Shipping is just like the coffee industry – the closer you look, the more complex it seems.
Royal is currently experiencing some delays in shipping, and although delays on imports are not a rare occurrence, wait times and frequency of delays are increasing for some very interesting reasons. The economics of the last few years have led to the current situation, as has the drive for more environmentally friendly (and economically efficient) shipping.
The economic downturn in 2008 caught many people off guard including shipping companies, who had pre-ordered ships based upon trends prior to 2008. Due to these orders, there is currently an oversupply of shipping capacity, which is driving shipping prices down. Lower prices make bigger ships (and fewer ships) an attractive proposition for shipping lines. Consequently, large shipping lines are acquiring smaller companies in order to eliminate shipping capacity, and at the same time, building larger ships to take advantage of the economy of scale those bigger steamships can offer. On the other hand, funding for port infrastructure was withheld during the recession, which leads us into a perfect storm.
These new ships are some of the largest ever built. The first of the Maersk Triple-E class ships, ordered in 2011, is the Mærsk Mc-Kinney Møller. This ship is nearly a quarter mile long (nearly as long as the Empire State Building is tall), can hold 18,270 containers, and is one of the most efficient ships ever built – but only when fully loaded.
These factors cause a few problems for coffee at port. Most ports in the US cannot accommodate Triple-E class ships because their ports are not deep enough, their cranes are not big enough, and their infrastructure is falling behind the advances in the shipping industry.
Another difficult factor is the time it takes to load and unload these ships. More than 18,000 containers takes up a good amount of space, and if each container took one minute to unload, that’s about 38 workdays of unloading time. The world’s fastest port – Jebel Ali in the United Arab Emirates – can move about 2.3 containers per minute; it would still take them 16 full workdays to unload a Triple-E class ship. Even if these containers could be unloaded faster at US ports, there may be no place to put them since trucks can’t be loaded fast enough to take the containers to their next destination, and space at the port is at a premium. In fact, if containers are held at port too long, it can cost $300 per day to keep them there – a fee called demurrage that must be paid even if it isn’t possible to move the container.
And this is only the import side of the equation.
The current Triple-E class ships also take quite some time to load. In the past, many smaller lines would run shipments from ports in coffee producing countries directly to the US. As modern shipping containers were introduced in the 1950s, companies began to consolidate their loads into larger ships. This results in more efficient and economically sound shipments, but longer wait times at port. Some of these larger ships can wait up to a month to be loaded at port before leaving. The Maersk Triple-E class ships can be some of the most efficient ships ever built – when completely full, and running at half speed. Thus it takes longer to fill a ship, and longer to get it over the ocean as well. Meanwhile, the coffee on board only gets older, much to everyone’s disappointment. These longer wait times are fine for dry goods, but food products are dependent on quick turnaround times. Coffee’s delicate flavor can fade quickly in the hot, humid climates of the tropics.
So what can be done about this situation? Are there any positive developments?
Currently, a large group of shipping and trade associations are lobbying the Federal Maritime Commission to prohibit demurrage fees for containers that can’t be accessed due to port congestion. This would help stem unavoidable costs to importers, but at expense to the Port. One view is that the port should focus on reorganization and efficiency; another is that the source of the problem is the large new ships offloading more containers than the port can handle in any situation.
Some ports are reinvesting in their infrastructure as slow-downs continue on the West Coast. When traffic was diverted to ports like Miami, Houston, New Orleans, and Mobile, those ports focused on providing new and updated facilities that could handle the extra volume. We can hope that reinvestment in ports will become a trend across the nation as this situation develops.
Technology is also our friend here; most steamship lines now have websites that are updated automatically with container arrival times and locations, which makes our process much more efficient than it was before.
Our inbound and outbound team is working hard to diversify options for drayage (getting items out of port), and we’re hopeful that everyone along the line can adapt to these new conditions at port. Royal has begun to work with three trucking lines rather than just one in order to avoid overtime charges and increase our capacity to move containers from port. We’re all in the same boat now, and we have to make the best of it!