From SCDigest's On-Target e-Magazine
SCDigest Editorial Staff
Jan. 13, 2011
Global Logistics News: Federal Maritime Commission to Relook at Slow Steaming, has Concern over Ocean Carrier Alliances
FMC wants to look at Impact of Slow Steaming on the Supply Chain, as for More Disclosure from Carrier Alliance Meetings
The Federal Maritime Commission has been busy of late, saying it is going to relook at the "slow steaming" practices to which it gave tantamount approval in 2010, and that it has some concerns over various ocean carrier alliances that led the FMC to require more timely reporting on capacity changes and other issues from alliance members.
In January of last year, the FMC gave the Transpacific Stabilization Agreement (TSA), a consortium of carriers serving the Asia to US market, permission to discuss slow steaming practices under the guise of environmentalism. Slow steaming is a practice in which cargo ships dramatically reduce their cruising speeds, from a normal 25 knots to 18 knots or even lower.
While the practice does reduce CO2 emissions and other pollutants, the real driver of the approach was the collapse in ocean shipping rates and much excess capacity in the industry. Slow steaming allowed carriers to save significantly on expensive bunker fuel consumption (by as much as 60%), and the longer voyages due to the slower speeds had the effect of reducing industry capacity. In the terrible economic climate, shippers and importers were willing to incur longer shipping cycles and more inventory risk to reduce logistics costs.
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There is even "extra slow steaming," in which speeds are cut to 12-16 knots, which research company Alphaliner estimates is used on half the Pacific to West Coast routes and an astounding 9% of Asia to Europe lanes.
The TSA, with 15 member lines, has immunity from U.S. anti-trust laws to meet and discuss issues relating to freight rates and surcharges. While it cannot force members to do anything, TSA regularly issues non-binding, voluntary guidelines developed from meetings of its members which are often adhered to by the members.
Until January, 2010, TSA did not have permission to discuss environmental issues because they never had asked for it. But the growing focus on emissions and other pollutants from ocean carriers nicely coincided with financial imperatives, and so TSA ask for such authority and was granted it by the FMC in early last year.
While the cover story was environmentalism, the TSA discussions no doubt focused heavily on consistency of slow steaming practices and coordination by the carriers on the increasing number of vessel sharing arrangements they have to jointly move containers from original to final destination that would be impacted by slow steaming voyages.
Now, Federal Maritime Commission Chairman Richard A. Lidinsky Jr. says this week that the agency should assess the economic effects of slow-steaming to ensure the practice is not causing "unreasonable constraints" on the international supply chain.
Lidinsky also said in a written message that said the FMC will devote a portion of its Jan. 26 meeting to look at the impact of slow-steaming on trade and consumers. In December, Lidnisky had called for analyzing he impact of slow steaming "on our supply chain, capacity, rates, fuel charges and emissions over the past year."
This review is necessary, he said, because the TSA now wants to an OK from the FMC to look at increased use of alternative fuels, "cold-ironing" (powering a ship from shore when it is at berth in port), and the use of other technologies to reduce air emissions.
"While these practices hold promise for reducing vessels' emissions, the Commission will closely monitor slow-steaming arrangements to ensure that they do not cause unreasonable constraints now that international shipping demand has recovered," Lidinsky said.
(Global Supply Chain Article Continued Below)
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