Shipping firms hit 'slow steaming' snag

PUBLISHED : Tuesday, 26 April, 2011, 12:00am
UPDATED : Tuesday, 26 April, 2011, 12:00am


Shipping companies have cut fuel consumption and emissions by sailing at slower speeds on transpacific routes between Asia and North America, but exporters and importers say none of the cost savings have been passed on to them.

Instead, they say, they face higher inventory costs and possible equipment shortages because sailing times are longer across the Pacific Ocean.

These are among the initial results from an investigation launched by the United States Federal Maritime Commission on the impact of slow steaming on both shipping lines and cargo owners.

The commission is assessing the 36 responses, which included seven from exporters and shipping bodies and 22 from container lines and carrier groups, before deciding if it needs to take follow-up action.

The general tone of the comments indicated shipping lines are deriving most benefit by cutting the speed of their container ships from about 24 knots to 17 to 18 knots.

But exporters and importers said they faced higher inventory costs, which can be passed on to consumers, and that there was also a lack of transparency from carriers about the impact of slow steaming.

This stance was reinforced by most carriers in their comments.

Although they gave the information to the commission, shipping lines declined to publicly disclose commercial details, including how many sailings involved slow steaming, how much money they saved and if these savings were passed on to exporters and importers.

Jonathan Gold, a vice-president of supply chain and customs policy at the National Retail Federation, the world's largest retail trade association, said its members supported the environmental benefits from slow steaming.

But the federation's 'members have not realised any benefits from slow steaming as conducted by the carriers' and that the 'major benefits are only realised by the ocean carrier', Gold said.

'As a result of the practice, we have seen supply chains extended by several days, which adds costs back into the system for the retailer.

'The practice results in higher inventory carrying costs for retailers and a decrease in the speed to market, which is critical for a retailer's success.'

Gold said that while shipping lines operated services both at reduced and normal speeds, there was 'no difference of rates offered by carriers for slow steaming versus regular steaming'.

These views were echoed by medical supplies firm Becton, Dickinson and Co, which said it had seen an extra two to five days in sailing time between ports, but that carriers and freight forwarders offered no choice between slow and normal steaming.

The firm was also critical of Orient Overseas Container Line, which it said was unable to provide detailed information about fuel and emissions savings which would help reduce Becton, Dickinson's carbon footprint, even though OOCL's 'website/marketing says they can'.

Commenting on the cost issue, Maersk Line said the daily rate of chartering extra ships, which has risen from US$8,000 to US$28,000, had eroded fuel cost savings.

'Any cost savings accrued by reduced fuel consumption have enabled Maersk Line to sustain its service levels in many US trades,' the Danish shipping giant said.

'Without such savings, Maersk Line would not be able to obtain a sustainable return on investment.'

Rising expenses

Traders say they face higher inventory costs due to slow steaming

The US Federal Maritime Commission is studying this number of responses on the issue from traders and carriers: 36