Shippers would benefit understanding carrier's bottom line: GES
THE more understanding of what affects the carriers' bottom line, the more shippers would help themselves plan for the future and control supply chain costs, says Poonam Datta, chief commercial officer of Charlotte, North Carolina’s Globe Express Services.
"For a lot of shippers, BAF surcharges and actual bunker fuel costs are the least understood concepts. Too often shippers simply defer to whatever their carriers tell them and go along with whatever the consensus is," she said.
Many ships, such as the giant new Maersk Triple E ships, have had physical and system changes to optimise slow steaming, making a return to higher speeds challenging, she said.
The Maersk Triple E's, for example, have less powerful engines than previous large ships and have slightly different shaped hulls, said Ms Datta.
While the fuel bill, despite the plunge in oil prices, remains the biggest carrier cost, and slow steaming was conceived to reduce bunker burn, but it is not its only benefit.
Just as slowing ships down reduced available capacity in any given time frame, so speeding ships up would increase it, said Ms Datta.
"With ship capacity growing faster than container volumes, pushing rates sharply down, the last thing carriers want is more capacity," she said.
The plunge in oil prices can be attributed to three factors, she said.
"First the value of the dollar rose 25 per cent from 2014 and 2015. Since all oil transactions are paid in dollars, this helped cause some of the 70 per cent decline. Most oil exporting countries peg their currency to the dollar. Therefore, a 25 per cent rise in the dollar offset 25 per cent drop in oil prices," she said.
"Second, production continued despite the falling prices because the producers became very efficient in extracting oil. Many producers continued extracting oil because capping a well is very expensive, she said.
"Third, OPEC didn't cut back on the production. In 2014, OPEC abandoned its policy to cut production to maintain a $70 price target. Saudi Arabia, OPEC's biggest contributor lowered its prices to its largest customers in October 2014 to avoid losing its market to the US or Iran," she said.
"Iran plans to double its exports to 2.4 million barrels per day now that the sanctions are lifted. In Feb 2016, Saudi Arabia, Russia and Iran discussed a production freeze, which put a floor to the plummeting prices," she said.
GES forwarding, founded in 1974, operates 60 corporate offices with a presence in 100 countries via agents and employs 1,000 people worldwide.
THE more understanding of what affects the carriers' bottom line, the more shippers would help themselves plan for the future and control supply chain costs, says Poonam Datta, chief commercial officer of Charlotte, North Carolina’s Globe Express Services.
"For a lot of shippers, BAF surcharges and actual bunker fuel costs are the least understood concepts. Too often shippers simply defer to whatever their carriers tell them and go along with whatever the consensus is," she said.
Many ships, such as the giant new Maersk Triple E ships, have had physical and system changes to optimise slow steaming, making a return to higher speeds challenging, she said.
The Maersk Triple E's, for example, have less powerful engines than previous large ships and have slightly different shaped hulls, said Ms Datta.
While the fuel bill, despite the plunge in oil prices, remains the biggest carrier cost, and slow steaming was conceived to reduce bunker burn, but it is not its only benefit.
Just as slowing ships down reduced available capacity in any given time frame, so speeding ships up would increase it, said Ms Datta.
"With ship capacity growing faster than container volumes, pushing rates sharply down, the last thing carriers want is more capacity," she said.
The plunge in oil prices can be attributed to three factors, she said.
"First the value of the dollar rose 25 per cent from 2014 and 2015. Since all oil transactions are paid in dollars, this helped cause some of the 70 per cent decline. Most oil exporting countries peg their currency to the dollar. Therefore, a 25 per cent rise in the dollar offset 25 per cent drop in oil prices," she said.
"Second, production continued despite the falling prices because the producers became very efficient in extracting oil. Many producers continued extracting oil because capping a well is very expensive, she said.
"Third, OPEC didn't cut back on the production. In 2014, OPEC abandoned its policy to cut production to maintain a $70 price target. Saudi Arabia, OPEC's biggest contributor lowered its prices to its largest customers in October 2014 to avoid losing its market to the US or Iran," she said.
"Iran plans to double its exports to 2.4 million barrels per day now that the sanctions are lifted. In Feb 2016, Saudi Arabia, Russia and Iran discussed a production freeze, which put a floor to the plummeting prices," she said.
GES forwarding, founded in 1974, operates 60 corporate offices with a presence in 100 countries via agents and employs 1,000 people worldwide.