Higher fuel costs altering boxship deployment patterns

As fuel oil prices continue to climb, carriers are increasingly applying extra slow steaming on their long haul services. With fuel prices at levels above $400/ton since October, extra slow steaming is increasingly taking hold on the Far East-North Europe route where loops are being stretched by a week.

Alphaliner predicts that 8-week rotations on this route will disappear if fuel oil prices remain above $400/ton, based on simulations for 6,500 TEU, 8,500 TEU and 12,500 TEU ships.

With fuel prices at the $400/ton level, 8-week service rotations on the Far East-North Europe route suffer a 2 to 6% cost disadvantage compared to 9-week rotations, taking into account the costs of the additional ship needed to maintain weekly sailings. The cost disadvantage will rise to between 6 and 10% when fuel prices reach $650/ton.

The cost disadvantage is higher for loops deploying smaller ships, since the proportion of fuel costs to vessel costs is higher, as the larger ships enjoy significant unit cost advantages compared to smaller vessels. Therefore, it becomes more cost effective to deploy additional ships at slower speeds as fuel prices increase, and the

bigger the ships, the better.

Alphaliner?s just-released survey suggests that slow steaming could help absorbing surplus capacity in the liner markets, provided the higher fuel price does not adversely affect trade recovery. Within the last four months, extra slow steaming has already been applied to 19 service strings on the Transatlantic, Asia-US, Asia-Europe and long-haul North-South trades. These moves have helped to absorb 19 vessels for a total close to 100,000 teu.

From a technical viewpoint, slow steaming is very efficient because the fuel oil consumption grows exponentially as speed rises, making high speed a luxury in an expensive fuel era. Roughly, a 10% increase in speed asks for a 30% increase in fuel consumption. This is also the reason why high speed can be found mainly on large container ships, as the supplementary fuel oil financial load can be spread over a huge quantity of containers.