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Carriers Will Continue to Slow Steam, Despite Falling Bunker Prices
Despite ongoing low bunker prices, companies are likely to continue the practice of slow steaming, Drewry predicts.
Drewry shipping consultants said that they were "confident" that ships would continue to run their ships lower than the maximum design speeds, as they would fear flooding the market with latent capacity that would also send freight rates plunging even further.
Fuel is the single biggest cost for carrier companies, but oil price fluctuations can have a reduced impact on the operator's bottom line as extra charges and savings are passed on to customers through the bunker adjustment factor (BAF) surcharge.
In the short-term however, lower oil prices will definitely be a tailwind for carriers, said Drewry, since so many deals with high-volume customers are made using inclusive, BAF-free contracts.
Slow-steaming has also proved to effective in reducing fuel bills, in addition to absorbing excess capacity, Drewry noted, and predicted that box ships would not even begin to approach original design speeds of 24-25 knots for at least a few years.
The Ocean Three mega-alliance, which consists of CMA CGM, China Shipping Container Lines Co., and United Arab Shipping Co., said last month that slow steaming would cut operational costs by an estimated $1 billion.
Key Bunker Prices More
| VLSFO | MGO | |||
|---|---|---|---|---|
| $/mt | +/- | $/mt | +/- | |
| Singapore | 571.50 | 0.00 | 665.50 | 1.00 |
| Rotterdam | 512.00 | 3.00 | 663.00 | 0.50 |
| Houston | 545.50 | 3.00 | 666.00 | 9.50 |
| Fujairah | 560.50 | 0.00 | 743.50 | 1.50 |
| Global 20 Ports Average | 584.00 | 1.00 | 751.50 | 2.00 |
| Global 4 Ports Average | 547.50 | 0.00 | 684.50 | 2.50 |
| Global Average Bunker Price | 633.50 | 0.50 | 805.50 | 0.00 |
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