Stick to Slow-Steaming to Keep Shipping in Profit, Advises Bimco

Shipping fundamentals: in balance (file image/pixabay)

Shipping body Bimco has said cost control will play an important role in keeping profits up as world trade plateaus in the coming years

With global trade set to settle in at around 4% over the next few years, Bimco shipping analyst Peter Sand believes the danger to profits will come from the supply of ships getting ahead of demand.

"The shipping industry has adapted quite well to a lower level of demand growth over the past couple of years," Sand said in an appraisal of industry prospects.

"The next challenge is to understand that this is as good as it gets, and to avoid wishful thinking that demand levels will increase significantly."

And he warned shipowners: "The biggest risks to the forecast remain on the downside, meaning that fleet could grow too much or demand too little."

Sand argues that slow steaming, where ships purposely operate at slower speeds, is a useful way of keeping shipping market fundamentals in check.

In the dry bulk sector "fundamental improvements will follow if slow steaming is kept up" Sand said as fleet growth and demand for ships should both be around 1%.

Sand sees a similar situation developing in the box shipping sector, where fleet growth and demand for shipping capacity should be in the 4- 5% region.

But that leaves "little room for fundamental market balance improvements".

"As a result, increased earnings must come from continued cost-cutting exercises and permanent slow-steaming to keep fuel costs on a tight leash," the analyst advised.

Slow-steaming first emerged as a response to high fuel costs as less fuel is consumed. In addition, when ships operate at slower speeds, overall demand for capacity is maintained.