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FMC’s Bentzel eyes broad changes to free time
FMC Commissioner Carl Bentzel is set to propose major changes to detention and demurrage billing. He is specifically targeting free time granted within service contracts in an effort to reduce port bottlenecks and ship backlogs.
Under the current system, free time is determined through negotiations guided by market conditions and shippers’ individual priorities to reduce costs. That needs to change, according to Bentzel. He says that container lines can’t offer customers more free time than the terminal allows.
Bentzel’s proposal could be incorporated into individual components for the five-member FMC to vote on. On the other hand, commissioners could vote on whether to implement the entire MTDI initiative. That scenario still remains unclear.
Benztel aims to implement a rule that would only allow asset owners to bill for detention and demurrage. That would strike at the heart of the disconnect between individual and collective supply chain priorities.
The Port of New York and New Jersey recently conducted a study. According to the study, it benefits shippers financially to keep containers on the terminals for up to 12 days. However, the port would see major gridlock if all shippers used that time. The port said, “The cost to leave containers at ports and on terminals must become financially inconvenient for cargo owners and shippers that it motivates the pick-up of cargo.”
New container ship deliveries to exacerbate overcapacity
A massive increase in new ship deliveries will outstrip weak demand growth in 2023. Additionally, the impact of new ship efficiency and carbon intensity regulations from the International Maritime Organization on vessel supply remains unclear.
Ship owners and operators will take delivery of new vessels with a combined capacity of roughly 2.6 million TEU in 2023. That is an 11.3% increase from the current global fleet capacity. The added capacity significantly outweighs the projected 1.9% growth in demand.
The IMO’s Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) rules, both of which come into effect January 1st, will likely absorb some of that excess capacity. However, the market will be heavily oversupplied.
Demand and rates on the major east-west trades are softening dramatically. Therefore, carriers will once again be urgently looking for freight to fill their growing fleets. This is good news for shippers after two years of capacity shortages, poor schedule reliability, and sky-high rates.
However, carriers might again face persistent overcapacity that resulted in major financial losses and widespread consolidation in the decade prior to the pandemic.
About O’Neill Logistics
O’Neill Logistics is a leading third party logistics provider. We operate in California, Savannah, New Jersey. We service many verticals including Garments, Fashion Accessories, Footwear, Furniture, Home Goods, & Electronics. Additionally, we offer omni-channel distribution and all value-added services. Lastly, we focus on retail “drop shipment” fulfillment and item-level fulfillment services with same-day service offerings.
O’Neill Logistics has over 2 million square feet of state-of-the-art facilities. Additionally, we offer dray services to support the warehouses and provide distribution to retailers and wholesalers. Our reliable 3PL platform combines sophisticated technology with robust, flexible processing designs and speed-to-market gateway models.
Lastly, we aim to simplify your supply chain. We deliver exceptional service and can optimize your operational performance. Therefore, we aim to build, protect and foster strong business partnerships.
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