports to be discharged within the first week of September, and that on top of some unexpectedly large transhipment volumes from the ocean carriers trying to bypass ports for schedule recovery,” he explains.
To make matters worse, the ongoing national shortage of haulage drivers in the UK became very clear shortly after the August bank holiday weekend, causing imports to clear the Southampton terminal more slowly than normal.
“After the August bank holiday, import dwell times went up by 50% meaning we were keeping 50% more import containers than we normally do during our peak season,” says Mr Lambers.
As it is, the terminal has contractual arrangements in place with ocean carriers that already disincentivise them from keeping empty containers in the terminal for extended periods. However, sometimes even this is not enough to ensure timely shipment of empties as the lines need to balance the requirements of various ports in their rotation.
There are other things that terminals in this situation can do to ease the problem. In the case of Southampton, DP World extended its landside operations to seven days a week until the end of October without additional charges to ensure imports could be taken out.
“We continue to ask lines to ship out as many empties as possible to reduce the empty stock in the terminal and, in the last few weeks in September, that was very successful,” he says, adding, “we also asked lines to temporarily stop using Southampton to tranship empties from the US to Asia.”
Lines were additionally being asked to consult with the terminal before discharging cargo for other ports to help schedule their recovery.
“We temporarily reduced the so-called 'export-receiving window' from the usual 10 days to 7 days to deter export boxes being brought into the terminal too far in advance of a vessel's arrival,” he says.
“The actions and steps we took to manage our stack levels were proven to be effective,” he reports, with shipping lines continuing to co-operate to alleviate the problem. By mid-October, the Southampton terminal had lower stack levels and the weekend opening hours and export receiving window had returned to normal.
While empty container storage is a revenue generator for terminals, Mr Lambers notes that “good service levels are more important than storage revenues for the long term sustainability of our business. Too many empties in our terminal is not good as it affects the operations of our yard and thereby our landside and ship side service levels.”
Although Finnish container terminal operator Steveco doesn't normally face the same problems as Southampton, its senior vice president of sales and marketing, Tapio Mattila, shares many of Mr Lambers' concerns. Mr Mattila has been with Steveco for more than 20 years and is well versed in the box market in Eastern Scandinavia.
Empty container storage, he says, comes down to one problem: a lack of space in many terminals. While a build-up of empties is not a problem at Steveco – the average stay for an empty container at one of Steveco's terminals normally varies between one and two weeks – Mr Mattila understands why it happens.
“Naturally, we do charge for storing empty containers, but it is not good business. For the shipping lines, positioning of empties is expensive, too, and this is the reason why they want terminals to support them in storing containers, or even give them free storage.”
While Mr Mattila believes that charges for storing empty boxes are generally too low, he is not convinced that higher prices will disincentivise shipping lines from storing them for long periods. While the terminal might boost revenues from some lines, hiking prices would drive away some of this business and ports would then run the risk of not having enough empties available. Worst-case, higher charges for empty storage might even prompt exporters to potentially change routing.
He feels that neither port authorities nor landlords give sufficient support to proper empty storage planning. “This is not a good strategy, because empties are there to be available for a port's own export traffic.”
When shipping lines do deliver empties to a Steveco terminal they do so as normal import-export operations, rather than as transhipment moves. “Transhipped empties would definitely become a bigger headache, because then we would need to store them at a straddle stack, which means running out of space very quickly,” says Mr Mattila. “To get around that would involve more costly double handling.”
If the wider problem with empty boxes clogging up terminals is not resolved, he suggests that freight rates will go up because an imbalance is ultimately very expensive. Routings may also need to be changed to cut out as much empty container movement as possible.
“Shipping lines are aware of the acute nature of the problem and they are working with terminal operators to try and resolve the problem,” he says. “However, in Steveco's market, while I don't think empty container movements will increase, they will not go away altogether.”
THE TWO-PORT SOLUTION
DP World does have one major advantage over competitors in the UK when it comes to managing container storage: it benefits from two large terminals in the south of the UK.
In addition to Southampton, it also manages the London Gateway terminal on the River Thames, near London.
DP World’s Aart Hille Ris Lambers points out that while the recent spike in empties clogged up Southampton, London Gateway continued to operate normally.
“DP World is the only operator in the UK to have two deep-water facilities that can provide operational back up for each other; de-risking cargo owners' supply chains,” he says.
As an example of this, the MOL Truth, which operates as part of THE Alliance's FE2 service, called at DP World London Gateway on October 2 to discharge imports rather than add them to a growing stack of boxes at Southampton. This vessel then called at DP World Southampton to collect export containers.
The strategy, which worked successfully, was taken after consultation with THE Alliance and the haulage industry, and demonstrated how the flexibility of having container handling operations in more than one port in a particular country can be used to support the flow of containers and supply chains.
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