Slow steaming will absorb newbuildings

Shipping companies desire to operate ships more slowly to save money will absorb most of the additional capacity added to the world containership fleet over the next year, an investment banker and a containership chartering executive said Wednesday.

Slow steaming are going to be an integral part of the industry, said Peter Shaerf, a managing director of AMA Capital Partners, told a conference on ship finance sponsored by the Marine Money magazine in New York.

Only about 15 percent of the 70 or so post-Panamax services have incorporated slow steaming and there is strong indication that others will follow, absorbing at least 50 new vessels, he said.

The economics are compelling, he said. Giving the example of an 8,000-TEU ship that costs about $43,000 a day to charter, a 10 percent reduction in speed will reduce daily fuel costs from $158,968 to $86,535 when bunker fuel is selling for $640 per ton.

Even if a ship owner has to add a ship to an eight-ship string in order to maintain a weekly port rotation, they have the potential to save about $450,000-$470,000 per steaming day.

John Coustas, chief executive of containership chartering company Danaos Corp., agreed with Shaerf's analysis, saying cost of the tonnage that is going to be delivered this year is going to be slow rather than increase capacity. But he also noted some savings will be offset by factors such as increased port costs.

Many containerships are built today to operate at about 15 knots, and Coustas noted that while ships can reduce speed by 10 to 15 percent easily, larger reductions have epercussions on the technical ability of the engines and overall systems. Ships can not run for long periods at less than 50 percent of their nominal horsepower, and that to a certain extent imposes a limit on what you are going to see as far as slow steaming. But 15 percent is definitely feasible and we have not yet seen the effects of that slow steaming because there are no ships for liner companies to introduce to loops, he noted.

Coustas noted that shipowners are wary of ordering ships designed with even slower service speeds in mind.

Many of them remember the experience of Malcom McLean, he said, whose 12 conships ordered in the early 1980s were built to operate at 17 to 18 knots.

While those ships looked good when they were ordered because of a spike in oil prices, they ultimately proved to be uncompetitive when fuel prices fell and other ships were able to offer higher speed delivery.

Source: American Shipper