Amid decarbon pressure, ship speeds already slowing

Amid decarbon pressure, ship speeds already slowing

Headhaul sailing speed from Asia to North Europe has fallen steadily since 2012 with the dual strategy of saving on fuel consumption while absorbing surplus capacity. Photo credit: Shutterstock.com.

Members of the global shipping industry are calling for mandatory slow-steaming to be imposed on all ocean vessels to speed up cuts in carbon dioxide (CO2) emissions, even as data shows transit times are already lengthening on the headhaul Asia-Europe and trans-Pacific trades.

Slowing vessels is a thorny issue for shippers that must plan their inventory needs around the longer transit times, no easy task with on-time performance at consistently low levels.

The French delegation to the International Maritime Organization (IMO) in April proposed mandatory slow-steaming be imposed on the shipping industry, and the proposal quickly garnered support from shipowners in the non-container line sector. A group of about 115 mostly bulk shipping companies, including a number of non-vessel-operating common carriers (NVOs), signed an April 30 letter calling for mandatory slow-steaming to be adopted at the upcoming May 13-17 meeting of the IMO greenhouse gas (GHG) working group.

Asked what impact the imposition of mandatory average speeds for container ships would have on his supply chain, the logistics manager of a Europe-based shipper said longer transit times and poor schedule reliability was pushing up his stock holding levels.

“My inventory costs are already going through the roof, and if ships take even longer to get here, that is going to add significantly to my stock holding levels,” he told JOC.com.

Self-imposed speed limits

Carriers on the long-haul trades introduced slow-steaming when demand dried up after the global financial crisis in 2008 in a bid to absorb surplus capacity. The recession also kick-started the mega-ship era as carriers pursued lower unit cost advantages and set off an arms race for ever larger vessels, exacerbating overcapacity issues and further limiting sailing speeds.

Examining the transit data from January 2012 to March 2019, SeaIntelligence found that headhaul speed from Asia to North Europe fell steadily over the period, from an average of 17.46 knots in 2012 to an average of 16.61 knots in 2018. During the first three months of this year, the sailing speed on Asia-North Europe fell steeply to about 15.6 knots, and a similar picture emerged on the Asia-Mediterranean trade.

Analysis of strings between Asia and the East Coast of North America shows the same pattern, with a constantly decreasing average sailing speed, although the Asia-US West Coast trade has remained at a relatively consistent 18-19 knots once the massive slowdown in sailing speeds around the US West Coast port labour dispute and resulting congestion in late 2014 and early 2015 is removed.

SeaIntelligence said this could be explained by the shorter average sailing distances from Asia to the North American West Coast of about 12.5 days, versus 17.5 days on Asia-North Europe, and 23.5 from Asia to the North American East Coast.

The backhaul trades from both Europe and North America to Asia showed similar decreases in speed during the 2012-2019 period. SeaIntelligence attributed the decline in backhaul speeds primarily to developments in the underlying bunker fuel prices.

“During the 2012-2014 period of high bunker fuel prices, carriers were continually slowing down the backhauls, but when oil prices dropped in 2015 carriers started speeding up on the backhauls, and as oil prices have started to rise closer to $500 per ton in 2018-2019, we see carriers starting to slow down again,” the analyst noted.

Industry pushback

Pressure is mounting on the shipping industry to reduce emissions that the World Shipping Council (WSC) said accounts for about 2.5 percent of global GHG emissions, with liner shipping accounting for a quarter of that. But there is already pushback from the industry.

John Butler, president and CEO of the WSC, said the April 30 letter “provides no specifics of how such a program would be structured, how it would be enforced, or how it would avoid the problem of encouraging artificial demand for building more of the fossil-fueled vessels that the industry will need to phase out in order to reach permanent greenhouse gas emissions reductions.”

He said the WSC would continue to work with all parties through the IMO to find lasting solutions that would allow the industry to achieve emissions reduction objectives.

Hapag-Lloyd spokesperson Nils Haupt pointed out that mandating slow-steaming would require additional ships to maintain weekly schedules, thereby increasing emissions.

“If we reduce speed in a loop from Hamburg to Singapore that requires 12 ships, to stay on schedule and maintain a regular weekly service, you would need a 13th or 14th ship, which means investment and additional CO2 pollution. This is something that bulk carriers and tankers don’t have to take into account, but for containers it would be a harsh investment and wouldn’t really solve the program,” he said.

A new round of self-imposed slow-steaming by the maritime industry overall may result from sulfur emissions limits to be imposed by the IMO on Jan. 1, 2020. Historically, when fuel prices increase, ship speeds slow down, and estimates for the cost of compliance for container carriers is between $10 billion and $15 billion in additional annual fuel expenses. Maersk Line and Mediterranean Shipping Co. each expect fuel costs to increase $2 billion a year as a result of the rule, while Hapag-Lloyd has projected a $1 billion per year cost increase.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.