Report: Demurrage and detention charges to soar in India as peak shipping season approaches

Fig 1: Accumulative D&D fees across shipping lines for key IST + SE Asia ports: 2023

India’s ports, such as Jawaharlal Nehru Port Trust (JNPT) in Mumbai and Mundra Port in Gujarat, have witnessed rapid development driven by India’s growing economy and expanding global trade. These ports have made impressive strides in efficiency, connectivity, and technology adoption.

With India serving as a major manufacturing hub and an attractive market for various industries, the demand for containerized cargo movements has surged. Consequently, Indian ports have faced challenges such as congestion and longer container storage times, potentially leading to demurrage and detention fees for importers and exporters.

Vietnam’s ports, including Ho Chi Minh City and Hai Phong, have also experienced substantial growth and development. Vietnam’s strategic location in Southeast Asia, coupled with its robust manufacturing sector, has attracted significant foreign investment and fueled its export-oriented industries. As a result, the volume of containerized trade flowing through Vietnamese ports has increased, resulting in potential issues like congestion and extended container storage periods, which can incur demurrage and detention charges.

“India and Vietnam have emerged as key players in international trade, with their ports witnessing impressive growth,” said Christian Roeloffs, Co-Founder and CEO, Container xChange. “As these countries continue to strengthen their positions, it is crucial for stakeholders to stay vigilant and make informed decisions regarding port selection, carrier partnerships, and supply chain optimization strategies. By proactively monitoring the evolving landscape, businesses can navigate potential challenges associated with demurrage and detention fees while capitalizing on the opportunities presented by these dynamic emerging markets.”, Roeloffs added.

Globally, average Demurrage and Detention charges experience a year-on-year decline of 25% in 2023, with a significant 14% decrease compared to the rates in 2020.

However, there are still 11 ports where Demurrage and Detention fees remain higher as compared to 2020. These ports include Antwerp, Jebel Ali, Ningbo, Port Kelang, Rotterdam, Shenzen, Singapore, Tianjin, Xiamen, Hong Kong, and Guangzhou. 

Fig 2: D&D fees over the last 4 years across shipping lines for key ports

In an exclusive webinar held in July’23, a powerful panel of speakers from Drewry, S&P Global, and Container xChange discussed the impact of these charges on shippers worldwide amidst the changing dynamics of demand and supply for containers on a global scale.

“There are multiple factors contributing to the inability of these ports to return to normalcy. The significant increase in energy prices, coupled with higher labour costs, and escalating land expenses and port fees, have all played a part,” stated Chantal McRoberts, Director, DSCA Advisory, Drewry. 

“Furthermore, the implementation of new regulations, particularly those focused on green energy in EU ports, has added to the financial burden. Additionally, the introduction of rules requiring individualized shipment customs clearance, no longer consolidated under one bill of lading, has proven to be time-consuming, as seen in the case of Rotterdam.”, added McRoberts.

Commenting on expectations from the upcoming peak season, Christian said, “Bleak expectations for a significant peak season with a substantial increase in volumes, prices, and the potential for congestion and associated charges are evident amongst our customers. However, a key factor in determining whether you must pay detention charges is the efficiency of your processes and monitoring. How quickly can you act and notify your agent or trucker if something goes wrong, such as a container being forgotten at the terminal. Timely communication is crucial in avoiding unnecessary charges. This holds true in any market situation.”

“Demurrage and detention should ideally be a free market. The number of free days and the charges should be negotiable between parties and carriers, just like any other free market scenario. However, perhaps what needs regulation is clarity on when the clock starts. Establishing clear time stamps and determining who bears the burden of proof in cases of congestion, where a container cannot be picked up, would be crucial. Payment should only commence once the terminal is able to release the container. These aspects warrant attention and potential regulation.”, he added. 

Shipping Industry Facing New D&D Challenges as U.S Regulators Prepare for Decisions

Demurrage and Detention (D&D) rates in the shipping industry have reached unprecedented levels, especially with the Federal Maritime Commission (FMC) set to make crucial decisions. 

Christian commented on the new regulations, “The pending U.S foreign trade regulator’s decisions on new shipping line regulations “will significantly impact D&D practices” and could even reshape the landscape, bringing both challenges and opportunities.”

The D&D annual report highlights Drewry’s perspective that the FMC must strike a balance between the conflicting needs of cargo owners and shipping lines. Before the pandemic, shipping lines prioritized revenue generation, considering factors like cargo weight and equipment availability when making occupancy decisions. Regulating these market factors presents challenges for the FMC, especially since a substantial portion of US exports fall into low-income and heavyweight categories.

In April 2023, even before the official FMC decision, major carriers like Maersk, MSC, HMM, and Hapag-Lloyd contemplated waiving D&D surcharges on weekends and holidays when terminals are closed. Additionally, the Port of Houston stopped charging import container storage fees during closed terminal gates but raised daily rates in specific positions by 32% starting May 1. 

Operational Challenges Likely to Impact D&D Charges Amid Uncertain Demand Recovery

Commenting on the shipping forecast for the upcoming holiday season, Eric Johnson Senior Editor, Technology JOC, S&P Global Market Intelligence, said, “In a very recent conversation with a Non-Vessel Operating Common Carrier (NVOCC) about their thoughts on a major trans-Pacific shipment, we came to know that they don’t expect the demand to recover until after the Lunar New Year next year. This matches what we’re hearing in general.”

“So, if we assume that’s the case, the focus shifts to operational issues at important ports that we need to consider avoiding delays or additional charges once the container is out of the terminal. It becomes more about specific factors in the field that could cause delays in returning containers on time, rather than relying on a big overall economic improvement to drive demand. With each passing day, it seems less likely that there will be a quick demand recovery.” 

U.S. Ports Rank Highest in average Demurrage and Detention (D&D) charges

Out of all the ports worldwide, those in North America stand out as the most expensive when it comes to Demurrage and Detention (D&D) charges. Leading this list of costly ports are New York, Oakland, and Los Angeles, taking the top three spots. 

Fig 3: Accumulative D&D fees across shipping lines for North American ports: 2023

Even though these ports take the top 7 spots in our ranking table, the overall average charge has at least decreased by 25% in 2023 and stands at a value of $2008 per container per day (coming down from $2692 in 2022). The late fees at the twin ports of Los Angeles and Long Beach surpassed by another western port, Oakland. 

Fig 4: D&D fees over the last 4 years across shipping lines for North American ports