Shipping has been an important part of history dating back to the Egyptian coastal sailships of 3200 B.C., predominantly in areas where prosperity has depended primarily on international and interregional trade. The maritime shipping industry is responsible for moving over approximately 90% of the world’s traded goods. Entire countries down to your local mom-and-pop stores rely heavily on the success of this industry.
With that said, the shipping industry is currently battling some very strong headwinds due to soaring bunker costs and sinking freight prices, among other things.
Today, we have seen bunker costs represent more than 50% of total costs. Not only have these costs reached record highs – they continually become extremely volatile due to widespread fluctuations in crude oil prices. Companies must find a way to successfully manage bunker volatility, or they will not fare well in today’s stormy business environment.
A recent article by The Boston Consulting Group (BCG), “Fueling a Competitive Advantage: An End-to-End Approach to Cutting Bunker Costs,” proposes a holistic approach to managing bunker costs. The article, aside from addressing a number of concerns around analytical and organizational complexities, details an important key to success–using real-time decision support tools.
Since all fuel price increases can’t be passed through to customers, the shipping company that best manages price risk will gain competitive advantage. To succeed, shipping companies need enterprise-wide information transparency and fast access to actionable data.
Triple Point’s Softmar Chartering and VesselOps™ is a next generation shipping solution that delivers a complete picture of enterprise position and exposure, and analyzes any combination of cargoes, vessels, load, and discharge operations. It enables the commercial maritime community to protect profits, make more informed and proactive decisions, and streamline day-to-day operations by providing advanced, actionable business intelligence. Learn more
Shipping lanes remain the great conduits of commerce. Like the great empires of old, today’s modern trading enterprises are built on naval strength and maritime capabilities, and 90 per cent of the world’s traded goods are transported by sea.
But although the majority of raw materials and finished goods reach their destination by sailing the seven seas, the reality of commercial shipping is much more constricted than the old cliché implies. It may well face fewer logistic challenges than transporting goods across huge land-masses, but getting cargo from one point to another is far from straightforward, and there are still plenty of constraints on where and how goods can be transported.
Oil products and minerals are the most transported commodities, and the location of these resources determines many of the shipping lanes for bulks. The importance of large manufacturing regions and consumption markets also give structure to the most common maritime routes. Then there are the physical constraints: coasts, winds, marine currents, depth, reefs, and ice all play their part in determining where ships can and can’t be sent – as of course do political boundaries. There is a reason that today’s supertankers plough the same waves as the great tea clippers of the 19th century.
However, many of the maritime routes that traverse the rest of the globe are only a few kilometers wide, and a limited number of strategic ports to serve these congested shipping lanes. Even ships on the popular trans-Atlantic and trans-Pacific routes, which have a far greater choice of routes and ports, still tend to congregate around tried and tested ‘Great Circle’ paths and the ports that serve them.
So a ship cannot simply turn up in a strategic port and expect to discharge one cargo, pick up another and sail off into the sunset. One of the most critical elements in managing the profitability of any voyage, therefore, is assessing port availability, and to include that information when calculating voyage distances, bunker fuel requirements, and the type of cargo to be carried. A ship sitting idle while waiting for a berth in one of the world’s shipping choke points will be missing its laycans, possibly destroying its cargo and definitely losing business. It is effectively throwing money overboard.
Port availability is also a critical factor in determining the level of risk of any given voyage. This is not simply the financial exposure to freight rate volatility and counterparty credit risk – although again an idle ship will have deleterious effects on both – but also the personal risk of piracy. Pirates off the Somali coast and in the Gulf of Aden have already caused shippers either to pay exorbitant war risk insurance premiums, or to re-route and add delays and extra fuel costs to the journey. UNCTAD’s 2009 Review of Maritime Transport found that, based on 2007 data, re-routing 33 per cent of cargo from the Suez Canal to the Cape of Good Hope because of piracy concerns would cost ship owners an additional $7.5 billion per annum.
So charterers, ship owners and operators need accurate, up-to-date and comprehensive information on all the ports on their routes. And not just whether there is room for them. Shipping firms need quick identification of port positions – individually, by country and by zone. They need pilot information and the restrictions on draft, length overall (LOA) and beam to make sure the port can take a given vessel. They need latitude and longitude values and the UNLOC code as well as distance and routes to other ports. Even information about GMT offset and Daylight Savings Time is essential if journeys are to be optimized and delays minimized.
