No Rush to Speed Up

Malcolm Latarche
Malcolm Latarche

17 May 2016


With bunkers at a quarter of what they cost just a couple of years ago it might be expected that with their major operating expense slashed, ship operators would be throwing caution to the wind and looking to get back to the peak earning days of the pre-2008 crash. The fact that they are not maybe due to the state of the world economy but there are other factors that come into play as well. To some within the industry and to most outside of it, the idea of fuel saving and efficient ships is something that has only just been conceived. Nothing could be further from the truth because shipowners have always been careful to avoid being profligate with fuel for a whole variety of reasons – not all of them economic. When ships were wind powered, fuel of course was free if not always available when needed once the cost of masts, rigging and sails had been accounted for. With first coal and then oil that changed and while motive power was more reliable there was a price to pay for that advantage. Early mechanical power was far less efficient than it is today and in some of the earliest ship the amount of fuel needed meant cargo capacity was minimal. Another reason why shipowners needed to be careful with fuel use was because once sails disappeared a ship at sea without fuel was in desperate trouble and bunkering stations still a rarity in some corners of the globe. Old habits die hard and seasoned engineers will do their best to conserve fuel regardless of the safety margin that should be built into all voyage calculations. Things have improved with regard to both efficiency and availability of fuel but to make the most of the earning capacity of ships – particularly bulk carriers and tankers that are normally fully loaded on at least one leg of a voyage – fuel use must be minimised. It is of course normal to plan voyages taking into account suitable bunkering points so as to maximise cargo intake but each bunkering stop also has costs and time loss associated with it so all factors need to be weighed before deciding. Even when ships are fixed under time charters and the owner is not responsible for providing fuel, the efficiency of the ship is always a factor that plays in determining how attractive it is to potential charterers and to the hire rate negotiated. Today fuel is relatively cheap (although in April when this article was written prices were rising) but bunker prices are subject to market forces and the crude oil price has fluctuated wildly over the course of the last decade. In the last year alone the global average price for IFO380 has been as high as $365 and as low as $110. In mid-April the average price was around $180. Both the current price and the recent high are well below the $600 plus mark of just two or three years ago. For ship operators – head owners and time charterers alike – the key to profitable operations lies in balancing bunker use with potential earnings. That is why when freight rates are high and bunker prices low, ships will sail at higher speeds so as to cover more tonne/miles per year. Conversely when freight rates are low and bunker prices high ships will slow down to the most economic point. Low freights come about because of supply and demand and that is affected by lack of cargo or excess ship capacity. The first is outside of the operators’ control and the latter very much the result of their own actions. In times past, shipowners would have no hesitation in laying up ships not least because ships were generally bought using own funds and there were no finance houses to keep paying and because restricting capacity would not have brought anti-trust regulation into play as such was seen as normal business practice. Today there are very conflicting signals coming from the industry regulators. Restricting capacity by any means can be seen as uncompetitive especially in the liner sector and could carry a threat of official sanction. Slow steaming on the other hand, which has exactly the same effect, is not only touted as environmentally friendly but also made practically mandatory under EEDI regulations. Slow steaming in other sectors can cause a breach of charter party terms so is often practised more on the ballast rather than the cargo leg of a fixture. The current low fuel prices have not generally seen slow steaming being abandoned in any sector. Mostly this is due to the huge overcapacity in all sectors which is keeping freight rates at low levels. So much so that a Capesize vessel that could have commanded a daily rate of in excess of $150,000 in 2008 could only earn $4,000 at the nadir in 2016. As well as slow steaming some vessels that could make use of Suez have taken to sailing around the cape so as to avoid paying canal dues. The Suez Canal Authority has even gone so far as to offer incentives by way of heavily discounted fees to encourage such ships back. Clearly the lower bunker prices, as welcome as they are, have not been sufficient as a financial incentive to tempt owners to speed up which goes some way to proving that prudence is and always has been the main driving factor. It hardly needs to be said that if shipowners were as reluctant to adopt fuel efficiencies as some regulators and observers make them out to be, then there would surely be no reason for any of the equipment makers and service providers to spend vast sums on R&D and bringing products to market because there would be no interested buyers. The very fact that at almost every maritime exhibition products that are not required under any regulatory regime are being promoted by highlighting their fuel saving ability is proof that shipowners do indeed put efficiency high on their list of priorities. There is a spin off benefit as well in that fuel saving to any degree allows owners and the industry in general to boost their green credentials. For every tonne of fuel saved, three and a half tonnes of CO2 is cut from the ship’s emissions. While there is currently no financial penalty for emitting CO2, that situation cannot be relied upon to exist forever and demonstrating reductions can make the ship more attractive to some cargo owners. When it comes to fuel saving through technology rather than operating strategies, shipowners have demonstrated time after time that anything that cuts fuel use or improves operations in any way will be welcomed. Turbochargers have been in mainstream use on ships far longer than they have for most motor vehicles and the constant evolution of the propeller and hull appendages is another example of not being satisfied with the status quo. Adopting ideas is one thing, coming up with them quite another. Shipowners are in business to operate ships by carrying cargo and passengers and they would not consider themselves to be innovative engineers or naval architects. Therefore they cannot force the pace of change other than by adopting the ideas and concepts proposed by others and assuming that the figures stack up most owners are prepared to do just that. We have seen that in recent years with the development of multiple ECO ship designs which at first glance do not seem so different from the traditional ship type they are intended to improve upon. However, the fuel efficiency of ships has improved dramatically over the last 50 years or so and while the low hanging fruit has nearly all been harvested and what is left gives only incremental savings these are still being pursued enthusiastically. Above the waterline little will have changed but beneath the surface there have been many changes. Bulbous bows have shrunk and disappeared in many bulk carrier designs, CFD software has allowed propellers to evolve faster than might otherwise have been possible and where possible larger diameter propellers have added to efficiency gains and hull lines have improved water flow to further improve propeller efficiency. Ducts and propeller cap fins are further examples of efficiency measures. A very good example of the types of technologies involved is Ugland’s 58,000dwt bulk carrier Lunita built by Tsuneishi Shipbuilding at the Cebu shipyard in the Philippines. The builder’s Aeroline bow form which has only a vestigial bulbous bow and which is more rounded in the upper part than conventional designs. According to Tsuneishi, in sea trials it helped to reduce wind resistance by 10%. In addition to its bow design, Lunita employs other fuel saving technology such as an exhaust gas waste heat recovery system that could reduce boiler fuel consumption by a quarter, an optimised propeller design and air ducts in the bridge area that feed cooler air to the main engine turbochargers.