Slowing down speeds up cost-savings
What to do when the tanker markets are depressed? Maersk Tankers has taken a hard look at bunker consumption, which e.g. on Maersk Tankers’ Very Large Crude Carriers (VLCC) makes up about 85% of the voyage costs.
The key to improve earnings is super slow steaming. Taking advantage of Maersk Line’s large experience in this field, Maersk Tankers is taking slow steaming to a new level on its VLCCs with speeds as low as 8.5 knots – something that no other tanker owner has done.
By doing so, Maersk Tankers has been able to significantly improve earnings over the past 18 months compared to competitors. Ballasting at 8.5 knots – compared to the normal 14-16 knots - saves an amazing 50% in bunker costs on the ballast leg and removes $400,000 on the bunker bill for a standard round voyage. It also adds another eleven days to the voyage, but as Maersk Tankers’ CEO Søren Skou commented in a recent interview with Tradewinds:
“What it effectively means is that on an Arabian Gulf to Japan or China voyage the fuel savings will pay for the additional days. It doesn’t really cost you to extend the time the voyage takes and you are doing something good for the environment.”
The tanker market is cyclical of nature and as it currently is in a trough, the current rates mean saving cost on bunkers makes better sense than speeding up.
VLCC market's future
Long term, Maersk Tankers regards the market as fundamentally sound, but short term it will surely be turbulent. The VLCC fleet grows by 60 vessels in the coming 12 months and even with oil demand back to at historical high levels it will be a challenge:
"Demand is looking all right - the big question is whether the market is going to be able to absorb all the tonnage that's coming in," COO Kristian Mørch told Reuters in a recent interview. “With this prospect, you should not ignore the advantages of super slow steaming.”
|What does it take?|
In reality it is rather simple: super slow steaming requires engine load to be decreased down to 10%, which is equivalent to 50% speed. This procedure has been approved by the two main producers of VLCC engines, Wartsila and MAN B&W, and only requires a few precautions:
“For Maersk Tankers this is really a no-brainer. We have operational know how and experience to super slow steam and in the current market it can make the difference between making a profit or taking a loss”, Claus Gronborg, Head of Crude says.