|
 Pros
& Cons of "Slow Steaming"
pro - Slow Trip Across Sea
Aids Profit and Environment
By
ELISABETH ROSENTHAL Published: February 16, 2010
It
took more than a month for the container ship Ebba Maersk to steam
from Germany to Guangdong, China, where it unloaded cargo on a
recent Friday — a week longer than it did two years ago.
But for the owner, the Danish shipping giant Maersk, that counts
as progress.
In a global culture dominated by speed, from overnight package
delivery to bullet trains to fast-cash withdrawals, the company
has seized on a
sales pitch that may startle some hard-driving corporate
customers: Slow is better.
By halving its top cruising speed over the last two years, Maersk
cut fuel consumption on major routes by as much as 30 percent,
greatly reducing costs. But the company also achieved an equal cut
in the ships’ emissions of greenhouse gases.
“The previous focus has been on ‘What will it cost?’ and ‘Get it
to me as fast as possible,’ ” said Soren Stig Nielsen, Maersk’s
director of environmental sustainability, who noted that the
practice began in 2008, when
oil prices jumped to $145 a barrel.
“But now there is a third dimension,” he said. “What’s the CO2
footprint?”
Traveling more slowly, he added, is “a great opportunity” to lower
emissions “without a quantum leap in innovation.”
In what reads as a commentary on modern life, Maersk advises in
its corporate client presentation, “Going at full throttle is
economically and ecologically questionable.”
Transport emissions
have soared in the past three decades as global trade has
grown by leaps and bounds, especially long-haul shipments of goods
from Asia. The container ship trade grew eightfold between 1985
and 2007.
The mantra was, “Need it now.” But the result is that planes,
ships, cars and trucks all often travel at speeds far above
maximum
fuel efficiency.
Slowing down from high speeds
reduces emissions because it reduces drag and friction as
ships plow through the water.
That principle holds true in the air and on land. Planes could
easily reduce emissions by slowing down 10 percent, for example,
adding just five or six minutes to a flight between New York and
Boston or Copenhagen and Brussels, said Peder Jensen, a
transportation expert at the European Environment Agency.
And simply driving at 55 instead of 65 miles per hour cuts carbon
dioxide emissions of American cars by about 20 percent,
according to the International Energy Agency. Yet many states
are still raising speed limits, even as policy makers fret about
dependence on foreign oil and emissions that heat the atmosphere.
“There’s a sense of urgency we’ve created — it’s always faster,
faster, faster,” said Tim Castleman, founder of the
Drive55 Conservation Project, a group in Sacramento that
advocates the lower speed limit.
“I can drive 55 right now,” he said. “I believe it will make a
profound difference.”
Of course, mile per mile, shipping even at conventional speeds is
far more efficient than road travel. Shipping a ton of toys from
Shanghai to northern Germany churns out lower emissions than
trucking them south to Berlin afterward.
Some carriers initially resisted the idea of slowing down, arguing
that speed was indispensable to serving their clients.
“There was initially a lot of skepticism,” said Philip Damas,
director of liner travel at Drewry Shipping Consultants of London.
“All ships are built with the expectation they’d have to sail
fast.”
But now, he said, carriers from Germany to Israel to China are
starting to embrace the slow strategy. Today more than 220 vessels
are practicing “slow steaming” — cruising at 20 knots on open
water instead of the standard 24 or 25 — or, like Maersk’s
vessels, “super slow steaming” (12 knots).
And many companies find that the practice allows them to cut
prices in an ever more competitive market, even at a time when oil
prices hover around $80 a barrel.
Any rise in fuel prices or taxes would enhance the appeal of slow
steaming. At the international
climate conference in Copenhagen in December, Connie Hedegaard,
now the
European Union’s climate minister,
proposed a tax on fuels used in shipping, saying the proceeds
could be used to help poor countries adapt to rising temperatures.
China and India objected, saying it would increase the price of
their exports to the West.
There are practical obstacles to a tax. For one thing,
longstanding international agreements intended to promote global
trade exempt airline and shipping fuel from taxation.
And even if nations were to accept emission ceilings under a
so-called
cap-and-trade system, there is enormous disagreement over how
the accounting would work. Should the Ebba Maersk’s emissions
appear on Denmark’s balance sheet, even though it travels from
China to Germany and back?
While slowing speeds is a good idea, said David Bonilla, senior
research fellow at the
transport studies unit at
Oxford University’s School of Geography and the Environment,
he maintains that it cannot on its own arrest the emissions growth
resulting from today’s trade patterns, in which vast amounts of
goods are produced in Asia but consumed in Europe or the United
States.
