Every now and then The Wall Street Journal prints something worth reading. And so on May 18th this headline caught our eye:
“‘Slow Steaming’ or Anticompetitive Behavior? The EU Wants to Know”
“A industry-wide, across-the-board hike in prices is almost certain to attract the attention of antitrust regulators.
“And indeed, that appears to have happened in regard to certain Asian shipping lines with key operations in Europe. Prices went up, and EU Commission officials took note.
“Hong Kong’s Orient Overseas (International), Taiwan’s Evergreen Marine and Hanjin Shipping, South Korea’s biggest container carrier by volume, all said Wednesday that EU Commission officials visited their respective offices in Europe.
“The announcement follows news Tuesday that several other major lines – such as Singapore-listed Neptune Orient Lines, Denmark’s A.P.Moller-Maersk, CMA-CGM of France and Hapag-Lloyd of Germany – had been inspected by commission representatives.
“The raids come on the heels of an investigation into how container shipping prices rose in 2009 even as demand dropped and industry capacity expanded.
“Shipping executives in the past have said prices increased because lines laid up vessels and cut the speed of ocean crossings, a practice known as slow steaming, to pare overcapacity.” –
Earlier, though, on April 12th, Cargo Systems posted this article by Damian Brett:
“Slow steaming benefits not being passed on.”
“US shippers have hit out at carriers’ slow-steaming policies, claiming none of the benefits of sailing at slower speeds are passed on to shipping lines’ customers.
“In a report, submitted to the US government’s Federal Maritime Commission (FMC) as part of its inquiry into slow steaming, shipper organization the National Industrial Transportation League (NITL) said the only real benefit shippers could get from ship slowing down sailing speeds was from reduced fuel costs.
“But it said: ‘It appears from the feedback of [NITL] members and public analyses of the US shipping markets that, to date, carriers have been reluctant to pass fuel savings from slow steaming through to shippers. In fact, many members have experienced increased shipping costs since the implementation.’…
“NITL also said slow steaming had resulted in increased inventory costs. It explained that shippers had been forced to increase inventory levels because the longer sailing times meant more stock was in transit at any one time. For shippers and receivers to support these necessary increases in inventory, they must incur additional storage, labor, and other costs, NITL said. ‘In many cases shippers or their customers cannot accept decreased service frequency. They must turn to higher-cost transportation alternatives [such as air].’ The reduction in frequency also pushed up prices because it had resulted in a reduction of supply. The policy had also exaggerated container shortages, because more containers are in transit at any one time.” –
In an earlier report, Peter Gatti, the executive vice president of NITL, stated that shippers were also counting on a pricing break from the carriers comprising the Transpacific Stabilization Agreement (TSA), but that didn’t happen. Indeed, added Gatti, one non-conference carrier operating a dedicated shuttle from Shanghai to Long Beach has been operating at normal knot-speed and delivering goods at a competitive price point.
According to Gatti, supply chains have suffered negative impacts as a result of slow steaming. Shippers said that transit times have risen, effective vessel capacity has dropped, shortages in containers have been exacerbated, and meeting customer expectations is more difficult.
“One of the key aspects of the supply chain is that transit times affects inventory,” said Gatti. Initially, slow steaming accelerated the depletion of inventory making it harder for shippers to fill their store shelves and manufacturers’ production lines in a timely manner. Over time, however, shippers have been forced to adjust to lengthened voyage times by increasing the amount of inventory they carry at higher costs, the NITL said. ‘Goods that sit in inventory are simply not producing real economic output or providing ant societal benefit,’ the NITL concluded.” –
If you’re not convinced by this time that “slow steaming” is just another hoax – just another sure-fire way to bleed the taxpayer/consumer – read what Lloyd’s Register says about the stratagem. In dismissing the “slow steaming” concept as costly and harmful to the environment, the marine classification society told Marine Biz TV:
“Containerships are built to operate at higher outputs and will need to be more closely monitored when slow steaming to avoid loss of engine performance, fuel quality, and lubrication oil consumption when moving below 20 knots. The large containership is designed for 25 knots at 70,000kw main engine power and will require just 50 percent power when reduced to 20 knots. As voyage times increase, fuel savings will be less, and at slower speeds, NOx emissions also increase, resulting in waste engine capacity, higher capital costs from unused power potential, losses in heat recovery systems, turbocharger and propeller efficiency as well as increased fouling of hulls and propellers. Lloyd’s Register also warned of increased compensatory fuel consumption and possible increased vibration levels risking safe, reliable ship operations.” –
Carriers should quit lying to us. There are no “benefits” or profits to pass on. The only things being passed on are the extra costs incurred by the arrogant “slow steaming” stratagem. The real reason for “slow steaming” is to avoid scrapping the overcapacity which resulted from mismanagement and the “corporate fanning of feathers”. Let’s call a spade a spade. “Slow stealing” is what it is.