Container ships are moving at their lowest speed ever

Container shipping has relied on one of its main tricks to keep the worst markets at bay by sailing extremely slowly.

According to Clarkson’s Research, the container fleet moved at its slowest speed ever in the first quarter, with BIMCO’s analysis suggesting ships could be moving even slower.

During the Corona pandemic, liner shipping companies increased the average sailing speed by up to 4% due to strong demand and widespread port congestion. Today the situation is very different and in the first quarter of 2023 the average sailing speed slowed down to 13.8 knots, a 4% decrease compared to the previous year. BIMCO estimates that this rate could drop by 10% by 2025.

Jan Tiedemann, an analyst at Alphaliner, confirmed that liner services have slowed down, in part to accommodate capacity that would otherwise have excess capacity. Nevertheless, in recent weeks there has been a slight increase in the average speed of the global liner fleet, accompanied by falling bunker prices, as can be seen from current Alphaliner data.

According to Alphaliner data, the average speed across the world’s pit fleet has dropped by about a knot over the past two years.

“That doesn’t sound like much, but at a global average of 16.5 knots, that’s about 6% slower, which means it takes X% more tonnage to move the same volume of cargo,” Tiedemann said syringes.

“Slowing down services is a commonly used tool in network operators’ toolbox. Over the last few decades we have seen this used whenever there is either structural overcapacity or high fuel prices – or both. The industry is currently facing both problems,” explained Lars Jensen, founder of container consultancy Vespucci Maritime.

Significant amounts of new capacity are being delivered into a market with sluggish demand growth.

At the same time, Jensen pointed out that new environmental regulations and upcoming CO2 taxes will have the same impact as rising fuel prices.

The record avalanche of newbuildings coming from shipyards in Asia is being poured into services that are progressing more and more slowly.

Maersk and MSC, for example, announced this month that they would add nine additional ships to the Asia-Europe trade, but at the same time added that these services would be up to three days slower than before, thus absorbing all the new capacity.

As shipping companies expect difficult conditions to persist for some time due to sluggish demand and exceptionally high order levels, shipping companies have adjusted their fleets to slow down. For example, South Korean shipping company HMM announced last month its decision to replace the propellers on six container ships with more efficient propellers specifically designed for slow steaming.

The switch to new fuels such as LNG, methanol and ammonia also favors slow speeds, as these fuels will be significantly more expensive than the previous ones, observed Tiedemann from Alphaliner.

“This shifts the balance between capital costs and bunker costs so that it makes sense to deploy additional ships but save fuel,” he explained.

After record profits during the pandemic, liner shipping has been on a downward slide for the past 11 months. Israel’s ZIM and Taiwan’s Wan Hai became the first major liners to post a quarterly loss this month since 2020. Overall, however, slow streaming kept the tide in check for most carriers. Blue Alpha Capital chief John McCown reported Friday that the container shipping industry posted a net profit of $13 billion in the first quarter.

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