Demurrage Becoming So Common That Ports Running Out of Room, Flexport Says
After 47,000 stores in the U.S. closed in a week, Flexport says that so many companies can't take shipments arriving at East Coast ports that those ports are now shopping for more warehouse space. Because importing companies' warehouses are either full or closed, they tell the ports they'll pay demurrage charges for the goods to stay there. “The ports are actually worried now they won’t have enough space,” said Chandrakant Kanoria, Flexport's head of network operations, during a webinar March 31. He said Savannah is hoping to almost double its warehouse space, and the New York and New Jersey terminals are talking with warehouse providers to try to make room, as well. There are problems in the warehouse logistics ecosystem, as well, because Amazon warehouses stopped accepting any goods other than essentials.
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“A lot of these customers really don’t have place to store their goods,” Kanoria said, since they expected to send them to Amazon warehouses. And, he said, importers learn that third-party logistics warehouses are shutting down after the goods are already on the water. Warehouses are more full not just because stores have closed, and so they're not refreshing inventory, but also because third-party logistics providers don't know if companies will be able to pay them for their services, so they're holding goods as collateral.
Kanoria said that shipments by ocean moving in April “look almost normal” as Chinese factories come back online. He said Foxconn, which makes iPhones, is at full seasonal staffing, and that automotive operations are almost at 100% in China. But he said that May has seen many order cancelations.
Meanwhile, goods that need to arrive quickly are facing delays and cost increases because of the lack of air cargo space and limitations at terminals because workers don't want to risk their lives to come to work, the webinar speakers said. Silvio Strathausen, senior director of airfreight for the Americas for Flexport, said that sending goods by air from Hong Kong is costing as much as $10/kilo. He shared a picture of a Lufthansa plane with boxes of protective equipment across every seat and in every aisle. He said “ghost freighters,” or repurposed passenger planes sending cargo, aren't just using the baggage holds to send goods, but utilizing the space in the cabins as well.
Luxembourg's airport, a huge freighter hub for Europe, has gotten so backed up that skids of goods are sitting on the tarmac, unable to get out, as fewer workers show up for their shifts. Some flights are shifting to Frankfurt or Amsterdam as a result. Strathausen said that in Chicago, there are six to eight hours of waiting time for truckers looking to pick up air cargo, and that Los Angeles has about the same wait time. But exports going by air are down sharply. He said that United Airlines announced that morning that it would combine exports and imports in one building at the Newark airport.