Stop queuing, start saving

Delays at port are a major cost for all industry stakeholders, from vessel owner to port authority, stevedore to shipper. For ports, long queues at anchorage can also be a major safety and environmental issue.

Many factors can contribute to vessel build-ups at harbour – bad weather, strikes, insufficient infrastructure or superstructure and poor management to name but a few. In June, almost 70 ships were queuing to load sugar off the Brazilian ports of Paranagua and Santos. Over the last year, extensive vessel build-ups have also been apparent at Hong Kong, various Chinese ports, container facilities at Mumbai and the Bangladeshi gateway of Chittagong.

In the overwhelming majority of cases the delays were known about before the vessel left its previous load or discharge port. Despite this, most of the vessels proceeded to congested ports at close to full speed burning huge amounts of expensive fuel and releasing excessive environmentally-damaging emissions in the process. On arrival, vessels then waited for days on end, adding to the port management burden and increasing the safety and environmental risk at anchorage. Two interlinked factors explain this seemingly irrational and costly behaviour - antiquated shipping contracts and berthing priority policies.

Most standard ocean shipping contracts require the vessel to proceed at “utmost dispatch” to the destination port because ports generally queue vessels on a first-come, first-serve basis (FCFS). Voyage charter party arrangements are particularly contrary because the parties tend to have disparate interests. In an FCFS-system, the charterers have a high interest in the early arrival of the vessel since this will determine how fast the vessel is served without impacting on the demurrage rate. In addition, the owner pays the fuel costs under voyage charterparties, something which leaves the charterers without an incentive to agree to slow steaming.

This contractual status quo means that even if a port is struggling with loading delays and it is certain a vessel will be stuck at anchor for days before receiving its cargo, the crew is usually still incentivised to sail at maximum speed.  Given the high cost of bunkers, the weakness of most freight markets, the risk of grounding, pollution or a collision at anchorage, and the fact that the rate of fuel consumption of a vessel increases as the cube of the vessel’s speed, clearly this is madness.

For example, at various times over the last decade as much as 8% of the world bulk carrier fleet has been stuck at anchorage. This may have helped prop up rates, but the operational impact on ports and the environmental repercussions were anything but positive, and could largely have been avoided.

Fortunately then, some enterprising souls are working on solutions to tackle the FCFS-charterparty conundrum that could offer benefits for all stakeholders. First and foremost is Australia’s Newcastle Port Corporation, which in response to the Pasha Bulker grounding back in 2007 introduced a new queuing system and drastically slashed the number of ships waiting to load at anchorage.

Industry organisation Bimco, Intertanko and OCIMP Oil Companies International Marine Forum (OCIMF) have also ploughed time and resources into studying the issue. Where known inefficiencies in the supply chain exist BP, a member of OCIMF, advocates a virtual arrival system in place of a traditional FCFS berthing policy.

Ships can then be slowed down to arrive during a pre-agreed slot saving on emissions and fuel, reducing congestion and cutting crew fatigue in the process. By adding clauses to charter contracts so the system is viable, BP believes charterers can offset their demurrage liability, owners can cut bunker costs and ports can reduce hazards and emissions in their locale.

Classification society Det Norske Veritas has taken things further and developed a new simulation model called ‘Synchroport’ which allows stakeholders to analyse different queue and berthing policies so contractual terms and conditions can be calculated to ensure all parties gain from slowing down vessels en route to busy ports.

Based on the estimated time of arrival (ETA) of the vessel, the model interacts between ship, port and charterer so that when the ship leaves the previous port it notifies the port and an ETA is calculated and a queue number and planned ETA is allocated.

The latest innovations in this field are variations on the slot and booking system used across most other transport modes. The complex scheduling of tramp shipping, weather variations, ship performance and safety are all cited as reasons why this system cannot work in the maritime sphere. But modern technology such as ship tracking and enhanced weather forecasts have removed most of these excuses, while with stakeholder collaboration it is now viable to draw up charter-party contractual clauses which ensure no one loses out. Berth positions could in theory even by auctioned or traded.

What is clear is that the upsides of reform are worth the effort. DNV’s Tore Longva says the potential gains from better queuing systems and supporting maritime contracts are immense. “A large tanker consumes about 100 tonnes of fuel per day,” he says. “If the speed could be reduced by two knots from 14 to 12, the fuel consumption per day could be halved to 50 tonnes.

“So, if the vessel received a notification 500 nm from the port that it could slow down and come five hours later, spending 41 hours cruising instead of 36 hours, the fuel consumption for the trip would be reduced from 150 tonnes to 85 tonnes.

“With a fuel price of $USD600 USD/tonne, the cost savings would be USD$39,000.”

He believes all port stakeholders could benefit from closer analysis of how berthing policies and charter contracts impact their bottom lines and operational efficiency. “Some of these contracts were written hundreds of years ago,” he adds. “But now we have more information about when the berth is available, the weather, the speed of the ship etc.

“We can estimate when that ship would have made it to the queue, and allocate a position based on that. Then the vessel can slow steam and still be loaded at the same time.

“All actors including ports have something to gain from this.”

He might just have a point.