Falling oil prices make slow steaming less attractive

Dynamar says fuel savings may not offset cost of extra ships.    The sharp drop in oil prices may make slow steaming unattractive for some liner services, says the consulting firm Dynamar.
   In its latest Dynaliners newsletter, the Netherlands-based firm says “at the present bunker prices ‐Rotterdam $239/ton 380 Cst‐ the tipping point at which the up to four (in a North Europe‐Far East sling) extra ships can no longer be financed from fuel savings will meanwhile have been reached with reduced revenue from BAFs further contributing to this. Consequently, for some the choice between the devil and the deep blue sea may have arrived: either lose money by continue steaming slow, or steam faster, accepting the costs of laying up (big, perhaps very big) ships.”
   Dynamar says “Although carriers have so far firmly maintained that they have every intention to continue slow steaming as is, some nervousness seems to be emerging on the seemingly never‐ending decline of oil prices and therewith fuel prices.”
   Complicating the decision making for shipping companies are “sometimes irreversible, modifications to ships.”
   It referenced a recent newsletter from the shipping company Marfret which said “Given that the technical specifications of ships on order have factored-in the long-term use of slow steaming and shipowners have carried out irreversible technical modifications on ships in service (antifouling, fuel injection pump modifications, changing the stem bulb or propeller blades etc), there’s no going backwards for the time being.”
   Marfret said “with the chronic over-capacity, the return on the market of the vessels having been absorbed by slow steaming would have a disastrous effect on freight and charter rates. Moreover, on the operational side, this would mean renegotiating terminal slots with port operators. If the situation were to continue, the economies of scale warranted to absorb the effects of higher oil prices may well have a detrimental effect after having contributed to reducing freight levels.”
   Dynamar noted that forward prices for a barrel of Brent crude oil on January 8 was $51.15. Ignoring 2009, it said the last time that that level was reached
was in 2005, when slow steaming had yet to be implemented.