Drewry: Speedier service doubtful as slow steaming here to stay

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4276814949_7c6d046e66_zSome shippers are calling for faster services from carriers, but Drewry forecasts that slow steaming is now an entrenched industry practice with the advent of mega ships, suggesting that shippers push instead for on-time reliability.

In a new analysis, the maritime advisory service said some shippers have called for ocean carriers to introduce faster service between Asia and Europe even at premium rates, but said this may be a hard request for liners to comply with.

It noted that one shipper had observed that it currently takes around 40 days door to door to ship from Shanghai to Germany, compared to 10 days for the much more expensive air freight option and 20 to 25 days for rail.

Drewry confirmed that shipping services have slowed down since the advent of slow steaming, but said shippers still have “a fairly wide range of options available to them.”

It said that currently, there are 13 weekly services from Shanghai to Hamburg with port-to-port transit times ranging from 29 to 36 days. Between Shanghai and Rotterdam there are 15 weekly services within the same band of transit times.

Assuming no interim ports and ships sailing at 24 knots, Drewry calculates that the fastest possible transit time between Shanghai and Hamburg is 19 days, a potential saving of 10 days against the current best.

“In theory, with smart planning, shippers using the main ports should have no problem receiving a regular flow of cargo, regardless of the extended lead times,” it added.

Poor reliability

However, in reality, Drewry said shipping lines have been slipping behind in on-time reliability, and suggests that shippers focus instead on demanding improved, rather than faster, services.

Data from Drewry’s “Carrier Performance Insight” has the average on-time performance (defined as more or less 24 hours from the scheduled arrival at the loading port) of East-West services since May 2014 at just 59%, although things have improved in the last couple of months.

In March, the aggregate on-time performance reached a five-month peak of 64%, a rise of 8.5 percentage points over February. The improvement was the due to much improved services in the Asia-Europe trade and easing congestion on the U.S. West Coast following the resolution of the port labor dispute.

“Carriers are too far down the slow streaming road to change course now and would require heavy persuasion even to consider introducing faster options. Shippers would have more success pressing for more reliable services,” said Drewry.

Moreover, the market for faster services would be relatively small as most shippers have already adapted to slow steaming and would be unwilling to pay a premium for speedier services.

Additionally, diverting cargo from the slow and big ships would also make it harder to fill them, adding huge downward pressure on already contracting freight rates.

“That is not to say fast premium rate services are completely out of the question, but in Drewry’s opinion lines would require a long list of cast-iron guarantees in terms of minimum volumes, rates and floating BAF that would probably be unworkable for most shippers,” said the report.

“Shippers would probably be better served making more demands on improving service reliability that remains poor,” added Drewry.

Better reliability is a win-win for shippers and carriers, it added. “Carriers shouldn’t need extra incentives to meet their schedule promises as delays hurt them too, from missing berthing windows, feeder connections, customer resolutions, and generally from ships being less productive than they could be.”

Photo: Alvaro Suarez Ruibal