It’s Not All Gloom and Doom.

After a steady diet of stories in the maritime trade press about shipping companies teetering on the verge of insolvency, it was refreshing to read the latest news from Neptune Orient Line (Lloyd’s List, Sept. 2).

The Singapore-based shipowner reported a profit of $42.8 million for the first half of the year, compared to a $369 million loss during the same period a year ago. The major reason for the turnaround is the dramatic cost savings achieved by the company’s APL liner operations. APL claims to have reduced operating costs by $504 million in 2012, and another $240 million in the first half of 2013 through a structured program of efficiency improvements across its fleet of 132 ships. The lion’s share, some 60 percent, came from savings in fuel costs. Another 25 percent resulted from terminal productivity improvements.

Measures implemented by APL in 2012 included more accurate speed measurement and control, vessel monitoring, trim optimization, port ETA management, cold-ironing in port, use of larger vessels to achieve lower costs per container, better scheduling and a crew incentive program to focus the attention of on-board personnel on improving fuel efficiency. This year, the company is focusing on standardizing operating procedures across the fleet, a structured vessel retrofit program to improve technical efficiency, improved procedures for bunkering, careful bunker purchasing and selective replacement of older tonnage with newer more efficient ships.

APL vice president Søren Anderson was quoted as saying this is just the beginning. He insists there is still plenty of room for further cost reductions.

Refreshing news indeed!

The subject of operating efficiency and cost reduction is the fundamental question that will be addressed at the SHIPPINGInsight 2013 Fleet Optimization Conference, which takes place Oct. 23-24 in Stamford, Connecticut. (Full disclosure: my company is co-owner of the conference.) Executives from over 17 major shipping companies will be joined by experts from classification societies, bunkering companies, engine manufacturers, naval architects, shipyards and suppliers of equipment and services, to examine practical solutions to improve ships’ operating efficiency.

You can register online at www.shippinginsight.com/event-registration. I urge you to register soon and to book your room at the Stamford Sheraton at www.shippinginsight.com/location. It’s likely rooms will be sold out, so you should act quickly to take advantage of the special conference rate.

Shipping Faces Some Grim Realities

What if the predictions of economic recovery are wrong? Clay Maitland takes a hard look at the prospects for the future, and it’s not necessarily a pretty picture. 

I commend to your attention the article posted earlier this month by Clay Maitland on his blogsite. In his own inimitable style, he presents the case that shipping companies are not coming to grips with the new harsh reality of a lingering and resilient worldwide recession affecting world trade. See his full text at http://www.claymaitland.com/2012/08/01/shipping-faces-some-grim-realities/.
Mr. Maitland is a well-known figure and astute observer of the international maritime scene. He is managing partner of International Registries, Inc., and chairman of the North American Marine Environment Protection Association. He will be the keynote speaker at the SHIPPINGInsight 2012 Fleet Optimization Conference in Stamford, Conn., October 8-10. I can guarantee you’ll find his comments illuminating, interesting and entertaining.  Register online now at www.shippinginsight.com, to take advantage of early-bird discounts.

Korean Yards Hold Fire Sale

Further proof that the glut of overtonnage is not going away anytime soon. 

MarineLink.com reported today that Korean shipowners are struggling to rid themselves of unsold ships at substantially lower than market prices. Daewoo is trying to sell a pair of 320,100 dwt crude carriers after the buyer withdrew orders for the ships. The orders had been placed during the heady days of 2007. Likewise, STX has put up for resale three 57,000 dwt bulk carriers after the buyer refused delivery. Industry analysts expect more unsold newbuilds to be placed on the market at knock-down prices.
The industry faces a near-term future of overcapacity, low freight rates and rising fuel prices. New ships ordered in the boom years prior to the recession are still coming into the fleet (albeit at very attractive prices for shipowners bold enough to buy them). Scrapping is part of the answer, but is not removing old tonnage fast enough to make a difference soon. Likewise, bankruptcies of shipping companies will not make the number of ships go away.

What this means is that fleet operators will need to reduce operating costs to survive in this grim economic climate. To that end, the 2012 SHIPPINGInsight Fleet Optimization Conference, October 8-10, in Stamford, Connecticut, will address mitigation measures and best practices for trimming costs and improving operational efficiency.  More than 30 speakers from all segments of the industry have been signed up. Online registration is open, and you can save money by registering early at www.shippinginsight.com.

Rising fuel costs + low freight rates = net loss for container fleets

More sad faces at major container lines. Hapag-Lloyd blames soaring fuel costs for 2nd quarter loss.

Bloomberg today reported that Hapag-Lloyd AG, Europe’s fourth-largest container line, reported a second-quarter loss after soaring fuel costs offset modest improvements in freight rates. The CEO, Michael Behrendt, was quoted as saying, “High bunker prices in particular cause our expenses  to increase dramatically – they are by far the biggest cost factor for our business.” The company said the average fuel price jumped 14 percent to $694 per ton during the last year. Freight rates did not keep pace. The weighted average freight rate in the second quarter increased 7.4 percent to $1,594 over the first quarter of 2012, and was 4.1 percent higher than Q2 2011. Behrendt noted succinctly, “The cargo on board our vessels has to cover the cost of transportation.” Sad but true.

