Shippers, carriers spar on slow steaming

Shippers, carriers spar on slow steaming
The National Industrial Transportation League said while it supports liner carriers' efforts 'to reduce their carbon footprint and the associated pollution of the environment,' the decision to reduce ship speeds in recent years has 'not benefited shippers.
   'Instead carriers appear to have retained the economic benefit of slow steaming for themselves,' the largest U.S. shipper organization said.
   Responding to a request for comments from the Federal Maritime Commission on the effect of slow steaming on U.S. ocean liner commerce, the NIT League said, 'our observation is that shippers and consumers have transferred economic well being to carriers; the analytical question would seem to be whether that transfer of wealth has been 'offset' by the reduced negative effects of vessel engine emissions into the atmosphere.'
   It 'urges the commission to closely monitor the practice of slow steaming and to consider collecting data from ocean carriers on a periodic basis that will assist in analyzing the effects of slow steaming on U.S. commerce, including whether there is a reasonable balance between the costs and benefits of slow steaming.'
   A notice of inquiry by the FMC on slow steaming resulted in 34 responses from carriers, ports, shippers and others.
   The World Shipping Council, the liner carriers' trade association, said the NIT League comments are 'erroneous and misguided' and that slow steaming 'is a practice that is probably here to stay for both cost and environmental reasons.

   'The FMC has no rate regulatory authority, and no authority to tell vessel operators what speed they should operate their ships,' the WSC said. The NIT League's recommendation 'appears to envision ongoing FMC data collection as a prelude to a regulatory wild goose chase. The FMC should not follow it.'
   While slow steaming increases transit times, the carrier council disputes NIT League's comments that it has resulted in a drop in 'effective vessel capacity,' saying capacity has been 'maintained or increased by carriers' addition of ships to service to ensure the same frequency of service when instituting slow steaming.'
   It also contends 'if there is sufficient shipper interest to pay rates that make faster services profitable despite their higher operating costs, there is no reason to believe that the market will not continue to see much faster services, as well as slow steaming services.'
   WSC said there is no evidence to support NIT League's statement that 'exporters are finding it harder to compete against foreign companies that are not affected by slow steaming.' Instead, the carrier group said slow steaming is an industry practice around the world affecting shippers globally, not just a practice affecting American exporters.'

   The NIT League said slow steaming has negatively affected company supply chains, forcing companies to increase the amount of inventory they carry at higher costs. It noted companies operating just-in-time supply chains rely on accurate demand forecasts and that 'the longer transit times associated with slow steaming reduce the accuracy of the forecasts that shippers use to manage just-in-time supply chains. To address this, they must increase their inventory levels to avoid supply interruptions at stores and manufacturing facilities.'
   But the WSC said some carriers have found 'on-time performance is better with slow steaming' and that 'if a few days of known and scheduled extra transit time cause a shipper to reduce the accuracy of its forecasts, it has much bigger problems than slow steaming.'
   The National Retail Federation said its members 'have not realized any benefits from the practice of slow steaming. As a result of the practice we have seen supply chains extended by several days, which adds costs back into the system for the retailer. The practice results in higher inventory carrying costs for retailers and a decrease in the speed to market, which is critical for a retailer's success.'
   NRF members said carriers 'do not differentiate between their 'slow steaming' and 'regular steaming' vessel strings. There is no difference of rates.'
   And while 'transit times and costs are a critical factor in the ocean carrier/service selection process,' the NRF said 'neither transit times nor slow steaming provisions had been included in service contracts with ocean carriers.'
   Perry M Bourne, director of international transportation and rail operations for Tyson Foods, said in his comments to the FMC that by greatly reducing fuel consumption, carriers are 'creating a significant revenue stream back to the carrier. With no reduction in the calculation of the emergency fuel surcharge, the carriers get a windfall at shipper expense.'
   Bourne said 'there needs to be a defendable science-based formula developed by each carrier seeking emergency fuel cost recovery.
'Instead of implementing a universal vessel speed for the round trip voyages many carriers only apply the slow steaming to the export trip from the U.S.'
   As a result, 'export service is denigrated with no reduction in cost to the shippers. U.S. exports are being used to cross subsidize fuel related costs for foreign imports,' he said.
   Slow steaming has a 'negative impact ' on shelf life for perishable food items like chilled beef pork and produce. These items are sold to arrive early in the week so that can enter the market for sale and consumption the same week the vessel arrives. When carriers move arrival dates due to the slow steaming it alters the delivery date past when customers are willing to accept the cargo, which creates fewer sales and or higher inventories for the receiver and lost shelf life for the consumer.'
   Becton Dickinson, the New Jersey-based medical products manufacturer, said slow steaming 'increased transit time and caused increase of inventory on water,' and that forwarders and carriers did not offer choices between normal and slow steaming services.
   'They don't even keep us informed that slow steaming will be deployed until we asked,' the company said.
   'Although slow steaming is environmentally friendly, we do need normal steaming as an option in the long run. This will offer us more choices and a good alternative over air mode.' ' Chris Dupin