It's a 400-m long ship with a top speed

of around 25 knots and carrying capacity

of over 24,000 containers. Everything's

fine in the ship, but still it just

don't want to go more than 15 knots.

This is a story of how moving slower

makes shipping companies billions of

dollars. To understand why a

multi-million-dollar cargo ship would

voluntarily cruise at a slow speed, we

have to rewind to the global financial

crisis of 2008.

In the years leading up to the crash,

global trade was booming. Shipping

companies ordered massive new fleets of

vessels from shipyards in Asia. But

building a mega ship takes time. [music]

By the time these new state-of-the-art

vessels were hitting the water, the

global economy had already collapsed.

And that made the biggest difference for

these shipping companies.

First, consumer demand plummeted,

meaning there was significantly less

cargo to move. Second, a massive wave of

newly built ships entered the market,

creating an extreme oversupply of

vessels. This overcapacity caused

freight rate to completely crash.

And third, the price of bunker fuel, the

fuel that is used in the ships,

skyrocketed to record highs. So, these

shipping giants were bleeding cash at

that time.

Then, Maersk, the world's largest

container shipping company at the time,

pulled a radical lever. They ordered

their captains to throttle down. They

took ships designed to cruise at 24

knots and slowed them down to 21 knots,

a practice that became known as slow

steaming. As the crisis deepened, they

pushed it further, dropping to extra

slow steaming at 18 knots, and

eventually to super slow steaming at 15

knots.

And the financial results of this move

were staggering. In the first quarter of

2009, Maersk posted a $373 million loss.

By the first quarter of 2010, undergoing

widespread slow steaming protocols, they

posted a $639 million profit. To see how

a drop of just a few knots made a

billion-dollar financial swing, we have

to look at the physics of dragging a

massive ship through the water.

Moving a vessel that weighs upwards of

150,000

tons through the ocean requires an

astronomical amount of energy. But the

relationship between a ship's speed and

the engine power required to achieve

that speed is not a straight line. Let's

do some math here. In maritime

engineering, the power required to

overcome water resistance scales

cubically with speed. So, if you want to

double your speed, you do not double

your fuel consumption. You multiply it

by eight. Conversely, and this is the

secret to slow steaming, a small

reduction in speed yields a massive

exponential reduction in fuel

consumption. Studies show that dropping

a ship's speed by just 10% reduces the

engine power required by an incredible

27%,

and that 27% saves a lot of money.

Let's understand it through an example.

Imagine an 8,000 TEU container ship, a

vessel capable of carrying 8,000

standard 20-ft shipping containers. At

its optimal design speed of 24 knots,

this ship will use roughly 225 tons of

heavy bunker fuel every single day. By

slowing down by a mere three knots, the

ship saves 75 tons of fuel a day. With

bunker fuel prices frequently hovering

between $600 and [music] $800 per metric

ton, saving 75 tons equates to keeping

up to $60,000 in the bank every single

day that ship is at sea.

On a standard 30-day voyage from

Shanghai to Rotterdam, slow steaming

saves a single ship $1.8 million in

operating costs. Now, multiply those

savings across a global fleet of 500

vessels and you begin to see why

shipping executives embraced the

strategy. Fuel costs generally make up

50 to 70% of a ship's total operating

expenses, but the genius of slow

steaming goes far beyond simply saving

fuel bill. It fundamentally rewires the

economics of supply and demand across

the entire globe. Remember that massive

oversupply of ships that hit the water

right as the 2008 [music] financial

crisis began? Slow steaming solved that

problem, too. It's a strategy known in

maritime economics as absorbing excess

tonnage. Here's how it works. Ocean

freight operates on strict published

schedules. A manufacturer in China

expects a ship to leave port every

Tuesday and a retailer in Europe expects

that cargo to arrive on a specific date.

If a shipping line is running ships at

full speed, a round trip voyage between

Asia and northern Europe might take 60

days. To maintain a weekly departure

schedule on that route, the company

needs to deploy a fleet of nine ships in

a continuous loop. But what happens when

you slow all those ships down? Suddenly,

that 60-day round trip takes 75 days. If

the shipping line still wants to offer a

weekly departure, those nine ships are

no longer enough to complete the

rotation. They're moving too slowly to

get back in time. To maintain the

schedule, the shipping line is forced to

insert two or three extra ships into the

loop. By slowing down the global fleet,

the industry artificially soaked up all

the extra unused ships sitting in

harbors. They decreased the effective

supply of maritime transport and in

economics, when you decrease the supply

of a service while demand remains

constant, the price of that service goes

up. By running slower, shipping

companies saved billions on fuel and

artificially propped up freight rates,

allowing them to charge their customers

more money. Of course, in a closed

economic system, if the shipping

carriers are winning, someone else is

usually losing. In the case of slow

steaming, the losers are the shippers,

the retailers, manufacturers, and

ultimately the consumers. For the cargo

owners, a longer voyage time is a

financial penalty. [music]

This introduces a concept known as

pipeline inventory cost. If millions of

dollars worth of electronics, apparel,

or automotive parts are sitting on a

slow-moving boat for an extra week,

that's capital tied up on the ocean. It

forces companies to hold more safety

stock in their domestic warehouses,

increasing storage fees, and slowing

down their cash flow. There are also

severe mechanical hurdles. Marine diesel

engines are engineering marvels designed

to run optimally at continuous [music]

high thermal loads. Running a massive

engine at half power for weeks on end

can cause extensive [music]

carbon buildup, accelerated wear and

damage to engine components. To safely

execute slow steaming, [music] companies

have had to invest millions in de-rating

their engines, mechanically adjusting

fuel injection timing, modifying exhaust

valves, and swapping out turbocharger

components so the engines can safely

work even in the slow speed.

Maritime law has centuries of precedent

stipulating that a ship must proceed to

their destination without unreasonable

delay. Intentionally crawling across the

ocean to save money technically violates

many older shipping contracts. The

industry had to draft completely new

legal frameworks as a result. The BIMCO

slow steaming clauses introduced in 2011

to legally protect ship owners who

decided to prioritize efficiency over

speed.

Today, the industry is evolving from

slow steaming to smart steaming,

sometimes called virtual arrival. In the

past, a captain might burn thousands of

tons of fuel racing across the Pacific

only to arrive at the Port of Los

Angeles and find severe congestion. The

ship would then drop anchor and idle for

a week waiting for a berth. Smart

steaming eliminates this waste. By

utilizing satellite data, port

communications, and dynamic routing

software, ships constantly adjust their

speed in real time. If the destination

port is backed up, the ship simply slows

down further, conserving maximum fuel,

and arrives precisely when a birth

opens. So, the era of the maritime speed

is largely over. Sometimes the fastest

way to grow your bottom line is simply

to slow down.

Thanks for watching, and see you in the

next video.