16 Januari 2015

[160115.EN.SEA] Falling Oil Risk End to Slow Steaming, Thus Magnifying Overcapacity

SHIPPING company Marfret has warned in a newsletter that with "chronic over-capacity" the return to the market of the vessels that have been absorbed by slow steaming would have a "disastrous effect on freight and charter rates."

The warning comes as the market experiences a sharp drop in oil prices, the benefits of which may be wiped out as shipping lines "continue steaming slow, or steaming faster, accepting the costs of laying up big, perhaps very big ships", said Dynaliners.

"Consequently, for some the choice between the devil and the deep blue sea may have arrived," said Netherlands-based Dynaliners.

"Moreover, on the operational side, this would mean renegotiating terminal slots with port operators," Dynaliners said.

"If the situation were to continue, the economies of scale warranted to absorb the effects of higher oil prices may well have a detrimental effect after having contributed to reducing freight levels."

It highlighted that "at the present bunker prices - Rotterdam US$239/tonne 380 Cst - the tipping point at which the up to four (in a North Europe-Far East sling) extra ships can no longer be financed from fuel savings will meanwhile have been reached with reduced revenue from BAFs further contributing to this."

Dynamar continued: "Although carriers have so far firmly maintained that they have every intention to continue slow steaming as is, some nervousness seems to be emerging on the seemingly never-ending decline of oil prices and therewith fuel prices."

Complicating the decision making for shipping companies are "sometimes irreversible, modifications to ships," including antifouling, fuel injection pump modifications, and changing the stem bulb or propeller blades.

"Given that the technical specifications of ships on order have factored-in the long-term use of slow steaming and shipowners have carried out irreversible technical modifications on ships in service, there's no going backwards for the time being."
Source : HKSG.

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