Are the Carriers Making Use of Low Fuel Prices?


Looks like No! Despite Fuel-Prices Nose Diving Carriers Continue With Slow-Steaming

Low Fuel Prices

Did the Carriers make use of the best with the fuel prices hitting a low?  Alphaliner views the prevailing condition critically citing the reason for ships still continuing with slow-steaming.

In the current scenario, container lines prefer slow-steaming the vessels even when the prices of bunker fuel prevail at the rock bottom.  This is due to the ongoing fluctuating trends in market that includes least possible ship charter and container leasing rates.  In such a fitting scenario, the cost of operating less number of ships at higher speeds would be lesser when compared to the cost of deploying additional vessels and containers in a slow-steaming state.

There are a lot of benefits when the speed of the ship is increased on a trans-Pacific loop.  For instance with an increase in the speed between Far East and the U.S West Coast by two to five knots would help the operators to trim one week off the total service rotation and reduce one ship.  This would also allow the operators to elude the cost of tying up containers on board ships for seven extra days when they are not going to produce any revenue.

Increasing the speed of the vessel and curbing the rotation of a typical China-U.S West Coast loop from six to five weeks might lead to an increase in consumption of bunker by about 30 to 50 tons per day for each ship.  Also, at present the price of bunker per ton is $ 170 and there are chances for an overall increase in bunker costs by $18,000 to $30,000 a day for the entire service.

On a whole the cost of extra fuel from accelerating loops is comparatively lesser than the cost of chartering one additional ship along with the leasing costs of containers under the longer rotation.  This should have bolstered the idea of benefitting from this ongoing favorable bunker price trend and doing away with the slow-steaming.  Instead, the rock-bottom vessel charters and container leasing rates have forced the carriers from speeding up.

The charter rates are also at an all-time low with ships up to 8,000 twenty-foot-equivalents available at less than $10,000 a day, while daily lease rates for containers are below 30 cents per TEU.  This unparalleled low is an indication that though there are advantageous fuel oil prices, the operators prefer deploying additional ships and slow-steam rather than reducing the tonnage and speeding up the services.

In a state of ups and downs both in the charter prices and oil prices, Korea’s Hanjin Shipping is to launch a new 11-day express service between China and the US West Coast in this May.  This could be considered as the second-fastest trans-Pacific service after the niche carrier Matson’s 10-day transit.

Alphaliner hints that if the express services are to sustain the current market trends, shippers should show an inclination to pay rate premiums for express services.  As a result more number of carriers can be ready to increase the sailing speeds.

Source: JOC



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