Hapag Lloyd operates a fleet of 147 containerships with a total fleet TEU capacity of 667,531 TEU. The company took delivery of the 10,000 TEU Hamburg Express last month, and has another nine 13,200 TEU ships on order.

Hapag-Lloyd is in good company. Bloomberg noted that A.P. Moeller-Maersk and CMA CGM both posted losses last year. The combination of overtonnage on key routes, sluggish growth in world trade volumes, soaring fuel costs and persistent low freight rates will not get better soon, and it is critical for fleet operators to seek out new ways to reduce operating costs.

To that end, I encourage you to attend the 2012 SHIPPINGInsight Fleet Optimization Conference, October 8-10, in Stamford, Connecticut, where industry experts will deliberate on technical solutions and best practices to optimize efficiency of ship operations.

I am especially happy to tell you that Clay Maitlandhas agreed to serve as keynote speaker for the conference. I am certain his unique expertise and insights will enrich the debate. He joins a top-notch roster of more than 30 speakers. You can register online and take advantage of early-bird discounts.

Note: This post originally appeared in the Maritime Professional, one of our media partners.

The Relentless Law of Supply and Demand

Even China’s go-go shipbuilding industry is feeling the effects of the slowdown in international trade and shipping overcapacity, which shows no signs of easing in the short term. Shipping fleets will need to trim operating costs to survive in this environment.

You may have seen the news item in MarineLink.com dated July 29 that China’s shipyards suffered a 49 percent plunge in orders during the first 6 months of 2012. This is clearly the result of a glut of shipbuilding capacity trying to sell into a marketplace already sufferening from overcapacity and low freight rates. The surge in shipbuilding in China was fueled by the country’s appetite for raw materials and low-cost government financing for new ships. Many of the ships ordered during the binge of 2007 are still trickling out of the shipyards to face an uncertain employment. The Baltic Dry Index, according to the article, has dropped 26 percent in the past year to 958. In May 2008 it was 11,793.

The global fleet of capesize vessels has doubled in the last five years according to Clarkson, and three-year charter rates are around $10,000 per day, down from $55,000 five years ago.

In this economic climate, it becomes even more imperative for ship operators to reduce operating costs and improve efficiencies in ship operation. Fuel is the most immediate target, since it represents a huge percentage of operating costs, but fleets will need to put all aspects of operating costs under scrutiny.

That’s the idea behind the ShippingInsight Fleet Optimization Conference, which is scheduled to take place October 9-10 in Stamford, Connecticut. More than 30 speakers have been lined up to address their areas of expertise, including ship design, hull performance, alternative fuels, bunker management, regulatory compliance, voyage management, weather routing and KPIs. Registration is now open at www.shippinginsight.com.

Note: This post was originally written for the Maritime Professional blog.

SHIPPINGInsight Fleet Optimization Conference to Address Compliance Strategies for Mandatory Emission Reductions

The North American Emission Control Area, which came into effect today (August 1) will have a far-reaching impact on the cost of operating ships. Compliance strategies and best practices will be hot topics at the upcoming SHIPPINGInsight Fleet Optimization Conference.

I’m sure you saw the news that the North American Emission Control Area is now in effect. This means ships operating on the coasts of North America will have to comply with the new limits on emissions of sulfur oxides (SOx), nitrogen oxides (NOx) and particulate matter. North America is the third ECA in effect. The other two are the Baltic Sea and North Sea. A fourth ECA covering Puerto Rico and the U.S. Virgin Islands is expected to be established next year.

Ships can comply with the SOx requirements by switching to low-sulfur fuel oil, installing  approved scrubber technology or alternate fuels such as LNG. Marine diesel engines installed on ships built after January 1, 2011, must meet the MARPOL Tier II standards for NOx emissions, and ships built after January 1, 2016 will have to meet the more stringent Tier III NOx standard.

Ships not meeting the standards will presumably have to be routed around the ECA compliance zones. This will of course be impossible for ships trading in U.S. ports or in much of Northern Europe.

It’s interesting to note that at least one ship routing software supplier, Applied Weather Technology, announced today that ECA zones will be displayed on their voyage planning screens.

As fleets struggle to reduce the rising costs of ship operation, the costs of regulatory compliance will have to be weighed with the other variables to optimize efficiency.

I encourage you to attend the 2012 SHIPPINGInsight Fleet Optimization Conference, where the costs and strategies for regulatory compliance will be discussed. The conference will take place October 9-10 in Stamford, Connecticut.  You can register online and take advantage of early-bird discounts.

View the original post here.

KPIs are Key to Cost Reductions

You may have seen the announcement, reported on MarineLink.com last week, that Maersk Line has saved almost USD$90 million on fuel costs in three years by measuring the performance of individual ships.

