Source: Maritime Executive
June 12th 2015
Nor-Shipping saw a number of innovations for improving the energy efficiency of container ship designs, but with low fuel prices and the latest spending spree on mega-container ships, the industry is undergoing a shift that may see a stall in the benefits shipowners will gain for their efficiency dollar.
“The difference between elderly ships without the latest energy efficiency features and the new ships is still definitely there, but the effects, in dollars, have become less,” says Dirk Visser, Senior Shipping Consultant at consultants Dynamar B.V. of the Netherlands.
The second half of 2014 saw a big drop in fuel prices, enough for many to anticipate a lessening of slow steaming. As fuel prices drop, a point is reached where it might be advantageous to remove a ship from a loop and speed up the rest. Some analysts put this point at a fuel price of $350 for the Far-East to Europe trade and around $400 for the Transpacific trade. There is no unambiguous assessment of the point, as it depends on many factors.
There are overheads involved in taking a ship out so fuel prices need remain low for a reasonable length of time before it is worth making the change. It may be better to keep ships in slow loops until they are disposed of.
So, the anticipated increase in vessel speed hasn’t really materialized. “Slow steaming is here to stay,” says Visser. “The industry has shaped its procedures to slow steaming (and so have shippers). Some vessels have been sailing a little bit faster. If they lose time in one port, they tend to make it up by steaming a bit faster to the next port. However, we see that the services between Europe and the Far East, for example, are still being run with the same number of ships as they did before the oil prices started coming down.”
Freight rates remain low as shipping companies struggle in a market characterized by vessel oversupply and deliveries of ultra-large ships. “Freight rates have come down tremendously over the years, and that is driving the move to larger ship sizes that tend to reduce slot costs,” says Visser. Under the present market (low cargo offerings versus overcapacity), the lower slot costs of each yet larger vessel are passed on straight to the shipper in the form of yet a lower rate, barely covering fuel costs.” This turns the multimillion investment in an 18,000 TEU ship into an investment into lower rates... and ultimately worse...”
The world cellular container ship fleet grew by 6.3 percent during 2014 to reach 18.37 million TEU as at 1 January 2015, according to Alphaliner figures. The 1.1 million TEU growth in capacity was driven by the delivery of newbuildings totalling 1.47 million TEU, up from the previous year’s 1.38 million TEU.
Larger vessels are having an effect on port operations, says Visser. This has generated debate in the industry on how much the increase in average vessel size and the rise of multi-partner shipping alliances can be cited as causes of congestion. The World Shipping Council recently released a report stating that port congestion can and does arise from multiple causes. “Closer dialogue and joint problem solving is what is needed to address those issues, and solutions will not be found by pointing fingers. Every participant in the supply chain will have a role to play.”
Visser agrees there is no simple answer. Improved vessel efficiency has helped shipping companies lower operating costs, but this has been partially negated this year and last year by one-off port congestion in some areas including the U.S. West Coast and Manilla. Waiting times lengthen voyage time and lead to the need to use more ships.
So, despite the best intentions of an industry looking to improve its operational performance and its environmental footprint, things don’t always work out as planned, he says.