Slow Steaming, a means by which carriers can achieve an environmentally more friendly record within the new carbon emissions regulations, but which is also a common strategy when supply exceeds demand , could see average sailing speeds fall by 10% before 2025, according to BIMCO’s chief shipping analyst, Niels Rasmussen.
When freight rates and the spot market declines, as it has done (dramatically) since the heady days of late 2020 and 2021, lower speeds can be an effective way of managing capacity supply. But lower sailing speeds also reduce bunker oil consumption and greenhouse gas emissions. In other words, there is now one added incentive to have your vessels travelling more slowly, even when the price of carrying goods picks up.
BIMCO said that “during the Covid-19 pandemic, liner operators increased the average sailing speed by up to four percent 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 has slowed to 13.8 knots, down four percent year-over-year.”
New environmental regulations from the International Maritime Organization, including the Energy Efficiency Existing Ship Index (EEXI) and the Carbon Intensity Indicator (CII), incentivize shipowners to slow the speed of vessels to reduce fuel consumption and in turn emissions.
BIMCO noted that some ships have had to install Engine Power Limitations (EPL), reducing their top speed, in order to comply with EEXI. To maintain the buffer between the top speed and scheduled speed creating the cushion to allow ships to recover from delays in port or due to weather, carriers have had to reduce schedule speeds and extend travel times for customers.
The CII regulation officially implemented by the IMO at the beginning of 2023, could drive further reductions in sailing speed, said BIMCO.
Average sailing speed has reduced significantly, although the traditional faster speed in the head-haul direction remains, reported BIMCO in its analysis of ship operations. It noted that the adjustments in schedules had impacted mainly the faster head-haul direction, while also narrowing the difference in speed between the directions. Larger ships sailing intercontinental trades have continued to sail faster than the smaller ships in intra-regional trades
Rasmussen said, however, that “these traditions may be about to change.” While in 2019 the largest ships sailed on average 2.6 knots faster than the smallest ships, that differential had narrowed to 1.8 during Q1 2022 and down 1.6 knots during Q1 2023, he noted.
As a result, the average sailing speed weighted by the ships’ teu capacity fell by 6% year on year in Q1 2023. The simple average sailing speed fell only 4% yoy. “Supply has therefore decreased faster than the sailing speed. The speed difference between head-haul and back-haul direction may also be reduced in the future”, said Rasmussen.
BIMCO accepted other potential impacts on the market. For example the lower average sailing speed might be due to improved port efficiency as the impact of the pandemic has faded.