Cargo Sits Waiting a Fortnight in Asia: Analysts Seek Reasons

MarineLink.com
Tuesday, April 15, 2014
Slow steaming & Lay-up impacts: Image courtesy of Drewry Maritime Research

Jochen Gutschmidt, head of global transport procurement at Nestle, asked the Global Liner Shipping Conference in Hamburg last week: “Why is cargo waiting in Asia for two weeks?” Using data from Drewry’s latest 'Container Forecaster', just published, this week’s 'Container Insight Weekly' attempts to answer that question and quantify how much capacity has been taken out of the system by slow steaming and lay-ups.

Slow steaming
There was a time when vessel optimisation was achieved by simply deploying the biggest ships at full speed so to minimise the number of vessels required. It was a rare example of a win-win scenario for carrier and shipper, aligning carrier profitability with service quality in terms of fast transit times.
The global financial crisis and hugely inflated fuel prices shattered those bedrock assumptions of how to operate liner services and ever since it has been much more cost effective to operate more ships at lower speeds.

Slow steaming (combined with additional ships being phased into loops) was first adopted in the Asia-Europe trades and then gradually expanded from early 2009 into the transpacific and several north-south routes. Carriers quickly realised the fact that as well as reducing voyage costs, slow steaming offered a way of managing the vessel surplus that was building up as demand shrivelled.

In the pre slow steaming era Asia-North Europe services deployed an average of eight ships, whereas these days the average has extended to 11 ships as round voyage speeds have slowed to about 17 knots, well below the 24-25 knots the vessels were designed for.

Longer round voyages require extra ships. Approximately 250 vessels, averaging a little over 11,000 teu, are currently needed for 22 weekly westbound Asia-North Europe services. If slow steaming had never happened and services in that trade were still running with eight ships rather than 11 then only 180 ships would be needed to maintain the same number of loops, meaning carriers have effectively absorbed 70 or so ships in that trade alone.

Idled vessels

To lay-up a ship is a last resort option as most carriers prefer to keep ships trading even when conditions are so bad that cargo is not fully compensating direct costs. But when all else fails, owners finally have to accept that lay-up is the ultimate fall-back position. This was most strikingly the case in 2009 when nearly 10% of the total fleet (in teu terms) was parked.

The idle fleet (defined as vessels not attached to a service for 14 days or more) is taking a much smaller bite out of the global fleet than it was in the industry’s annus horribilis. Drewry estimates that the idle fleet is now equivalent to around 3% of the cellular fleet with the non-operating owners baring most of the pain.

Net impact on effective capacity
Slow steaming and idling were the inevitable consequences of the downturn as carriers had to put an end to the cash burn that was making bankruptcy a very real prospect for many. Most carriers are still losing money despite the costs savings from lower bunker prices and fuel consumption so their capacity management cannot be considered a complete success, although the insistence to carry on ordering big new ships is the prime hindrance on that front.

The net result is that total effective capacity has only grown by 22% since 2008, whereas at “full speed” the global capacity would have grown by 40% over the same period. In 2013 alone, slow steaming and lay-ups reduced available supply by nearly 3 million teu.

The impact on aggregate ship utilisation (and subsequently freight rates) is the difference between vessels being close to 90% full rather than only being three-quarters full. Missed voyages also temporarily inflate load factors with Drewry estimating that throughout 2013 blank voyages cut monthly one-way capacity in the Asia-North Europe trade by an average 2.5%. Depending on the severity of the missed sailing program it added as much as five points on to our assessment of headhaul load factors.

Put all these factors together and the chance of cargo roll overs in peak cargo months is greatly increased. Through the sub-optimal deployment of assets carriers have been relatively successful in reducing voyage costs and raising ship utilisation. However, this policy is at times excessive and detrimental to shippers.

Drewry's  View
Carriers have done a good job of absorbing excess capacity into the system but the foundations of their “recovery” are rooted in inefficiencies and as such are fragile. The large orderbook means they will need to intensify their efforts and shippers should prepare for longer transits and more frequent use of blank voyages.

