News

Slow Steaming to Continue Despite Low Bunker Prices

Source: Drewry

February 10th 2016

Container lines will continue slow steaming and move toward larger ships despite current low bunker prices undermining the economic case for doing so, according to Drewry Maritime Advisors.

It was looking at whether the practice of slow steaming and seeking economics of scale – two of the sector’s responses to a period of high fuel prices – is still offering cost advantages as bunker prices have retreated from levels of $600/mt to the current $100-$150/mt range.

Drewry modelled scenarios for an illustrative Asia to northern Europe loop, using 11, 10 or 9 ships to provide a weekly service with bunker prices at $100, $300 and $600/mt.

At a bunker price of $100/mt “there are clear cost savings from increasing service speed, and reducing the number of vessels per loop,” said Drewry.

Despite this, it said container liners were unlikely to speed up loops on the main East/West trades because it takes time to change carefully planned networks and sailing schedules which are based on their present slow steaming speeds.

Moreover, they are nervous about making radical changes in case prices go back up, and it would exacerbate the current excess supply of tonnage.

As for the drive to larger ships, Drewry said: “Operationally, the savings will still be made, irrespective of the bunker price. However the value of the bunker savings will diminish at lower bunker prices.”

A comparison of vessel sizes down to Panamax vessels of around 4,000 TEU found that with bunker prices at $100/mt, at current charter rates, these vessels can compete on costs with vessels twice their size on trades that cannot sustain the largest vessels.

“A continuation of the current low bunker prices is not going to change the drive of the lines to larger vessel sizes in pursuit of economies of scale, but it does represent a stay of execution for the smaller Panamax ships,” Drewry said.

“While there are other reasons why lines may continue slow steaming for the time being, a trend of increasing service speeds will reduce global requirements for tonnage. Lines should carefully consider this change when planning any orders for new vessels.”