Tag Archives: slow steaming

SHIPPING: BIMCO’s Slow Steaming Clause gets final polish

A new time charter clause for slow and super slow steaming will be published shortly by BIMCO. The clause was adopted by the Documentary Committee in November subject to the drafting team conducting a pre-publication review of some of the key features of the clause. The team met in London on 30 November and made a number of improvements to the layout and structure of the clause. The clause will now be circulated to all Documentary Committee members before being published by Special Circular along with explanatory notes later this month.

The Clause deals with a number of potentially difficult technical and legal issues as it is designed to cover all types of ships and trades from the container to the bulk sector. The technical aspects have been resolved and clarified with the assistance of engine designers Wartsila and MAN Diesel. Two types of slow steaming are contemplated by the Clause: Slow steaming down to a level which would not require the owners to make any modifications to the engine – basically the cut-out point for the engines auxiliary blowers; and, should the owners and charterers agree that the vessel can slow steam to a greater degree, then an additional optional provision is given to deal with “ultra” slow steaming – which will apply only in a few cases.

In all cases the master retains the right to refuse to slow steam as the right of the charterers to order slow steaming is subject to the obligations of the master in respect of the safety of the vessel, crew and cargo. The Clause also distinguishes between liner and tramp trades to the extent that in scheduled liner trades due despatch obligations do not generally apply under bills of lading – therefore the final two provisions of the Clause which deal with due despatch obligations do not apply in the liner trades.

Having completed the time charter Slow Steaming Clause, the Working Group has now turned its attention to voyage charters and is developing a virtual arrival clause. A first draft should be ready to be reviewed by the Documentary Committee in April next year.

Source: https://www.bimco.org/News/2011/12/01_Slow_Steaming_Clause.aspx

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MARITIME | Maersk says slow steaming is a ‘win-win-win situation’

Line sets out case for reduced ship speeds as container trades are recovering

SLOW steaming is here to stay,Maersk Line has told its customers,writes Janet Porter [for LLOYD’S LIST].

In a message on its website, the Danish carrier has set out the case for reduced ship speeds at a time when the container trades are recovering but prospects for the global economy remain murky.

As far as Maersk is concerned, slow steaming “remains a win-win-win situation”, says chief executive Eivind Kolding.

“It is better for our customers, better for the environment and better for our business.”

A ship that reduces speed by 20% will use 40% less fuel, thereby reducing CO2 emissions correspondingly. To maintain the same service frequency and compensate for a lower average speed, one to two extra vessels are added per string.

“Despite the extra vessels, slow steaming has over the last one and a half years reduced Maersk Line’s CO2 emissions by about 7% per container moved,” the line said.

Furthermore, schedule reliability has improved since vessels are able to continuously adjust speed in order to deliver the cargo on time.

“We believe we serve our customers best by steadily improving schedule reliability, by keeping fuel costs down and by continuing to improve on our carbon footprint,” said Mr Kolding. “The cost savings will enable us to further invest in innovation and improved service, for example with more efficiency at terminals.”

Although some customers have complained about longer inventory time — in essence with Maersk Line ships as floating warehouses — analysis shows that slow steaming also helps prevent bottlenecks at terminals.

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SHIPPING | Slow steam: Change of pace may be best for all

Steve Matthews | LLOYD’S LIST

IT HAS been widely commented recently that containership slow steaming is likely to remain in place for the foreseeable future. This viewpoint is predicated on the basis of high fuel costs persisting together with an underlying surplus of shipboard container capacity, with the bonus of enabling container lines to claim credit for reducing greenhouse gas emissions.

Worries that permanent slow steaming could damage engines designed to operate at higher power were allayed by various tests and adjustments in co-operation with engine manufacturers.

Despite container markets recovering this year and idle containerships going back into service, with idle capacity falling to about 2% of the total fleet, most lines are still operating services at reduced speeds.

Maersk Line chief operating officer Morten Engelstoft was recently reported saying that slow steaming is a permanent shift across global container trades and that even when markets fully recover there will not be a widespread resumption of faster speeds.

Ron Widdows, NOL group president and chief executive, commented that in addition to the direct savings in fuel costs, slow steaming gives more flexibility in scheduling so that other cost savings become possible, such as in terminal handling and feeder costs. These remarks beg the question as to why they did not do it before the market crashed.

Slow steaming avoids lay-up costs while generating fuel savings across the fleet. The aggregate reduction in capacity supply from slow steaming also helps support freight rates. Against this, operators must pay additional costs of deploying extra vessels to maintain sailing frequencies. For example, on Asia- Europe trades slower speeds have resulted in most service strings increasing vessel deployments from eight to nine or 10.

