Mumbai / Bangalore: Roundabout routes and slower speeds are among the measures recession-stricken shipping companies are taking to stay afloat.
Shipowners are steering clear of the Suez and Panama canals to avoid high user charges. Instead, they are sending ships around the Cape of Good Hope at the southern tip of Africa. This route adds to the time taken to ship goods but helps pare costs.
Economy sailing: A 2007 photo of ships harboured after passing through the Panama canal. Shipowners are steering clear of the Suez and Panama canals to avoid high user charges. Instead, they are sending ships around the Cape of Good Hope which helps pare costs. Susana Gonzalez / Bloomberg
“When compared with the high canal transit charges, the additional costs arising from extra days of journey actually turns out to be lower,” said Nikhil Jain, a research analyst at the Indian unit of London-based maritime consultancy firm Drewry Shipping Consultants Ltd.
Shipowners are also resorting to slow steaming, or cutting down speeds. “Reducing the average speed of vessels helps reduce bunker (ship fuel) consumption, which accounts for a significant part of voyage costs,” Jain said. Staff costs, too, are being sliced by reducing the number of crew members on board, he added.
“We are actively looking at operational costs at sea by optimizing ship design and embarking on slow steaming initiatives and bunker saving initiatives. The aim is to increase fuel efficiencies, thereby contribute positively to the environment,” Rizwan Soomar, managing director, Maersk Line (India Cluster) told Mint.
Maersk Line, a division of Denmark’s AP Moller-Maersk, is the world’s biggest container shipping firm.
In 2007, Maersk Line initiated a comprehensive study on 110 vessels, which showed that despite the traditional policy of having 40-60% as the minimum engine load, it is safe to go as low as 10%. This makes it possible for container ships to sail at half speed, reducing not only fuel costs significantly, but also CO2 emissions, the Copenhagen-headquartered Maersk said in a media statement on 16 July.
Large dry bulk carriers can save up to $1 million (Rs4.8 crore) a year by cutting speeds down to the minimum.
Soomar said energy costs (fuel and electricity costs) are among the major components of Maersk’s cost structure. “To quote a few initiatives to cut down energy costs, (they) include, slow steaming, wherever possible, optimizing ship design, network design to optimize net fuel requirements for maximum throughput at all ports per round voyage and energy efficient modes of transport, wherever possible (road or rail),” he said.
Sudhir Rangnekar, chief executive officer of Indian National Shipowners’ Association, an industry lobbying group, said shipping companies are entering into land logistics since freights have fallen.
“Carriers are trying to focus on warehousing and container freight stations to derive profit as freight rates are going down. Many carriers are either cancelling or deferring their vessel acquisition plans. Carriers are also either combining services to particular destinations or withdrawing to cut the cost,” Rangnekar said.
Innovations also play an important role in cutting down costs. For instance, Maersk paints its ships’ hull with special paints that offer lesser resistance and thus improve the fuel efficiency.
It is also implementing e-solutions EDI, or electronic data interchange, wherever possible, thus cutting down the need for paper usage, printing and associated costs.
S. Hajara, chairman and managing director of the country’s largest shipping company Shipping Corp. of India Ltd said his company is doing everything possible to counter the slowdown since it has affected shipping very badly.
Frivolous expenditure has been cut down at Great Eastern Shipping Co. Ltd, India’s biggest private ocean carrier. Advertisement spends have been slashed and executives travel only when it is absolutely necessary.
“Even when they do travel, executives have voluntarily decided to fly economy class,” said Anjali Kumar, spokesperson at Great Eastern Shipping. “Shipping has been the worst affected by the crisis because this is an industry that is closest to global economies.”
Also, since January, 148 container ships have been sent to scrap yards for demolition, a number that is ten times the historical average, according to Paris-based container industry database AXS-Alphaliner. Among various segments, container ships and dry bulk carriers bore the brunt of the global downturn. Some of the container ships that were demolished were just 16-17 years of age.
Mediterranean Shipping Co. SA (MSC), the world’s second biggest container carrier, sold 20 ships for demolition this year. The scrapping programme helped MSC avoid idling of ships, a phenomenon that many other shipowners could not avert as demand and rates plummeted to rock-bottom levels.