Limits To Slow Steaming Very Real

Implications: The article highlights the limitations to slow-steaming and why this will result in diminishing returns as a mechanism for absorbing excess container ship capacity.

Analysis: Container ship supply growth has exceeded demand growth for over four years now, and will continue through at least 2010.  Several reasons account for the lack of a substantial downward impact on rates: higher growth on longer-haul trades; recurring congestion delays; fuel surcharge reimbursement; and slow-steaming.

Slow-steaming is basically taking an average 8 vessel Asia-Europe loop and adding a 9th vessel while maintaining weekly port schedules.  The entire loop of vessels is slowed, resulting in significant fuel savings.  Only in a very high fuel price environment will this offset the total cost of the 9th vessel.

There is a limit to how far this scenario can be taken.  As vessel speed is further reduced:
-the net fuel savings diminishes as combustion efficiency suffers
-cargo limitations come into play, as the greater transit time becomes unacceptable to perishable and time-sensitive cargoes
-main engine maintenance and the risk of main engine casualty increases.

Marine engines (and their attached propellers) are generally optimized for 85% of maximum RPM.  Above that level, specific fuel consumption increases rapidly.  Much below that level (current slow-steamers are operating at 70% MCR) and even modern, electronically controlled engines see significant drop off in combustion efficiency.  Further, the attached exhaust systems, which typically capture residual heat to fuel auxiliary boilers, start having problems.  Poor combustion results in soot deposits that retard boiler performance and increase fire risk.  In extreme situations, the exhaust gas boiler becomes inoperable, and the vessel must use oil-fired boilers to produce the necessary steam and thereby reduce the overall fuel savings.

In the end, nearly half of the container ship fleet belongs to charter owners.  These operational parameters fall outside of that allowed by the typical charter party, and require the owner's agreement to implement.  Unless the risk of operations is transferred to the liner company, this is unlikely to happen.