Coming your way, a 3% rise in Operating Costs

By Maritime Reporter & Engineering News
Thursday, January 02, 2014
(Photo: Alex Sergienko)

A new survey from Moore Stephens finds that vessel operating costs are expected to rise by more than 3% in both 2013 and 2014. While this news should not be unexpected it is nevertheless bad news for ship owners that continue to struggle with low freight rates and over capacity across several oceangoing sectors. In total the survey examined 10 main cost areas, summarized in charts one and two. Crew expenses, broken in two categories as ‘wages’ and ‘other’ by far dominated the cause of cost escalation, accounted for a 4.5% rise in 2013 and a projected 4.7% rise in 2014.
“Crew costs, as always, emerged as a major concern for respondents, which is no surprise given the potential budgetary implications of the entry into force of MLC 2006 and the increasing involvement of both international and regional bodies in the oversight of crew competence and its effect on safety,” said Richard Greiner, Moore Stephens shipping partner.
Running neck-and-neck though were cost increases due to rising insurance costs, with P&I insurance expected to escalate 2.4% in 2013 and by 2.5% in 2014, and hull & machinery insurance projected to increases 2.0% and 2.3%, respectively.
Expenditure on spares is expected to increase by 2.1% and 2.3% in 2013 and 2014 respectively, while respondents anticipate a 2.2% increase in the cost of lubricants in both years under review.  The cost of stores is expected to increase by 1.9% and 2.0% respectively for 2013 and 2014, while repairs & maintenance expenditure is predicted to increase in those two years by 2.3% and 2.4% respectively.
Drydocking costs over the same period are expected to rise by 2.1% and 2.4% respectively. Meanwhile, as was the case in the 2012 survey, management fees are deemed likely to produce the lowest level of increase in both 2013 and 2014, at 1.4% and 1.7% respectively. 
The cost of fuel occupied the thoughts of a number of respondents, one of whom noted, “Fuel costs remain the biggest chunk of our operating expenses due to surging price increases.”
Referring to political volatility in the Middle East and increasing regulation on sulfur emissions levels, another respondent predicted that many owners would “have to switch to Marine Gas Oil, which will involve a very big cost increase. We have already seen how the switch between high and low-sulfur fuel is causing problems for some ships, and instances of black-outs and loss of power are on the increase.”
Moore Stephens also asked respondents to identify the three factors that were most likely to influence the level of vessel operating costs over the next 12 months. Overall, 21% of respondents (compared to 27% in last year’s survey) identified finance costs as the most significant factor, followed by crew supply (20%), competition (18%), demand trends (16%) and labor costs (13%). The cost of raw materials was also cited by 10% of respondents as a factor that would account for an increase in operating costs.
Ship operating costs fell by an average of 1.8% across all the main ship types in 2012, so at first blush the predicted increase in costs for this year and next might come as something of a disappointment,” said Greiner. “In truth, however, the levels of increase anticipated for 2013 and 2014 are still way below many of those we have seen in recent years.”
In regards to increased costs for underwriting, Greiner said “the projected rise in P&I premiums for 2013 and 2014 can be attributed, among other things, to a number of major casualties to which the clubs and their reinsurance underwriters have had to respond, as well as to the escalating cost of wreck removal. For these reasons, the anticipated cost increases are not unexpected. The fact that the projected increases for hull & machinery cover are lower than those for P&I is perhaps an illustration of the difference between physical loss & damage cover and third-party liability cover, and of the distinction between commercial and mutual insurance.”


By the Numbers


Chart 1

Cost type (mean)    2013    2014

Crew wages    2.4%    2.5%

Other crew    2.1%    2.2%

Lubricants    2.2%    2.2%

Stores    1.9%    2.0%

Spares    2.1%    2.3%

Repairs & Maintenance    2.3%    2.4%

H&M Insurance    2.0%    2.3%

P&I Insurance    2.4%    2.5%

Management fees    1.4%    1.7%

Dry docking    2.1%    2.4%

Total operating costs    3.0%    3.2%

Source: Moore Stephens


Chart 2

By Vessel Type


Expected % Cost Increases for Year Ending December 31, 2014

Mean    Bulkers    Tankers    Container    Offshore    Total
            Ships

Crew wages    2.2%    2.4%    2.8%    3.4%    2.5%

Other crew    1.9%    2.3%    2.5%    2.9%    2.2%

Lubricants    2.1%    2.2%    2.6%    2.5%    2.2%

Stores    2.0%    2.0%    2.1%    2.2%    2.0%

Spares    2.3%    2.4%    2.4%    2.2%    2.3%

Repairs &
  Maintenance    2.4%    2.6%    2.4%    2.4%    2.4%

H&M Insurance    2.2%    2.3%    2.8%    2.2%    2.3%

P&I Insurance    2.6%    2.4%    3.0%    2.0%    2.5%

Management
  Fees    1.5%    1.7%    2.1%    2.1%    1.7%

Dry docking    2.2%    2.3%    3.1%    2.5%    2.4%

Total costs    3.0%    3.2%    3.6%    3.5%    3.2%

Source: Moore Stephens

 

(As published in the December2013 edition of Maritime Reporter & Engineering News - www.marinelink.com)

 

Maritime Reporter March 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Finance

Shipping Turns From Banks to Equity Markets for Cash

Shipping companies are turning to equity markets to fill a growing funding gap, betting that investors hungry for decent returns will provide capital to a sector

Canaveral Tops State List for Sand Bypass Funding

The Canaveral Harbor Inlet Sand Bypass Project has earned the top state ranking for 2014/15 inlet management funding. As a result, Port Canaveral is expected to receive $100,

Rotterdam port's throughput almost stable

The Port of Rotterdam’s throughput in the first quarter of 2014, at 109 million tonnes, was 0.2% below the level for the corresponding period last year.Split up by goods type,

News

Canaveral Tops State List for Sand Bypass Funding

The Canaveral Harbor Inlet Sand Bypass Project has earned the top state ranking for 2014/15 inlet management funding. As a result, Port Canaveral is expected to receive $100,

Rotterdam port's throughput almost stable

The Port of Rotterdam’s throughput in the first quarter of 2014, at 109 million tonnes, was 0.2% below the level for the corresponding period last year.Split up by goods type,

PetroVietNam Gas's Q1 gross profit falls 27.5%

PetroVietNam Gas's first-quarter gross profit fell 27.5 percent to 3.9 trillion dong ($185 million) from a year earlier, the Lao Dong (Labour) newspaper reported.

Logistics

Among 2014's Most Powerful & Influential Women: Karen Jones

Commercial transportation and supply chain management firm Ryder System Inc. say that their Chief Marketing Officer, Karen Jones, was named one of 2014’s Most Powerful

Inchcape Shipping Services Opens in Venezuela

Inchcape Shipping Services (ISS), the world’s leading maritime services provider, has expanded its network in Central and South America with the opening of ISS Venezuela in Puerto La Cruz,

Blackstone Unlikely to Enter Commodities Trade

Blackstone exec doesn't expect move into commodities in near term Blackstone Group LP is unlikely to make a foray into commodity trading in the short term as

 
 
Maritime Contracts Maritime Standards Naval Architecture Pipelines Pod Propulsion Port Authority Ship Electronics Ship Repair Shipbuilding / Vessel Construction Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2442 sec (4 req/sec)