Carriers Stick with Slow Steaming as Rock Bottom Rates Outweigh Gains from Sharp Fall in Bunker Costs

"Rock-bottom" vessel charters and container leasing rates are dissuading carriers from going full throttle.

Even though increasing the speed of vessels on certain routes would theoretically have numerous benefits at a time when bunker fuel has dropped below $200 per metric tonne (PMT), Alphaliner has found that carriers are resisting the urge to do so and maintaining a policy of slow steaming.

This is in sharp contrast to Alphaliner data earlier this month showing that low bunker prices are prompting carriers to "increase average sailing speeds again, further worsening the vessel over-supply situation." 

This time out, Alphaliner studied traffic on the China - US West Coast route and found that the majority of ships still sails at speeds of 19-20 knots eastbound and 14-15 knots westbound: "The slowest ships in the trade operate at speeds as low as 13 knots; service speeds could thus be increased by 2-3 knots on the headhaul leg and 4 -5 knots on the backhaul, allowing overall transit times to be cut by 2-5 days in each direction."

Alphaliner points out that an increase in speed and a shortening of rotation in the China to USWC loop from six to five weeks would result in additional daily bunker costs of $18,000-$30,000, and under normal circumstances this would be lower than the cost of chartering one extra ship.

It stated, "This should provide a strong financial incentive for carriers to abandon slow steaming; however, rock-bottom vessel charters and container leasing rates have deterred carriers from speeding up."

The rates Alphaliner refers to are below $10,000 per day for ships of up to 8,000 twenty-foot equivalent units (teu) and less than $0.30/teu for daily container leasing- which combined means it's still cheaper to deploy extra ships instead of shed the extra tonnage and speed up.

However, Alphaliner notes that Hanjin Shipping's new 'China-America Express' (CAX) loop launch in May will provide a transit time of  just 11 days from Shanghai to Long Beach at speeds of between 14 and 21 knots: "If demand for such express services were to increase, and more importantly if shippers show a willingness to pay rate premiums for express services, more carriers could be prompted to increase sailing speeds."

Last October, statements from a number of container lines regarding improved transit times were regarded in some circles as a signal that an end to slow-steaming could be on the horizon.