Quotulatiousness

November 1, 2010

Shipping at Age-of-Sail speeds

Filed under: Asia, China, Economics, Germany — Tags: — Nicholas @ 12:40

In an attempt to save fuel, shipping lines have been ordering their ships to go slower. Some of them are now slower than 19th century clipper ships:

For those who haven’t followed the situation closely, many container ships right now have practiced ‘slow steaming’ due to a glut of ships being built worldwide.

Essentially, they are sailing at speeds well below their potential in order to reduce the supply of ships in the market, and thus support shipping rates.

The way this works is that the slower a ship sails, the fewer times it can make a round trip per year. Thus purposely sailing slowly reduces the effective supply of ships. It’s a response to insufficient shipping demand relative to the size of the global container shipping fleet.

Yet these poor shipping companies have taken this practice to such an extreme that many ships are now sailing at speeds slower than old clipper ships from the 1800’s.

H/T to Monty:

Overcapacity in shipping means lower demand for the finished goods overall. This is also a prime reason why export-driven economies (China, Germany) are in for a pretty dramatic adjustment soon. They’ve been counting on an economic recovery in America and Europe to soak up all that excess production, but it looks like things are going to stay weak for at least another six months to a year.

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