Vessel operating costs expected to rise

press release
Monday, October 31, 2011
Moore Stephens shipping partner Richard Greiner

Vessel operating costs are expected to rise by 3.8% in 2011 and by 3.7% in 2012, with lube expenditure and crew costs identified as the categories most likely to produce the highest levels of increase, according to a new survey by international accountant and shipping consultant Moore Stephens.

 

The survey is based on responses from key players in the international shipping industry, predominantly ship owners and managers in Europe and Asia. And those responses identified lubricants as the cost category likely to increase most significantly over the two-year period – by 3.6% in 2011, and by 3.1% in 2012. Crew wages, meanwhile, are expected to increase by 3.1% in both 2011 and 2012, while the cost of spares is expected to escalate by 2.7 % and 2.6 %, respectively, in the two years covered by the survey. Expenditure on stores, meanwhile, is expected to increase by 2.5 % in each of the two years. The cost of repairs and maintenance is expected to increase by 2.8% and 2.6 % in 2011 and 2012 respectively, while the increase in P&I costs for those two years was estimated by respondents at 2.4 % and 2.3 % respectively. As was the case in the previous survey, in 2010, management fees was identified as the category likely to produce the lowest level of increase in both 2011 and 2012, at 1.8 % and 2.0 % respectively.

 

“Bunkers and lubes are our biggest cost,” said one respondent, while another observed, “The cost of bunkers is unrealistically high. There is no reason for that. If the price of bunkers remained at a reasonable level, shipowners would not be struggling in the way they are at the moment.” Another still said, “There will be an inevitable cost consequence of implementing fuel efficiency measures at the request of charterers, while the benefits of such measures will not be seen in terms of operating costs”. One respondent expected dry cargo crewing costs to increase more than tanker crewing costs, while another noted, “The Manila amendments to STCW will result in significant increases for ‘other’ crew costs, especially in respect of training.”

 

A number of respondents expressed concern about overtonnaging and the weakness of rates in the freight and charter markets, “Overcapacity and newbuilding deliveries involving larger tonnage on the main routes will maintain downward pressure on rates,” said one. Another maintained that there was “no sign of resolving the overtonnaging problems in the dry bulk sector”, arguing that this, together with unpredictable trade volumes, would lead to pressure for cost increases and for reflagging as a means of driving operating costs down. Another respondent pointed out, “Depressed charter rates will lead owners to seek in vain to minimise operating costs.”

 

Predictably, worldwide economic and political problems were uppermost in the thoughts of some respondents, with one commenting, “World financial conditions will depress shipping revenues, and this will impact on ship requirements and charter rates.” Another respondent felt, “China’s effective control of the market, together with inflation, will make shipping markets difficult for most people involved in the business.” Yet another said, “It all depends on whether the global economy – and particularly that of the US – can recover, and whether the US dollar continues to be the only currency for oil trading.”

 

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, 26% of respondents identified finance costs as the most significant factor, followed closely by crew supply (25%). Demand trends were in third place, with 14%. In last year’s survey, 30% of respondents identified crew supply as the most significant factor, followed by finance costs, at 28%, and demand trends at 16%. “Finance costs and potential interest rate hikes will be key factors for the market,” said one respondent.

 

Labour costs, competition and raw materials costs were other significant influencing factors which featured in the responses to the survey. One respondent said, “Raw materials will increase in cost, so there will be upward pressure on stores, spares and repairs.” Moore Stephens shipping partner Richard Greiner says, “Ship operating costs increased by an average of 2.2% across all the main ship types in 2010. And it is no surprise that our latest survey anticipates that costs will rise in both 2011 and 2012.

 

“These projected increases are nowhere near the increases we saw in the 2000s. They point to a less volatile period for operating costs. But any increase in costs is going to be a problem for a shipping industry struggling with overtonnaging, declining freight rates, and the cost of regulatory compliance and environmental accountability. Add to that the continuing economic and political problems which form the background to shipping’s operating arena, and you can see that the industry is not going to be for either the faint-hearted or the short-termist.”

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

People & Company News

Australian Defence Minister Says Would Not Trust Submarine Firm to Build Canoe

Australia's defence minister has said he would not trust state-owned Australian Submarine Corp (ASC) "to build a canoe", fuelling expectations that most work in

Matson Raises Guam, Micronesia Rates

Matson, Inc., a U.S. carrier in the Pacific, announced today that Matson Navigation Company, Inc. will raise its rates for the company's Guam/Commonwealth of the

Norwegian Buys Ship from Princess Cruises

Norwegian Cruise Line Holdings Ltd. announces fleet expansion for Oceania Cruises in 2016; Sirena to join sister ships Insignia, Regatta and Nautica   Norwegian Cruise Line Holdings Ltd.

Tanker Trends

US House to Hold Hearing on Oil Export Ban

A House of Representatives panel will hold a hearing on Dec. 11 to explore whether a decades-old law that prohibits the export of crude oil makes sense in an era of domestic energy abundance.

Frontline Disappoints with Deeper 3Q Loss

Frontline, once the world's biggest crude oil tanker company, reported a bigger than expected third-quarter loss on Tuesday and said it is still considering options

Navios Revenue Up 25% in 3Q 2014

Highlights of Navios Maritime Holdings Inc. Financial Results for the Third Quarter and Nine Months Ended September 30, 2014: Revenue 25% increase to $152.

Education/Training

New Training for Man Overboard Response

Falling overboard is a life-threatening emergency, not only for the person in question but also for those involved in their rescue. Every step in the rescue process

Gazprom Transgaz Ufa Organizes Arts Festival

Over 200 healthy children and children with disabilities from Bashkortostan as well as the Volga Region participated in the Breaking the Barriers second interregional children’s arts festival,

Everett College to Launch New Research Boat

Everett Community College’s Ocean Research College Academy (ORCA) will launch its new research vesel on November 22 with a celebration at 11 a.m. at the Port of Everett.

Fuels & Lubes

Is Glycerine the Next Marine Fuel?

Following a year described as “intense activity,” the Glycerine Fuel for Marine Sustainability project (GLEAMS) concluded that Glycerine is a viable, exceptionally clean alternative marine fuel.

Preparing for Low Sulphur Operation

Stricter limitations on sulphur emissions (SOx) will pose many challenges to ships operating in Emission Control Areas (ECAs). If not handled with care, switching

Russian Liftings for Western Options at 12-Year Low

By Gleb Gorodyankin MOSCOW, Nov 25 (Reuters) - Exports of Russian crude oil to Western markets are set to fall by almost a third in December and reach a 12-year

Consulting

Kemp Succeeds Semple at Wood Group

Wood Group announced following changes to its senior management team. Alan Semple, chief financial officer (CFO) has advised the board that he intends to

EMGS to Map Brazil's Gas Hydrates

Electromagnetic Geoservices ASA (EMGS) has received a contract worth USD 1.5 million for a research project in Brazil. The project will use 3D EM data to map

Fulcrum Buys BMT Snyek Technologies

BMT Group announced the sale of BMT Syntek Technologies Inc to Fulcrum Corporation. Fulcrum Corporation, based in Arlington, VA., providies customized services

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Naval Architecture Navigation Pipelines Pod Propulsion Salvage Ship Electronics Shipbuilding / Vessel Construction Winch
rss | archive | history | articles | privacy | terms and conditions | 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: 0.2673 sec (4 req/sec)