OCEAN CARRIER REVIEW 2006 - Container lines must grapple with energy costs, congestion

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Container lines must grapple with energy costs, congestionBy Paul Scott Abbott, AJOTFuel costs and port congestion head the list of challenges facing global container carriers, which are looking to solutions ranging from installation of shipboard windmills to establishment of reserved berthing windows.
“It’s fuel, fuel and fuel,” Dale Yadlosky, director of pricing and marketing for China Shipping (North America) Holding Co. Ltd., told American Journal of Transportation when asked what he sees as the major issues with which ocean carriers are grappling today.
“There really are only two ways to deal with it,” he said of the fuel cost concern, “by hedging in the futures market or trying to address engineering issues.”
Yadlosky noted that last year, when Maersk Line bought P&O Nedlloyd for some $2.7 billion, a Maersk unit spent $2.95 billion on Kerr McGee Corp.‘s British oilfields.
As far as engineering efforts, Yadlosky cited the fact that Mitsui OSK Lines, Ltd. has put a small wind-power generator on one of its vessels. Innovative hull designs also may yield more efficient use of precious fuel.
“It needs a lot of blue-sky thought,” Yadlosky said, adding that there are limitations on how much carriers can “ratchet up rates.”
Whereas energy costs offer a major internal point of discussion, carrier executives are not necessarily quick to talk about the matter publicly. Indeed, AJOT approached officials of a dozen global container lines for comments on current issues, and most declined to offer their thoughts.
“We’re so fuel-intensive,” Yadlosky said. “I know why nobody touches this. Few people actually talk about it.
“I think these are things the carriers haven’t addressed and they need to address,” he added.
A pair of senior vice presidents for Hamburg Süd North America were happy to share their views on carrier concerns and how their company is addressing them.
“In general, the surge in international trade in recent years, particularly with China, Asia and India, has taxed the world’s transportation infrastructure in many ways,” said Hamburg Süd’s Frank Larkin.
“One of the most obvious ocean transport problems is port congestion,” he said. “Despite major investment in port modernization and expansion, Latin America’s ports have struggled to keep up with growth demands and, in numerous cases, are hemmed in by urban growth, limiting their ability to expand. Legislatures and regulatory authorities have sometimes been slow to provide the resources and approvals needed for expansion of existing ports and the development of new ones closer to emerging growth centers.”
Larkin said his firm, anticipating the growth in cargo volumes at the start of the 21st century, undertook a major investment program, creating new fleets of modern containerships, sized and configured to serve the specific needs of Latin American customers.
“Built for trade with North America, and with North Europe, they are larger, faster and more efficient - helping us achieve new economies of scale and control costs for our customers and ourselves,” Larkin said of the new vessels.
“In the near term, Hamburg Süd has been able to alleviate some congestion delays for its customers by negotiating reserved berthing windows at key Latin American ports,” he said. “However, these can only be useful if we strictly maintain schedules operating within narrow time windows.”
Juergen Pump, a fellow Hamburg Süd senior vice president, offered these thoughts on schedule integrity: “Today, fixed-day sailing schedules have become the norm expected by our customers on most of our major trade routes. But the growth in overall sailings and in the number of ships has produced further challenges at chokepoints like the Panama Canal. Today, we often pay extra charges at the canal to reserve transit windows. Failure to reserve space could result in delays of hours or even days - which can impact berthing commitments at key ports at either end of our trade lanes.
“Now, the canal is considering put

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For more than a quarter of a century, Paul Scott Abbott has been writing and shooting images for the American Journal of Transportation, applying four decades of experience as an award-winning journalist. A graduate of Northwestern University’s Medill School of Journalism, with a master’s magna cum laude from Trinity Evangelical Divinity School, Abbott has served as president of chapters of the Propeller Club of the United States, Florida Public Relations Association and Society of Professional Journalists. Abbott honed his skills on several daily newspapers, including [em]The Cincinnati Enquirer, The Richmond (Va.) News Leader, Albuquerque Journal and (South Florida) Sun-Sentinel, and was editor and publisher of The County Line, a weekly newspaper he founded in suburban Richmond, Va.[/em] A native Chicagoan, he is a member of American Mensa and an ever-optimistic fan of the Chicago Cubs.