Extra Slow Steaming is Affecting Transit Times
Whether you believe it’s simply ‘green wash’ or not, industry sources are reporting that the increase in ‘extra-slow-steaming’ (ESS) is having a profound effect on the international freighting sector. The knock-on effect for tyre importers and exporters is that ESS adds a few days to transit times.
Officially, ESS is the shipping industry's response to cutting global carbon emissions and is supposed to cut vessel emissions by some 30 per cent. It’s now the norm on the majority of trade routes although the cynic would say that it’s simply a significant cost cutting exercise, keeps ships in employment and, in fact, was widely used just to redress the supply-demand imbalance that built up in 2009. It’s estimated that in May alone, speed cuts to between 17-19 knots from the usual 23-25 kept almost 100 ships in employment.
According to Rob Shelley, who founded Maritime Cargo Services’ nearly twenty years ago, the UK Freight Transport Association (FTA) itself has just highlighted the issues of reliability and sustainability and said that with global activity levels and volumes rising, shipping lines must rethink those short-term, ‘credit crunch’ business strategies that have impacted on customer confidence. In our latest update on freight rates and shipping trends, he explains that the FTA has indicated that the prevalence of slow-steaming has been badly managed and has had a detrimental impact for shippers as they foot the bill for delays, supply chain disruption, roll-overs, late notification and port of call issues. In fact an FTA spokesperson said that they expected lines to take steps to conserve fuel and take out cost but with trade on the rise again, shippers have the right to expect better treatment and more joined-up supply chain solutions.
Freight rates in the peak season
“Unbelievably it was only a couple of months ago we were reporting price cuts in the cost of international container shipping as the markets struggled to recover. But the subsequent rebound in container shipping demand seems to have given many in the shipping industry the excuses they’ve been looking for to inflate prices and there has been much ‘rattling of sabres’ to this effect,” Shelley explained adding:
“For example, there has been much talk in the sector of a shortage of actual containers. To an extent this is indeed true and has been exacerbated to a degree because container manufacturers cut production back over the last 18 months and are now struggling to catch up. However, this potential problem has been eased by the shipping lines themselves actively repositioning empty stock to meet demand wherever it is.”
There are also said to have been attempts by the shipping lines to control available space – and consequently rates – through restricting capacity; and this is probably best demonstrated by their seeming reluctance to reintroduce the promised – previously moth-balled – vessels. We are now in what the shipping sector calls the ‘peak season’ and, whilst there continues to be a growth in Far East trade, it seems that a combination of the strength of the US$, US trade news and continued Chinese inflation is working to keep costs in line. “Despite this, and as we’ve discussed, the shipping lines are continuing to actively threaten rate rises – or what they, more euphemistically, label as ‘peak season surcharges’,” Rob Shelley continued.
As a result many in the import/export sector are becoming increasingly and understandably frustrated at these proposed rate rises and surcharges from the shipping lines due to market conditions that many would say are of their own making and in whose hands the answers lie. However the law of supply and demand still holds true to this day and, if things are not quickly and better managed by the shipping lines, they could easily see custom drift away to competitive and alternative suppliers. In the meantime though, the tyre products that are hardest hit are those that are travelling from further away. So, together with raw material cost rises and exchange rate fluctuations, this all has the knock-on affect of making some of the previously competitive Far Eastern produced products less economical.