Today Online 17 Jul 08;
AFTER seeing oil prices more than double in the past year, shipping lines have warned they may cut capacity, especially on trade between Asia and Europe.
“If these fuel prices stay in the range where they are today, I think you are going to see some fairly substantial service pullbacks,’’ said Neptune Orient Lines new chief executive Mr Ron Widdows in an interview with Lloyd’s List.
Maersk Line, the world’s largest container shipping firm, yesterday said it plans to introduce a bunker fuel surcharge on its Asian contracts later this year to help tackle rising costs.
The surcharge, or bunker adjustment factor, has been implemented on its contracts in Europe and the United States. However, such a move is likely to irk the Asian Shippers’ Council, a body representing cargo owners. Earlier this month, it protested against a similar move by eight shipping lines in Asia, adding it was anticompetitive and would set a precedent for more surcharges.
“It’s an old rhetoric. We knew exactly what reaction would come from shippers,” said Jesper Praestensgaard, Maersk’s Asia-Pacific chief executive.
He said freight rates had been falling over the past five years and “if there was a cartel or abuse of that dominant position, freight rates would be rising”.
Bunker fuel prices have doubled over the past 12 months and now make up over half of shipowners’ operating costs. Benchmark 380-centistoke bunker fuel prices in Singapore reached around US$760 per metric tonne on Tuesday.
Besides passing on costs, Maersk, which consumes over 1 million tonnes of bunker fuel each month, is reducing fuel use by slowing ships down.
Slow steaming, or travelling at lower speeds, can save about 10 per cent of a ship’s total fuel use. However, it means that goods carrried are slower to market.
Maersk is also taking steps to improve its vessel designs by using silicon paint to reduce resistance and adding waste heat recovery systems.
All Maersk’s ships are told to keep strictly to schedule so they don’t waste fuel by waiting at ports or having to run at full speed if they are late.
Trade between Asia and Europe, which gained about 20 per cent last year, has slowed this year on weaker demand.
Shipping lines have deployed new, larger vessels on the route. The Howe Robinson Container Index, which tracks weekly charter rates for container vessels, has fallen for four straight months to the lowest since April last year.
Mr Praestensgaard predicts the industry’s global growth may slow to 7 to 8 per cent this year, compared with about 10 per cent last year.
“There’s going to be pressure (from excess ship supply and higher fuel costs) over the next couple of years, but there will still be healthy growth,” he said. “Container shipping has never had negative growth in the past 25 years.” Agencies
