London: Implementing speed cuts, or slow steaming, might seem an obvious solution to spiralling bunker prices and an imminent tonnage surplus in various key shipping sectors. But take care, warns a leading member of the P&I community. Tony Baker, head of loss prevention at the North of England P&I Club, warns members "to ensure their position is protected - both under the terms of the relevant charterparties and under the bills of lading". Owners of chartered ships which slow down to save on fuel costs risk being sued for "failing to proceed with the utmost despatch" under a NYPE timecharter, or "failing to proceed with reasonable despatch" under a voyage charter.
The warning comes as Asian bunker prices continue their latest surge. Singapore's price on Wednesday broke through $700 for the first time, reaching $701.50, whilst in Shanghai, prices climbed another $15 to $735.50. The latest increase reflects a 20-day spread of $124 and $134 respectively. A wide range of Asian lines, together with their European counterparts, have cut service speeds recently. They include Cosco, MISC Berhad, NYK, NOL subsidiary APL and OOCL.
The exponential relationship between speed and fuel consumption means that even a modest reduction of a knot or two can save many tonnes of fuel a day. But whether or not such a cut is worthwhile depends on a ship's earnings. In a recent analysis of a 15-knot VLCC burning 87 tonnes laden, and 74 tonnes in ballast on the 6,216-mile route from the Arabian Gulf to Ulsan, Clarkson found that at a bunker price of $150 a tonne, slow steaming was not viable until daily earnings fell below $10,000. However, at $600 a tonne, speed cuts made sense as soon as daily rates fell below $70,000. An approximate interpolation suggests that at $750 a tonne, slow steaming could save money if daily rates fall below $90,000. [3/7/08]
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