To make a difference, he said, fuel costs for long-distance
shipping must rise to the point where carriers are forced to
invest in new, far more efficient boats or shift to shorter
routes.
“What you may have to do is to shift the location of industrial
plants in international supply chains to shorten the distance
between production and consumption,” he added. “But it’s very
difficult to do that.”
Yet in shifting hundreds more ships to its slow steaming program
last year, Maersk considered itself prescient: it is convinced
that a carbon tax or tighter shipping rules are on the horizon.
“This is not going away, and those of us who are starting now will
be ahead of regulations,” Mr. Nielsen said.
Super slow shipping involves adjustments. Maersk had to prove that
slow speeds would not damage ship engines in order to maintain
engine warranties that did not cover such slow travel. Customers
have to factor in extra time for delivery, which can be
problematic for time-sensitive products like fashion or
electronics, said Mr. Damas of Drewry Shipping.
Maersk has also shouldered the labor costs of having crews at sea
for longer periods and added two ships on its Germany-to-China
route to maintain scheduled deliveries. But those expenses were
canceled out by decreased fuel costs, it said.
Now Maersk is working with customers in the hopes of slowing more
boats and contemplating charging customers variable rates,
depending on speed.
If so, “they will have to decide what needs to come quickly,” Mr.
Nielsen said, “and what can go on the proverbial slow boat to
China.”
A version of this article appeared in print on February 17, 2010,
on page A1 of the New York Times New York edition.
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con -
Shippers Rocked and Rolled
Peter Tirschwell | Jan 25, 2010 The Journal of
Commerce Magazine - Commentary
It’s not every day that I’m minding my own business and my phone
rings, and on the other end of the line is the logistics director
for one of the world’s largest retailers. He is in a bad mood. He
has called to inform me that there is a crisis in the
trans-Pacific market and we need to report it.
His
cargo is being rolled throughout Asia, jargon for missing its
intended sailing because of a lack of space. His carriers are
demanding an “emergency” rate increase as if the clause in his
service contract barring such actions didn’t exist. And when his
cargo is eventually loaded, the ship proceeds at slow speed as
carriers try to save fuel and absorb capacity.
For
the shipper, that means more inventory must be in the pipeline,
and thus more cost, at a time when retailers are managing
inventory conservatively because of the uncertainty of the
recovery.
This was not an isolated call. It was one of several nearly
identical conversations since the beginning of the year, all
initiated by large shippers, that in the aggregate drew back the
veil on one of those rare, but combustible, scenarios in freight
transportation: a nasty bottleneck that appeared seemingly out of
nowhere and, though it may be brief in duration, will likely be
remembered for years to come, like the infamous rail and port
bottlenecks seen over the last decade.
There is probably not a single major shipper moving goods from
Asia to North America that has been unaffected and is not
wondering how something like this can be avoided in the future.
How
this happened is explained easily enough. If the circumstances are
rare, so are the causes. Shippers sourcing in China always push
through a stockpile of spring merchandise early in the year in
advance of the Chinese New Year, when the country all but closes
down for more than a week, similarly to the Christmas-New Year
stretch in the West.
This year, the holiday falls in mid-February, later than usual,
making January an unusually busy month for cargo movements. “The
demand right now is a little more than we had planned for. We have
a bit of an artificial peak created by the Chinese New Year,”
Peter Keller, executive vice president of NYK Line (Americas),
told a panel at a National Retail Federation event in New York on
Jan. 11.
Set
the pre-Chinese New Year surge against a carrier industry that is
reeling from an estimated $20 billion in losses last year as rates
and volume collapsed under the weight of a surge in ship ordering
ill-timed to the Great Recession.
Funds from multiple carrier refinancings last year will quickly
dry up unless a meaningful rate recovery occurs this year, with
forced asset sales or bankruptcies the next step if a recovery
doesn’t come quickly.
For
carriers, 2010 is a year to survive. Given continuing high
unemployment and the drying up of consumer spending, shippers
don’t see their own business much differently. The stakes are
high, and tempers are short.
As
painful as it is, this capacity squeeze will pass. But what will
be left in its wake? How will shippers and carriers do business
with each other when rates are volatile and unpredictable in the
extreme and trust is a thing of the past? More than one shipper
remarked how the emergency rate increase seemed conveniently timed
to the so-called winter deployment in which carriers withdrew
capacity from the trade during the normally light winter months.
