Newsroom Blog
Slow steaming is good
By Lloyds List Comment
Tuesday 26 January 2010
SLOW steaming is starting to have a considerable impact on the beleaguered container shipping market.
The latest group to put on the brakes is the CKYH alliance, which today said it would be implementing slow steaming on the eastbound legs of its four Asia-Europe services.
This is just the sort of news that owners want to hear, because reduced speeds mean more ships are required to maintain fixed schedules that are essential in the liner trades.
The charter market is the immediate beneficiary of this drive by lines to both reduce fuel consumption and cut emissions. A year ago, Mediterranean Shipping Co chartered eight 8,400 teu newbuildings for 12 months at a reported $10,000 a day. This month, the same ships are being extended at daily rates of around $14,000.
This is still modest compared with their daily earning power of a few years back, when vessels of that size would have been able to command well over $40,000 for 10 years or more. Even so, these latest fixtures represent a sizeable recovery.
But owners should not get carried away by the thought that the market is now back on some long-term upwards trajectory. There are still far more ships in the pipeline than there is demand for extra tonnage to compensate for slow steaming.
At most, the number of ships required for Asia-Europe strings will go up from the traditional eight to 11.
Once every loop that can be operated more slowly has been restructured, then this requirement for more ships will cool again.
In other words, slow steaming is not some long-term charter market saviour, but a short-term fillip.
That is not to downplay the wider implications, however. Slow or extra-slow steaming is no temporary phenomenon but looks set to become a permanent feature.
This have major consequences for cargo interests, particularly if ships start to slow down on the headhaul as well as the backhaul routes.
So while the impact on the charter markets may be limited, the repercussions for the freight markets could be far-reaching.
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