15-06-2018

Container giants MSC, Maersk eye slow steaming to cut costs amid rising fuel prices

Slow steaming is to become a more prominent feature on some routes for container shippers as industry leaders Mediterranean Shipping Company (MSC) and Maersk look to cut costs and improve reliability, the companies confirmed Wednesday.

“The cost of fuel and the advantages of reducing related air emissions into the environment are among the factors behind this,” a spokesman for MSC said.

“The initiative is driven by a need to become more reliable and punctual, which is an issue facing the whole industry,” the spokesman added.

Bunker costs for June are higher than they were at the start of the year and have been rising strongly since March, the S&P Global Platts’ North Asia to North continent IFO380 average cost assessment, which includes bunker fuel costs at Colombo, Gibraltar, Rotterdam and Singapore, showed.

NORTH ASIA TO NORTH CONTINENT IFO380 AVERAGE COST ($/MT)

Jan 394.00

Feb 380.50

Mar 378.00

Apr 399.50

May 442.00

Jun* 450.50

* month to date

Source: Platts

By going slower vessels can better adhere to more realistic schedules and avoid congestion at ports when they stop to bunker. “The schedule is often impacted by port congestion and once they are out of sync they have to move ships much faster, using more fuel to catch up,” he said.

The same thoughts have occurred to Maersk, which is part of the 2M Alliance with MSC.

“The reliability in the industry and for Maersk Line is lower than we would want it to be and there are many levers a shipping company can pull to increase punctuality and efficiency,” the company said in a statement.

“These include the removal of port calls, the reduction of speed as well as adding ships to a service. We are constantly looking for ways to improve our network, making it more efficient and customer-oriented,” Maersk said.

By slow steaming, bunker buyers have said they can push vessels further to reach even cheaper and more strategic bunkering locations, rather than having to stop at the most convenient location in terms of logistics. Barge fees, calling costs and port charges can contribute to hikes in prices and make owners selective about the economics of bunkering.

Slow steaming is likely to be adopted by those who do not upgrade their fleet or invest in scrubber technology, industry participants have said. This will add time to voyages and alter the timeliness of delivery schedules.

However, owners who have upgraded their fleet to incorporate new and more efficient vessels are likely to lead the competition in terms of fuel economics and savings.

Cargo volume allocations are increasing to the mid 90%s and beyond from around levels of about 85% for some, for June and July, according to sources. However, a few carriers are not as full as hoped and this has dampened box rates in the second half June. The new alliance structures, such as the 2M Alliance, are proving to be unpredictable in their cargo loadings with some being delayed at source or at the arrival port.

This is causing some difficulties for shippers and freight forwarders as they seek to manage the overall supply chain.

Increasing capacity is leading to difficulties in ships reaching their full loading capacities. Some carriers are introducing their newbuilds into their schedules which could lead to lower than anticipated cargo allocation percentages.

Slow steaming may help reduce the impact of this capacity increase as well as alleviate the port issues but could further frustrate shippers, when added to the Emergency Bunker Surcharges that some carriers are implementing, sources said.

Source: Platts

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