The Federal Maritime Commission is soliciting public comment on the impact of slow steaming on U.S. ocean liner commerce on ocean liner carrier operations and shippers’ international supply chains. The agency also wants to hear about how the practice has affected the cost and/or price of ocean liner service and mitigated greenhouse gas emissions.
Responses, which will become public record unless marked “Confidential-Resrticted,” are due on or before April 5 and can be submitted via e-mail to secretary@fmc.gov. For more detailed instructions, including specific questions the FMC has for shippers, read the FMC’s full solicitation here.
Background:
Over the past two years most ocean liner carriers regulated by the Commission have implemented the practice of slow steaming by which the normal service speed of ships is reduced in an effort to reduce bunker fuel costs which account for a high proportion of ship operating costs. Initially, ocean carriers took these measures in response to severely depressed international trade conditions, but slow steaming also is used to mitigate greenhouse gas emissions in response to new environmental initiatives and concerns.
By slow steaming, ocean liner carriers address both of these problems by significantly reducing total bunker fuel consumption and the associated emissions.
In the U.S. ocean liner trades, the practice of slow steaming appears to be most prevalent in the transpacific trade. Data derived from Alphaliner, for example, shows that more than half of the 45 weekly services operating between U.S. west coast ports and Asia are currently slow steaming, while more than three-fourths of the 15 weekly services operating between U.S. east In contrast, just 20 percent of the 15 weekly services operating between the United States and North Europe are currently slow steaming.
Slow steaming is a complex issue with advantages and disadvantages for both carriers and shippers depending on trade conditions and commodity transported. For example,
when carriers are experiencing high bunker costs and low charter rates, slow steaming becomes more attractive to the carrier. When these conditions do not exist, slow steaming does not offer the carrier the same advantages. Thus, in the coming years, potential increases in fuel costs and planned vessel deliveries will weigh in favor of carriers continuing or expanding slow steaming, but a continued recovery in demand and rates will tend to mitigate the trend.
While a good deal of commentary and analysis have appeared in the trade press regarding the benefits that carriers derive from slow steaming services, information about how this practice has affected American exporters and importers is limited. In cases where shippers of low-value commodities receive lower rates as a result of the carrier passing along some of the fuel savings achieved through slow steaming, the additional time for transport may not be an issue for these 5 shippers.
On the other hand, shippers of high-value commodities may not find slow steaming advantageous because a potentially lower freight rate may not outweigh the added delay in accessing payments for goods rendered. These tradeoffs for U.S. importers and exporters assume that carriers pass at least a portion of the cost savings from slow steaming on to their customers. In the U.S. trades, where the vast majority of liner cargo travels under annual service contracts, it is unclear whether ocean carriers’ customers have received those savings either through adjustments to bunker fuel surcharges or the underlying rates.