Source: Drewry Maritime Research
http://www.drewry.co.uk/publications/
 

 

 

Maritime Reporter August 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Jet Edge Celebrates 30 Years in Waterjet Industry

Waterjet systems manufacturer Jet Edge, Inc. celebrated its 30th anniversary Sept. 3 with a special open house celebration. Jet Edge’s anniversary event included

TITAN Salvage Receives NAMEPA Award

The North American Marine Environment Protection Association (NAMEPA) announced earlier this month that Houston-based TITAN Salvage, a subsidiary of Crowley Maritime Corp.

MM&P Hopes to Pad Ranks with Brown Water Mariners

New York Harbor Tug Boat Captains and Crews, Staten Island Ferry Workers, Circle Line and Other Tourist Boat Crews Vote on Joining New Union Uniting with the International Organization of Masters,

Contracts

AEGIR-Marine Partners with On Site Alignment

AEGIR-Marine and On Site Alignment (OSA) signed a contract at SMM in Hamburg confirming the companies’ strategic alliance concerning stern seal and propulsion service

Brommeland to Supply KNS VSATs to Kopervik

Brommeland Elektronikk AS, the Norwegian distributor for KNS, was awarded a contract to supply 13 VSAT systems to a large part of the Norwegian shipowner Kopervik Group fleet.

Seaspovill Orders Second Damen Fast Ferry

South Korean operator Seaspovill signed its second contract for a Fast Ferry with the Netherlands-based shipbuilder Damen Shipyards Group. The Fast Ferry 4212 -

Ports

Maritime Reporter @ 75: The Daily Cartoon

Maritime Reporter & Engineering News was founded by John J. O'Malley (1905-1980) in 1939, and today ranks as the world's largest audited trade publication in the world serving the maritime industry,

MM&P Hopes to Pad Ranks with Brown Water Mariners

New York Harbor Tug Boat Captains and Crews, Staten Island Ferry Workers, Circle Line and Other Tourist Boat Crews Vote on Joining New Union Uniting with the International Organization of Masters,

Second Sailing Added to Cleveland-Europe Express

The Port of Cleveland and Amsterdam-based Spliethoff Group announced today their mutual intent to add a second monthly vessel to the Cleveland-Europe Express (CEE),

Container Ships

Global Ship Lease to Acquire Containership

Global Ship Lease, Inc. has  announced  that it has agreed to acquire a 8,063 TEU containership from a leading container liner company for a purchase price of $55 million.

Maersk Sees US Approval of Shipping Alliance as Formality

U.S. regulatory approval of a proposed shipping alliance involving AP Moeller Maersk should be a formality, the Danish company's chief executive said on Wednesday.

Cargo Container Security Alliance Formed

SC-integrity, Inc. (LoJack SCI) and Contguard Ltd. announced a strategic alliance designed to provide their customers with security and real-time visibility of

Logistics

Second Sailing Added to Cleveland-Europe Express

The Port of Cleveland and Amsterdam-based Spliethoff Group announced today their mutual intent to add a second monthly vessel to the Cleveland-Europe Express (CEE),

Finland Grants Support to Three Small LNG Terminals

The Finnish government granted 65.2 million euros (84.22 million US dollar) in subsidies to build three small liquefied natural gas (LNG) terminals to cut on use

LQT Delivers Accommodation Facility and Helideck in Gulf of Mexico

LQT Industries , a full-service provider of accommodation facilities, design-build construction services, and support services to the oil and gas industry, has

Consulting

Ebola & the Shipping Industry: Latest McQuilling Analysis

Although the Ebola epidemic has remained predominantly in West Africa, fears about the virus have spread globally and it is becoming a cause for concern in the transportation industry.

RRI Launch Marine Services J/V with a Trans-Atlantic Reach

Regional Reporting Inc. (RRI) and Global Risk Evaluations (GREvL) inform of the creation of a joint venture aimed at expanding their marine services offerings.

Upcoming Winter Tanker Market Same as Last Year?

Will the 2014/15 winter tanker market be a repeat of the previous one? Poten & Partners consider the question in their latest 'Poten Tanker Opinion'. As the

 
 
Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Naval Architecture Offshore Oil Pipelines Pod Propulsion Port Authority Ship Electronics Ship Repair
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.3579 sec (3 req/sec)