[160810.EN.SEA] Slow Steaming, High Rates Equal Lower, Slower Service To Shippers

SLOW STEAMING, the popular cost cutter and environmental public relations play for carriers, is not nearly so popular with shippers who see rates going up and transit times going down, according to a report from the New York-based Seeking Alpha financial portal.

Some shipping lines have slowed to 12 knots while clippers, fast 19th century square riggers, averaged 14 - 17 knots, the report noted.

Maersk, with more than 600 ships, finds that super-slow speeds reduces fuel consumption and is believed to have saved the company more than US$102 million on fuel since the measure was introduced.

Maersk spokesman Bo Cerup-Simonsen said: "The cost benefits are clear.

When speed is reduced by 20 per cent, fuel consumption is reduced by 40 per cent per nautical mile. Slow steaming is here to stay. Its introduction has been the most important factor in reducing our CO2 emissions in recent years, and we have not yet realised the full potential. Our goal is to reduce CO2 emissions by 25 per cent."

But slow steaming compels retailers to accept longer planning horizons which will increase wastage and the production of unneeded goods, said the report.

Meanwhile the cost of shipping an FEU from Hong Kong to Los Angeles without a contract, or spot rate, was about US$871 in July 2009, a five-year low. In July this year the spot rate hit $2,624 - a five-year high.

Lifetime Brands, which makes and sells products under brand names like Cuisinart and KitchenAid, said it was now paying about double last year's rates, and Costco said it was now back to 2007 rates.

Shipping lines have pulled capacity out of service when the economy tanked and have been slow to bring it back in support of higher prices. To make matters worse, there are not enough containers to meet demand, again pushing up rates and prices, said the report.

Mona Williams, vice president for buying at the Container Store, said the company was telling manufacturers to book space well in advance, and that it was moving delivery dates earlier.

And for items that simply must arrive, "sometimes you can offer to pay a steamship company a larger amount of money, and they might take somebody else's container and not put it on," said Lifetime Brands CEO Jeffrey Siegel, but "in most cases, you just have to wait."

Mr Siegel said he has begun to schedule items to arrive as long as three months before they need to be in stores. That means a higher cost for holding inventory than usual.

Source : HKSG, 05.08.10.