SIW1101In the Financial Times last week Bill Gates gave the shipping industry a nice tribute. Asked to recommend a book for Christmas, he chose ‘The Box That Changed The World’. Explaining his choice he described shipping as “one of the cornerstones of globalization”, and said that since reading the book he “won’t look at a cargo ship the same way again”. A small but significant step along the road to wider public recognition.

Unsung Heroes

In 2013 the shipping industry will prove its worth by moving 10 billion tonnes of cargo. An amazing number and a reminder that whatever the state of the market, shipping companies must still deliver the goods. Another statistic that might impress Bill Gates is 1.5 tonnes of cargo delivered per capita. An astonishing number, which includes every man, woman and child on the planet. Of course some import more than others, and as this changes it will challenge shipping in the coming decades.

Must We Do Better?

All this is positive, but looking ahead the the focus is now on delivering more cargo with less carbon emissions. Doing this is hard enough, but how can the industry monitor its progress? One perspective is provided by tracking the tonnes of cargo delivered per dwt per annum. The industry’s performance over the last 20 years shows the complexity. Back in 1986, during a deep depression, the world fleet delivered 6.3 tonnes/dwt. But by 2004 this had surged by 30% to reach to 8.2 tonnes/dwt.

Ship to System Gains

This improvement was driven by a tightening market. With higher freight rates, charterers used ships more efficiently. Ships sailed faster, emitting more carbon, but logistical inefficiencies like multi-port discharge, dead-freight and waiting were squeezed out. For example the US Gulf-Japan grain trade, previously a 55,000 tonne parcel in a Panamax bulker for Panama Canal transit, was downgraded to Supramaxes loading a full cargo with no dead-freight.

Cheap and Cheerful

This performance surge did not survive the downturn. After 2009 the ratio fell to 6.6 tonnes/dwt and by 2013 to only 6.1 tonnes/dwt, lower than in 1986. Slow steaming driven by sky high bunker costs has played a big part in this reduction, whilst rock bottom freight rates encouraged charterers to use cheap ships less intensively. In fact the average global transport performance of the fleet may not be any better than 27 years ago; the flat trendline confirms this.

Living up to Bill’s Accolade

So there you have it. Bill Gates is impressed by shipping’s contribution to the global economy. But shipping is not delivering much more cargo per dwt than nearly 30 years ago. Could tighter logistics help it meet IMO’s carbon footprint target? How does 10 tonnes/dwt in 2030 sound? Certainly challenging, but is it theoretically possible? Now that’s a question worth a closer look. Have a nice day.