According to a report by Alphaliner at the end of May, the widespread adoption of slow steaming resulted in an additional about 100 ships and 580,000 teu being deployed by lines to maintain weekly schedules. Alphaliner estimated that a large majority, about 78% of service strings in the Asia-Europe trade and over half in the transpacific, were operating at slow speeds. On other trades adoption of slow steaming has not been so prevalent, but appeared to be increasing. On the Asia-Europe trade, where super post-panamax tonnage of more than 10,000 teu is deployed, average round-trip voyages increased from about eight weeks to 10.

A rough calculation based on super post-panamax ships deployed in the Asia-Europe trade suggests that compared with operating at a full speed of 25 knots there are clear savings for lines from slow steaming while fuel costs are at their present level or higher, but as fuel prices fall the benefits reduce sharply. If fuel prices were to fall much below $400/tonne and towards $300/tonne, the savings from lower fuel prices at full speed overtake the declining savings achieved from operating at slower speeds due to the additional costs of deploying more ships (see top graph). If some form of carbon pricing was introduced, the extra cost could significantly alter the equation in favour of slow steaming at lower fuel prices.

Bunker fuel prices rose briefly to over $700/tonne in mid-2008 before the financial crisis hit and then slumped to just over $200/tonne by the beginning of 2009. In recent months, prices have settled in the $400-450/tonne range. According to Paul Dowell, head of research at broker Howe Robinson, his calculations suggest that at a fuel cost of up to about $600/tonne and current charter rates it makes sense to operate a 10-ship string on the Asia-Europe trade. It would require even higher fuel costs and another collapse in charter rates to justify slowing further and adding an eleventh vessel.

He also pointed out that the benefits of slow steaming are greatest on longer routes such as Asia-Europe and are more limited on shorter trades, so that most transpacific services still deploy five vessels. “Slow steaming is here to stay but it is finite and close to running out of momentum,” he commented.

As global economic recovery continues and demand is restored will container lines keep speeds down and is it cost effective to do so?

At present, with bunker prices in the $400-450 per tonne range, an underlying surplus capacity and new super post-panamax ships still being delivered, the economic benefits from maintaining a slow steaming policy seem clear. Indeed, the cost savings are a major contributor to the significantly improved financial performances by container lines this year.

But what happens when fuel prices change, demand returns to historic growth levels, freight rates are restored and capacity supply growth eases?

A factor easily overlooked in this decision is the attitude of shippers. During the recession, when demand for their goods slumped, most shippers were content to bear additional inventory costs of keeping goods onboard ships, because it was often cheaper than storing them ashore.

But as supply chains crank back up to full speed and just in time delivery returns as a key strategy, shippers might be less accommodating for their goods taking longer to reach their destination and bearing the associated costs.

In fact, shippers argue that they take a double whammy because as well as the extra inventory costs the absorption of capacity by slow steaming tends to increase freight rates.

A recent study by Thomas Eefsen and Bo Cerup-Simonsen presented at the International Association of Maritime Economists annual conference in Portugal last month shed light on the wider economic impact of slow steaming. The paper ‘Speed, carbon emissions and supply chain in container shipping’ was primarily focused on greenhouse gas emissions, but the study revealed some interesting general findings relevant to slow steaming containerships.

The study used a supply chain cost model to analyse shipping and inventory costs of slow steaming as well as associated carbon emissions. It was based on a voyage by a 6,600 teu containership from Ningbo to Bremerhaven. Although the voyage used for the study was in 2008, before slow steaming was introduced in practice, the basic analysis remains valid.

For the 6,600 teu ship a reduction in speed from 24 knots to 20 knots cut the propulsive power requirement to 55%. This ratio of speed to fuel consumption applies more generally. For shipowners there is a relatively simple trade-off between speed and costs.

However, shippers face a different trade-off. Lower speed means higher in-‐transit inventory costs and higher uncertainty on forecasts. Previous studies have shown that transit time is one of the most important factors for shippers in choosing transportation, along with reliability and freight rates.

The cost model includes direct shipping costs (cost per container), in-transit shipping costs (capital costs of goods in transit including interest and depreciation), ordering costs per unit and inventory carrying costs (interest and depreciation of the receiver’s safety stock).

Transportation costs comprise capital, operating and voyage costs. Assuming a bunker price of $480/tonne and goods valued at $27,331/teu, transportation costs for this voyage were $1,433/teu.

