Time ripe for slow steaming answers
If anything is slower than a backhaul transit these days, it's probably the process to ascertain how slow steaming should affect the bunker surcharges carriers assess shippers.
It seems everyone is studying the issue. The Transpacific Stabilization Agreement told American Shipper last month it is doing so, as is the European Shippers' Council. Peter Friedmann, executive director of the Agriculture Transportation Council, said at an April liner shipping conference in London that his members are keen to know this. Consultants are also examining slow steaming's effect on carriers' sailing costs.
But it's not a linear argument. As Brian Conrad of the TSA pointed out, you can't say slow steaming reduces bunker consumption by X percent and so bunker surcharges should be reduced by the same factor. Yet it's probably not as complex as carriers are making it out to be.
The question to answer before asking whether bunker surcharges should drop in line with bunker consumption is this: Is slow steaming purely a carrier's operational change that is a separate issue from rising and volatile fuel prices? In other words, should carriers be penalized for operating in a more efficient manner by not being able to collect as much bunker surcharge revenue as they did when they sailed faster and used more fuel?
Or should slow steaming be considered an operational adjustment, like sailing around Africa rather than through the Suez Canal? To my memory, carriers that switched to round-the-Cape sailings did so of their own volition and didn't raise bunker fees to compensate for extra fuel burned. It was their choice to route their ships that way, just as it's their choice to go slower.
For shippers, it seems easy to connect the dots and say if a carrier consumes less fuel, it shouldn't charge its customers as much for fuel, even as fuel prices are rising.
There's also the service aspect. This isn't an operational change, like switching from diesel trucks to LNG trucks, where service is unaffected. This is a change that significantly affects the supply chains of carrier customers.
But from the carrier perspective, you could say slow steaming has nothing to do with procurement of raw materials, and so it should have little bearing on its cost to procure fuel, as it's independent of how much fuel it uses.
The issue probably boils down to transparency. It's not hard to envision shippers and carriers conducting studies that support their own positions.
But what would really help matters is for one carrier to explicitly state its fuel consumption and costs before and after slow steaming on a key east/west service. Then we could calculate how much per ton, per mile traveled and per TEU slow steaming has actually saved. While that would only illuminate the equation for one service from one carrier (or alliance), it would establish a baseline and could force other carriers to divulge similar information.
Again, carriers could argue the bunker surcharge is not about the number of tons of bunker burned, but rather about the total cost of fuel for a voyage over and above some specified baseline. Either way, they'd be in a better position to argue the authentic merits of bunker recovery.
It seems silly to think that it took years for carriers to become transparent about how they calculated their bunker surcharges, only for one operational change to completely obscure the lines of communication soon after. Let's hope these studies elicit some real actionable results.
The topic of port competition came up in a recent conference, and I got to thinking about that in terms of the ports of Long Beach and Los Angeles. Is there another port in the world where as many terminal operators compete against one another as in the Southern California ports?
You have major terminal operators like Ports America, SSA Marine and APM Terminals, and lines like NYK Line, Evergreen, APL, Hanjin, China Shipping, Hyundai Merchant Marine, COSCO and OOCL all involved in terminals (some partnering with the three listed above).
There are 14 terminals, with many catering to some of the same lines and alliances. Now as a shipper, it's not as if you have a menu of 14 terminals from which to choose. Depending on the origin of your cargo and carrier chosen, options can dwindle quickly. And most of the terminals are aligned with certain carriers or alliances, either by company affiliation or volume contract.
But there is simply nowhere else in the world where so many terminals have to compete with one another. Perhaps it's the reason the world's major terminal operators, like Hutchison Port Holdings and PSA International, have avoided the Western Hemisphere's biggest cargo gateway ( A topic explored last year, 'Home field advantage,' May 2010 American Shipper, pages 56-59 or online at www.AmericanShipper.com/links).
It's something to think about when discussions of Southern California's waning competitiveness in relation to other North American ports comes up. Aside from the established multimodal and logistics infrastructure and intelligence in Southern California, it also remains a place where liner business is keenly valued.
CMA CGM a victim?
French liner carrier CMA CGM netted some unwanted publicity last month, the result of an alleged shipment of high-tech weapons that Israeli forces found in a container said to be containing legumes.
The line strenuously defended its business in the days following the incident: 'It is important to know that when a person or business wishes to send cargo via a container, the shipping company provides the container and the shipper loads it with their cargo and seals it and, by this act, the shipper is therefore responsible for the cargo declared on the bill of lading. Once the container is ready, it enters the transport chain to be taken onboard the ship, where it is locked and sealed and can only be opened by a customs officer.'
The line's defense ' that it is at the mercy of what its customers mark on the manifests of the containers it transports ' rings a little hollow. Yes, there is a limit to what a line can do to verify the veracity of the contents of all the goods its transports. But maybe they should be doing more, and maybe governments should be enabling them to do more. And this applies to every line, not just the one that got embroiled in the latest affair.
Airlines, not just airports and passengers, are responsible for the safety of their planes. They have a vested interest in protecting passengers because safety breaches put lives and expensive assets in danger, not to mention the harm to the brand. Lines don't face the pressure of protecting the lives of passengers other than their employees, but do face the loss of valuable assets and valuable brand reputation. Perhaps that would be enough for greater interest in making sure the cargo they carry is benign.