ESS to absorb over 2% of boxship capacity

ESS has gathered pace since fuel prices reached over $350 per tonne in June 2009. With the fuel price now reaching $500 per tonne, the trend is expected to continue.

Alphaliner says that by end January 2010, ESS will have absorbed 230,000 TEU of vessel capacity and the figure will rise to over 250,000 TEU in February, as more carriers slow down loops to save on fuel costs. This figure adds to the estimated 45,000 TEU of capacity that was already kept busy through ESS since 2008, bringing the figure close to 300,000 TEU. These ESS initiatives keep in activity 47 vessels of between 3,000 and 13,000 TEU, which otherwise would have been idle. The capacity kept active through ESS corresponds to 2.3% of the cellular fleet.

With the bunker price at around $500, ESS generates 5%-7% savings on total operating costs on long haul loops, including the costs of the extra ship deployed and of the additional containers required due to the longer transit times. Translated into annual savings, ESS allows for example to save $15-20million for a typical FE-Europe service which uses vessels in the size range of about 8,500 TEU.

The average duration of the 50 loops recorded by Alphaliner in ESS mode is 10 weeks. They employ a total of some 480 ships totalling just over 3.0 Mteu. Since the vast majority of these loops employ ships over 4,000 TEU, this means that almost 40% of the large ship fleet (vessels of over 4,000 TEU) is currently running in ESS mode.

The impact of ESS on loops costs is more important on long distance services (such as FE-Europe) than on shorter ones (such as FE-WCNA). This is reflected by the fact that 25 of the 40 FE-Europe loops are now in ESS mode, of which 20 were activated since June 2009 (the five remaining service were in ESS since 2008).

On the FE-USEC route, which typically employs eight ships, the trend is to add a ninth ship. The movement is however less pronounced than on the FE-Europe route, as transit time considerations appear to be more sensitive on the US trades than on European routes. However, ESS is now seriously considered for the FE-WCNA route despite the shorter sailing distance. By February, nine FE-WCNA loops will operate at slower speeds, including two high-volume routes employing 8,000- 8,500 TEU ships.

Seven of these nine loops (including two pendulum services) are slowed down through the classic way of stretching the duration of the rotation by one week with the addition of an extra ship, without altering the port rotation. Two other services have been slowed down through removing port calls, without affecting the duration (so there is no need to add an extra ship, although this implies extra feedering).

On the Transatlantic route, there is less ESS being applied due to the shorter transit durations. Some of the North-South routes, however, are suitable candidates for ESS. Two North-South routes involving long steaming distances have been slowed down in ESS mode over the past six months: FE-ECSA and FE-WCSA, where a total of six loops have been slowed down since June. These routes are typically run with 11 ships today (if not truncated), against 10 ships in early 2009 and nine ships until 2007-2008.

There is still additional room for ESS to be applied as more services are expected to switch to lower sailing speeds of around 18 knots, down from their current speeds of 20-22 knots, themselves slowed down from the usual commercial speeds of around 24 knots which characterised linehaul services using large container vessels when the FO was still at an affordable price. For example, if the remaining Far East-Europe services were switched to ESS mode, a further 105,000 TEU would be required to maintain the existing rotations.