Significantly, the cost model showed that 52% of the total transport costs are due to shippers’ inventory capital costs, with bunker costs accounting for about 26% of the total. However, for the shipowner, fuel costs account for about 56% of transport costs — giving shipowners a clear incentive to reduce speed.

But when speed is reduced total transport costs increase due to the higher capital costs of the cargo in transit, which exceed the savings on fuel. In the example, reducing speed from 24 knots to 17 knots cuts fuel consumption by 56% but transit time increases by about 10 days and total transport costs per teu increase by 9%. Shipping costs per container are reduced by 16% but inventory costs increase by 32%. Reducing speed only to about 20 knots leaves the two more or less cancelling each other out so that total transport costs are almost unchanged.

Writing in Shippers Voice earlier this year, Jean-Louis Cambon of Michelin gave a practical expression of shippers’ trade-off regarding slow steaming. He said that on the Asia-Europe trade, slowing slightly, adding a week to the round-trip voyage time and therefore about 3.5 days to a one-way transit was generally acceptable and could lead to benefits from better reliability. But longer transit times would increase shippers’ costs more significantly due to higher inventory costs. He suggested that shippers should evaluate the impact of each extra day in transit time due to slow steaming in terms of the carrier’s cost saving and the shipper’s increased inventory costs and see where the benefits fall.

Slow steaming currently appears to be a no-brainer for containership operators, while shippers seem willing to accept slightly longer transit times and, as the study suggests, the overall costs of modestly slower speeds are roughly neutral. But super-slow steaming is more problematic and is a harder sell to shippers who bear most of the additional costs.

The days of full speed ahead may not return for the foreseeable future but as markets recover, intermediate speeds may prove the most economic for everyone.

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CONTAINER CRISIS | Laid-up boxship fleet shrinks

From TRADEWINDS.NO

Laid-up capacity has fallen to 8.9% of the global fleet having been stuck above one tenth for much of last year.

Alphaliner says continued slow steaming and new services have led to just 1.18m teu remaining in lay-up, down from 1.22m teu two weeks ago.

The Idle boxship tally reached a record high of 11.5% at the start of this year but has been steadily reducing more recently.

Alphaliner believes the decline will continue in April as more vessels are placed into new services between Asia and Europe.

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Is fast steaming irrational?

Thanks to a tweet from @gCaptain, I recently came across an article from the Financial Times about the mothballing of the ‘Maersk B-class’ ships, the fastest container vessels in the world.

Curious as I am, I had to google and wikipede around, and I found a quite interesting feature from The Buteman as well as more information from the Wikipedia on the Maersk Boston, the first of the seven ships that belong to the class.

Here is a sample of what I read on The Buteman:

“These particular ships [the B-class ships] were ordered when the world economy was in really good shape, but they are not very efficient – they are too small, and they are built for speed, and they use a lot of fuel.

On the bridge of the ‘Beaumont’, Maersk’s fleet superintendent Stewart Kerr explains that the B class was built in Germany for the specific purpose of taking cargo by high speed from China to the USA. Each was designed to have a service speed of 29 knots ahead (and 19½ knots astern!), though the Boston, the first of the class, reached a remarkable 32½ knots during trials.

The vessel’s main engine produces a power output equivalent to 135 McLaren Formula One racing cars, and boasts 12 cylinders, each capable of running at 102 revolutions per minute (rpm) – all powering a directly-driven propeller six and a half metres in diameter and weighing 82 tonnes, itself capable of providing 17 knots of speed at a rate of 55rpm.

But running ships at that kind of speed requires an awful lot of fuel, so when the recession began to bite in the autumn of 2007, Maersk’s search for economies quickly fell upon the B class. In fact, they have never operated on the route, or at the service speed, for which they were intended.

“The price of oil at one point rocketed to $700 per tonne,” Stewart continues, “and these ships will burn three hundred tonnes of fuel a day at full speed, which just wasn’t viable.

(…) even though there is more life here [at the engine room] than anywhere else on the laid up ship, all of that oomph, and all of that human expertise, is not designed to be lying stationary in a loch on Scotland’s west coast.

But the future, it seems, does not belong to fast shipping, even though the world’s economy recovers sooner than expected. Carriers and owners learnt that speed is a powerful tool to mitigate the damage caused on freight rates by the imbalance between supply and demand.

If slow steaming is really here to stay — and the evidence affirms that it is –, the B-class are unlikely to come back to the oceans in their present configuration. And, at any rate, their history is a stunning reminder of how irrational shipping was in the last few years.

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