Carriers deny this, but are open in saying a major push is under
way to generate $400 per 40-foot container in non-contracted
revenue from shippers beginning on Jan. 15.
“If
the contract allows for some kind of automatic adjustment, it is
being applied,” said Brian Conrad, administrator of the
Transpacific Stabilization Agreement, the carrier discussion group
in the eastbound trans-Pacific. “If the contract says no
additional surcharge and increase, then what the carriers are
doing is approaching shippers on a one-on-one basis, and saying,
‘We know what your contract says; per the terms, we are not able
to apply anything, but you know what the situation is. Is there
any way to work with you to reopen the contract and put in some
kind of adjustment?’ ”
Is
there a way to remake the shipper-carrier business environment
such that rates are stable, capacity is available and everyone
more or less is happy for the long term? The only solution is to
acknowledge that container rates are largely set by the market,
and to create some form of hedging that would allow shippers and
carriers to protect themselves from adverse movements in rates.
Unfortunately, though the industry may be headed in that
direction, it’s not there yet.
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With negotiations nearing, shippers and carriers consider 2009’s
tough lessons in their 2010 strategies
Dean Tracy, director of international logistics at Lowe’s, had a
devilish time getting his spring and summer merchandise on vessels
leaving Asian ports in late January. The busiest time of the year
for home improvement retailers was approaching rapidly, but space
on vessels was unusually tight.
“It
was a nightmare,” Tracy told the annual Georgia Foreign Trade
conference in Sea Island, Ga., on Feb. 1.
His
frustration reflected the dismay spreading among shippers in
recent weeks as they watched shipment after shipment “rolled” to
later vessels than scheduled, even after agreeing to carrier rate
hikes in January that should have guaranteed them space.
The
capacity crunch in Asia likely will end with this week’s Chinese
New Year celebration or shortly after. Carriers removed a large
chunk of vessel capacity from the trans-Pacific for the winter
months, as they do every year, but cargo volume leaving Asia
before factories close for the two-week celebration were larger
than anticipated.
While the resulting cargo backlogs are a temporary phenomenon, the
bedlam at Asian ports could have a lasting impact on importers who
will begin service contract negotiations with carriers soon.
Those talks should be more intense than any in recent memory.
Carriers are determined to increase freight rates, and the specter
of another round of congestion during the summer-fall peak
shipping season could convince importers that a repeat of last
year’s low freight rates would force carriers to cut capacity
again.
Carriers’ rates and profitability plummeted last winter as the
recession struck with a vengeance. Ships began leaving Asia half
empty, carriers panicked, and spot rates dropped from about $2,000
per FEU to less than $1,000 over a few months.
Carriers this spring will manage capacity closely, returning
vessels to service only as demand develops. “We’re not going to
make the same mistake twice,” Frank Baragona, president of CMA CGM
Americas, told the Georgia conference.
Evidence of that strategy emerged in late January, when the strong
demand in the run-up to the Chinese New Year spurred carriers to
return nearly 50 idled container ships to service. The week
leading up to Feb. 1 represented the first significant decline in
idled container ships since November 2008, according to
Paris-based consultant and analyst AXS-Alphaliner.
Still, some importers and cargo consolidators accuse carriers of
keeping capacity tight in order to push rates up faster and higher
than market conditions warrant. When carriers late last summer
began pulling capacity out of the Pacific, they note, spot freight
rates charged to non-vessel-operating common carriers for shipping
a 40-foot container from Hong Kong to Los Angeles doubled,
according to the Drewry Shipping Consultants’ published Container
Rate Benchmark.
Retailers and other importers say rate volatility makes it
impossible to price their 2010 merchandise as they place orders
with Asian factories for the back-to-school and holiday shopping
seasons.
Baragona said carriers last year cumulatively lost about $20
billion in their global operations, and they had no choice but to
slash capacity to prevent further losses this year. “In the real
world, we’re losing money,” he said.
Carriers already have demonstrated their resolve in Asia-Europe
lanes, which picked up before Asia-U.S. business did. Carriers
implemented eight rate increases in the Asia-Europe trade over the
past eight months, Baragona said.
And
carriers are not rushing to return capacity to the Pacific.
Baragona said some capacity will come back, as it does every
spring, but carriers will act cautiously, watching for signs of a
sustainable economic recovery, to avoid starting another rate war.
Walter Kemmsies, chief economist at Moffatt and Nichol Engineers,
said U.S. businesses have stabilized and are reporting decent
profits, and employment should pick up over the next three months.