Key Performance Indicators (KPIs) were developed for each vessel by Maersk Line Vessel Management and Maersk Maritime Technology, which is in charge of the Maersk Ship Performance System (MSPS). For each ship, MSPS monitors and produces a scorecard for each ship’s KPIs.

Maersk reports that the KPIs have made it possible for the company to save 160,000 tons of fuel through higher propulsion efficiency. This does not include savings from other energy efficiency measures such as trim optimization or load reductions.

Want to know more?

KPIs will be a major theme at the Fleet Optimization Conference, which will be held in Stamford, Connecticut, October 9-10. Maritime Reporter and Maritime Professional are the media sponsors.

Frank Soccoli, ShippingInsight conference co-director, commented, “Rising bunker costs and increased regulatory requirements for emissions reduction are primary drivers for improving ships’ fuel efficiency. A critical element in developing strategies for efficiency gains is establishing, monitoring, measuring and reporting on KPIs. We will have panels of experts presenting the latest technologies, techniques and best practices for ship KPI management at the Fleet Optimization Conference.”

You can save money by registering online and taking avantage of early-bird discounts. Read the original post here.

Container Shipping: More Ups and Downs Ahead

The container shipping sector faces a challenging future as additional capacity comes into service, threatening the tenuous recovery in freight rates. That’s the conclusion in a recent article by Greg Kowler in the June 2012 issue of Maritime Reporter. The author notes that the container shipping industry lost US$16 billion in 2009, rebounded with a profit of US$20 billion in 2010 and lost $US8 billion in 2011. And 2012? “Break even is about the best prediction availabile even with a surge in freight rates as general freight increases (GRIs) imposed by the carriers in the first few months have largely stuck,” said Knowler.

The reason for this volatility is clear –  too much capacity – and some industry watchers are warning that the market will not be able to absorb the enormous surge in capacity as the next generation of supersized containerships on order are delivered. Maersk Lines will start taking delivery of its 20 18,000-TEU ships next year. OOCL has placed orders for 10 13,000-TEU ships for delivery in 2013-14. Evergreen Marine has 35 8,800-TEU ships on order, with deliveries of one ship per month for the next three years.

The key to profitability will be optimizing utilization. Container lines will struggle to find the right balance of lower cargo loading, scrapping older tonnage, idling some capacity, slow steaming, alternative fuels, better voyage planning, weather routing and other strategies.

The article cites a Maersk Lines spokesman as saying, “In the old days, the most expensive cost was the ownership of your assets and carriers wanted to utilize them to the highest degree possible. But now with bunker fuel being so expensive, we are entering a time when the highest utilization may not be the model that gives a liner operator the best economy.”

Knowler concludes that “Rising bunker prices are hiking operating costs and as trade volume slumps, lines have been forced to focus on trimming costs and improving efficiency.”

Efficiency and cost control are the new imperatives in today’s shipping industry. The SHIPPINGInsight Fleet Optimization Conference, which takes place in Stamford, Connecticut, October 9-10, will provide a forum for discussion of the challenges, strategies and solutions for improving ship and fleet operating efficiency. The two-day conference is sponsored by Maritime Reporter and Maritime Professional.  Registration is open now at www.shippinginsight.com, and discounts are available for early-bird registration.

View the original posting here.

Survey Results: Confidence Rises Marginally, but Operational Costs Must Be Reduced

A recent survey by an international accounting firm reveals that confidence levels in the shipping industry are rising modestly. But the fundamental issues of overtonnage, low freight rates and economic/political turmoil remain, and shipowners see reducing operating costs as critical in the coming years.

I am grateful to my friends at The Maritime Advocate, an excellent e-news summary for the maritime legal profession, for calling attention to a recent survey on confidence levels in the shipping industry.  The survey, conducted by the international accounting firm Moore Stephens in May revealed that the average confidence level among all industry sectors was 5.7 on a scale from one to ten. This is slightly higher than the 5.5 average recorded in a similar survey taken in February.  By category, the confidence levels in the May survey were: ship managers 6.0, owners 5.6, charters 5.0 and brokers 5.0.

The survey results – showing confidence levels at just slightly above 50% - reflect a lingering atmosphere of uncertainty within the industry, which still faces a future — at least for the next 12-24 months – driven by overtonnage, low freight rates and political and economic crises in the eurozone and elsewhere.
The survey also reveals a continuing focus on reducing operating costs.  Moore Stephens partner Richard Breiner stated: “The number of resopndants to our survey who cited operating costs as a signifant performance-influencing factor is as high now as at any time in the past four years.  Both cost increases, which are expected to continue for the next two to three years, can be ameliorated to a certain extent by good husbandry and sound business planning, and will of course be more easily borne in a profitable freight market.” He also noted the renewed interest in eco-friendly ships running on alternate fuels to address the lingering high cost of bunkers.

These are the issues that will be addressed at the ShippingInsight Fleet Optimization Conference, at which business leaders and technical experts from all segments of the shipping industry willo gather to discuss the challenges and solutions of improving ship operating efficiencies.

Read the original post here.