Manufacturers and retailers looking to cut shipping costs by slowing their supply chains are finding unlikely new supporters of the strategy: the ocean container lines that carry the overwhelming majority of goods in international trade.

Financially strapped ocean carriers are cutting fuel costs by reducing
vessel speeds on a growing number of long routes, and the impact of
what’s called slow steaming is starting to reverberate across supply
chains. Even amid a halting recovery, the economy is very literally
slowing down on the water, with dozens of routes — mostly those out of
Asia — extended by several days, and some shippers say they are having
to adjust inventories to the changing service patterns.

Shippers may
have to get used to it. Carriers say what began as a cost-saving
strategy will likely last into any recovery in global trade when
carriers and regulators see the environmental benefits of slower speeds.

“I
think the advent of slow-steaming on the trans-Pacific is an
unavoidable outcome of the economics today,” said Ron Widdows, group
president and CEO of Neptune Orient Lines, the Singapore-based parent
of APL. “It has become quite a usual occurrence in other trades. But I
think it is a glimpse of the future in the way this industry is going
to have to operate, because of the need to reduce emissions.”

Jorgen
Harling, vice president of global network design at Maersk Line, said
engine speeds and vessel emissions “are 100 percent correlated.” He
said slow steaming “is now becoming the industry standard, and
everybody is getting used to it. I think we are entering a new era.”

Slow
steaming — sailing 25-knot vessels at 20 to 22 knots — became standard
practice on long Asia-Europe routes last fall as carriers sought to
control costs and find gainful employment for some of the 700-plus
container ships laid up around the world.

During the last three
months, slow steaming has spread to trans-Pacific voyages, adding up to
three days to the 11 or 12 days that most vessels required to sail from
their last Asian port to their first inbound port on the U.S. West
Coast. Ships also have been slowed on long intra-Asia routes and in
other services.

The four-carrier CKYH alliance — Cosco, “K” Line,
Yang Ming and Hanjin Shipping — announced last week it will extend slow
steaming across its Asia-Europe service, using it on six loops before
the first half of this year.

AXS-Alphaliner, the Paris-based
consulting group, counts 64 long-haul routes that have gone beyond slow
steaming to “extra-slow steaming,” at 17 to 19 knots. On some
backhauls, carriers are going a step further with “super-slow
steaming,” lumbering along at 14 to 16 knots or even slower.

That
produces significant cost savings, but the impact for the carriers goes
beyond the fuel costs. Keeping a ship on the ocean for three days
beyond a 12-day trip keeps the vessel from taking on new loadings
during that time, potentially cutting revenue opportunities but also
effectively reducing capacity just as the carriers are trying to keep a
lid on space.

For shippers, the new era means more slack in their
supply chains — and the possibility of higher inventories and other
adjustments to logistics networks that may already have been overhauled
in the downturn. Complaints about slow-steaming have been muted,
however, with many saying it is a business imperative for a shipping
industry facing billions of dollars in losses.

Source: Journal of Commerce

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