SLOW STEAMING A transientt fashion or here to stay?

Transcription

1 SLOW STEAMING A transientt fashion or here to stay? Modern box vessels cruising slower than ships in the era of sail... Dynamar B.V. Noorderkade 1G 1823 CJ ALKMAAR The Netherlands Phone: Fax: info@dynamar.com Web:

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3 SLOW STEAMING A transient fashion or here to stay? Dynamar B.V. Noorderkade 1G 1823 CJ ALKMAAR Phone Fax info@dynamar.com Dirk Visser August 2010 All rights reserved. No part of this publication may be reproduced, distributed, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without explicit permission of the publisher. While the information contained in this report is presented in good faith, it frequently involves estimates where no current published data is available. This information, believed to be accurate, can therefore not be guaranteed. The publishers cannot accept liability of any errors or omission.

4 Contents PREFACE... 8 THE BASICS... 9 SLOW STEAMING DRIVERS Introduction Fuel Prices Environmental factors impacting bunker prices Bunker hedging Environment; emissions from shipping The environmental role of IMO Reduction of emissions through Slow Steaming Slow Steaming Categories Availability of Ships Lay-up Scrapping Newbuildings Charter prices Finance THE TECHNICAL SIDE Concerns? No problem! Acceptance by Engine Makers, P&I Clubs and Underwriters Technical appliances Financing the retrofit SHIPS Fuel and alternatives Fast ships of the past Box ships on order and their individual design speed RE-DESIGN OF ROUTES Variable Speeds Inventory of Slow Steaming services and capacity Introduction Conclusions Containers too Slow Steaming Carriers Round-the-World re-invented THE SAVINGS Fuel consumption reduction Differences in portstay; different speeds The costs of lay-up... 73

5 Economy of scale Container costs Estimated savings on a per-service basis The price of extra calls Impact of bunker prices on Slow Steaming viability IMPACT ON SHIPPERS AND THEIR LOGISTICS Schedule Integrity How Slow Steaming impacts logistics The impact on logistics of irregular service Mitigating the consequences SLOW STEAMING QUOTES THE FUTURE OF SLOW STEAMING GLOSSARY LITERATURE LIST AND SOURCES... 94

6 Tables Table 1 - Development of Rotterdam bunker prices per ton for 380 Cst Table 2 - Development of crude (Brent) prices per barrel Table 3 - Crude (Brent)/Bunker prices relation Table 4 - IFO versus MGO price comparisons Table 5 - Low Sulphur time line Table 6 - Shipping Share of Worldwide Emissions Table 7 - Slow Steaming categories; fuel consumption, emissions reductions Table 8 - Idle capacity (monthly average TEU) H Table 9 - Capacity in lay-up by vessel size Table 10 - Scraping by vessel size (over 1,000 TEU) - October H Table 11 - Existing fleet and orderbook effective 1 October Table 12 - Delivery of newbuildings larger than 4,000 TEU by carrier Table 13 - Existing fleet and orderbook effective 30 June Table 14 - New ConTex charter rates per 4,250 TEU vessel per day Table 15 - Reported charter rates for ships between 4,000 and 14,000 TEU Table Financial results Top 25 Container Liner Operators Table 17 - Top 25 Container Liner Operators by capacity as of mid-july Table The world s largest shipowning countries Table 19 - Europe-Far East trade - mainhaul: Westbound Table 20 - Transpacific trade - mainhaul: Eastbound Table 21 - Backbone operations of major carriers Table 22 - Variable speed indeed Table 23 - Full container services between North Europe and the Far East Table 24 - Full container services between the Mediterranean and the Far East Table 25 - Full container services in the Transatlantic trade Table 26 - Full container services between the Mediterranean and North America Table 27 - Full container services between the Far East and North America West Coast Table 28 - Full container services between the Far East and US East Coast via Panama Table 29 - Full container services between Asia and US East Coast via Suez Table 30 - Multitrade and Round-the-World full container services Table 31 - North-South full container services from North Europe Table 32 - North-South full container services from the Mediterranean Table 33 - North-South full container services from the Far East Table 34 - North-South full container services from North America Table 35 - Long haul full container services in Slow Steaming mode Table 36 - Additional ships employed in Slow Steaming operations Table 37 - Additional ships by Slow Steaming category Table 38 - Number of services by Slow Steaming category Table 39 - Slow Steaming carriers Table 40 - Fuel consumption savings for slowed down ships I Table 41 - Fuel consumption savings for slowed down ships II Table 42 - Portstay and sailing speed Table 43 - Economy of Scale Table 44 - Container per diems Table 45 - Per Service Slow Steaming savings Table 46 - Impact of Bunker Prices Table capacity and rates development Table 48 - Schedule reliability (4th Quarter 2009) Table 49 - Per TEU Slow Steaming savings Table 50 - Inventory-related cost aspects Table 51 - Speed distribution of newbuildings... 89

7 Figures Figure 1 - The world is drowning in the costs of oil Figure 2 - Historical ( ) development of bunker prices Figure 3 - SOx Emissions from Ships Figure 4 - CO2 Index Figure 5 - World fleet by deadweight capacity (January 2009) Figure 6 - The world s largest container ships in slow steaming mode Figure 7 - Overview of Incoterms... 85

8 PREFACE Slow Steaming, already promoted by classification society Germanischer Lloyd in 2005, started becoming de rigeur in In the first half of 2008, when oil/bunker prices reached a dramatic peak, around 40 long-haul services deploying an extra vessel (to keep the original frequency) were counted. Since then, bunker prices have fallen and gone up again, both steeply. At the same time, the global economy and therewith the container liner trades have become subject to a severe downturn. The subsequent overcapacity not only fuelled the application of Slow Steaming but, with ships a plenty, also induced the emergence of even slower variations, down to 12 knots. Recovery (albeit considered fragile) was on its way when this publication was going to press in early July The number of container shipping services worldwide in any Slow Steaming mode then surpassed one-hundred slings. Upon going slow, many of those had been rescheduled and sometimes completely overhauled. It can be argued that all ships employed over the normal service requirements would otherwise have been in lay-up. Consequently, if the Slow Steaming strategy persists, the crisis-caused mismatch between (excess) supply and (too low) demand could altogether become repaired earlier than previously expected. Slow Steaming is a multifaceted phenomenon: - On the economic side, the combination of high bunker prices, low charter rates and avoidance of lay-up costs leads to substantial savings for the carriers - The green side in the form of (assumed) reduction of emissions is a topical issue anyway - It is the logistics side, rather the consequences for their long stretched supply chain, which is causing worries to shippers. Longer delivery times are less predictable and increase inventory costs. This should, in part at least, be offset by improved schedule integrity - On the technical side, modern ships may be able to do with just 10% engine load, others require specific precautions, to turbochargers in particular, for which upgrade kits are in the market. An important requirement is the acceptance of insurers to proceed to Slow Steaming with existing vessels. Ultimately, propellers and underwater shapes of ships will have to be redesigned. But will future large box ships really be built for much lower maximum speeds (than today s 25 knots or so)? Talking of the future, there are more question marks. When persistent recovery is seen and the current gap between supply and demand narrows, the Slow Steaming urgency will become (almost) entirely subject to fuel costs. Would that be the moment that distinct Slow, Medium and Fast Steaming services -at different freight rate levels- emerge on a more structural basis than today? The above and other related Slow Steaming issues will be discussed extensively on the next pages. Alkmaar, The Netherlands, July 2010 Dirk Visser Managing Editor Senior Shipping Consultant

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