Job growth would spur consumer spending, which accounts for about
70 percent of GDP. Consumer merchandise is the biggest driver of
imports from Asia.
Although economists are divided as to how rapidly consumer
spending will return, advance bookings in Asia-to-U.S.
trans-Pacific lanes are strong into June, so retailers believe the
recovery will be relatively robust. In fact, some factories in
China say they will reduce the traditional two-week Lunar New Year
vacation period to seven to 10 days because orders are so strong.
“The recovery from Chinese New Year will be much faster than last
year,” said Frankie Lau, director of marketing at Orient Overseas
Container Line.
Therefore, after the customary dip in eastbound freight following
the New Year celebration in Asia — a dip that could be far less
pronounced this year, considering cargo backlogs — volume could
pick up rapidly. That will happen just as importers meet with
carriers to negotiate freight rates for their May 1-April 30,
2011, service contracts.
Importers appear resigned to the end of last year’s low rates, but
they will make additional service demands on carriers as their
rates increase. Tracy of Lowe’s said some carriers acted
unacceptably last month by confirming customer bookings but
rolling the cargo to subsequent voyages when vessels were
overbooked.
Getting carriers to commit to space on a weekly basis is easy, but
enforcing the commitments when space is tight is difficult.
Carriers rarely agree to pay penalties when they overbook voyages.
The
months ahead will therefore be filled with uncertainty as carriers
and their customers attempt to develop accurate cargo forecasts
and match capacity with demand. Both are seeking the elusive goal
of rate predictability.
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Five Carriers to Launch Vessel Agreement
Peter T. Leach | Feb 12, 2010 The Journal of Commerce
Online - News Story
CCNI, Hanjin, Hapag-Lloyd, Wan Hai, Zim to serve Asia, Africa,
South America
Five shipping lines are setting up a new vessel-sharing agreement
that will start service in April between Asia and the East Coast
of South America via South Africa.
The joint operation between CCNI (Compania Chilena de Navegacion
Interoceanica), Hanjin Shipping, Hapag-Lloyd, Wan Hai Lines and
Zim Integrated Shipping Services will serve South Korea, Central
and South China, Singapore, South Africa, Brazil, Uruguay and
Argentina.
The new weekly service will consist of eleven vessels of 4,200
20-foot equivalent units. Hanjin and Zim will deploy three vessels
each, CCNI and Wan Hai two vessels each and Hapag-Lloyd one vessel
plus slot purchases from the other lines.
Please contact the M.E. Dey export division to see if your
shipments can benefit!
 The PORT of MILWAUKEE
Thursday, February 4, 2010
2009
International Business Increased 22 % over 2008
During a year when Great Lakes international shipping was down 25%
and most ports saw declines between 15% and 30%, the Port of
Milwaukee international tonnage was up 22%. Overall tonnage was
down less than 1 %.
"The Port is well positioned as we enter into a period of economic
recovery," said Mayor Tom Barrett. "The Port's accessibility to
rail, roads and other modes of transportation provides us with the
infrastructure we need to capitalize on job creation."
Two of the Port's "bulk" commodities saw a considerable increase:
Salt that is distributed from the Port throughout Southeast
Wisconsin was up over 23% due to the salt mines production
increase. Grain exports were up over 74% due to good shipping
rates out of the Lakes.
The Port handled several full shipload project cargoes. The
heaviest piece ever to move across Port railroad tracks came in
during the summer on a special heavy-lift ship through the St.
Lawrence Seaway. The Union Pacific Railroad then moved the 800-ton
(1,763,200 pounds) transformer with the oversight of Specialized
Rail Carriers. Federal Marine Terminals-Milwaukee, the ports
stevedore that loads and unloads ships and barges and provides
terminal handling services to/from truck and rail, also brought in
two 83,776 pound capacity reach stackers with special attachments
to handle future shipments of wind blades. FMT is focusing on its
Milwaukee terminal to handle these 150 foot long wind blades,
because of the ports favorable inland transportation capabilities.
These machines will make the Milwaukee terminal more cost
effective and efficient in handling oversized machinery.
Early predictions for 2010 anticipate a steady as you go year for
most commodities. However, the Port anticipates an increase in
machinery exports, which is the port’s most labor intensive cargo.
M.E. Dey has proudly partnered with the Port of Milwaukee in
servicing area importers and exporters and in addressing local
trade concerns. Contact our Sales or Logistics Division for more
information on services available at the Port.
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