International accountant and shipping consultant Moore Stephens reports an average fall of 2.0 per cent in total annual operating costs in OpCost 2010, its unique ship operating costs benchmarking tool. This is the first time since 2002 that OpCost has revealed a fall in total operating costs, which compares with the 15.8 per cent average increase recorded in OpCost 2009. All cost categories were down this time, except for crew costs, which in recent years have been the single largest contributor to total increases.
OpCost 2010 reveals that the majority of vessel categories experienced a decrease in total operating costs in 2009, the financial year covered by the survey. Costs for the main vessel types in the three sectors covered - bulkers, tankers and container ships – were down. The bulker index decreased by 4 index points (or 2.3 per cent) on a year-on-year basis, while the tanker index witnessed a bigger decrease this year of 5 index points (2.7 per cent). The container ship index (with a 2002 base year) experienced the biggest decrease of 13 index points (7.5 per cent), having recorded the smallest increase amongst the three sectors the year before.
The increases in crew costs in 2009 were at their most moderate levels for a number of years. Costs in this category were up overall by 2.2 per cent, compared to the 21 per cent recorded for the previous year. All tankers experienced increases in crew costs of 2.5 per cent on average. For bulkers, meanwhile, crew costs for smaller tonnage increased by 2.9 per cent on average, but those for the bigger vessels - panamax and capesize - decreased by an average of 2.0 per cent. The box trades experienced decreases in crew costs ranging from 1.2 per cent for container ships to 5.2 per cent and 4.5 per cent for container feedermaxes and container main liners respectively.
For repairs and maintenance, there was an overall decrease across all vessel types. The average decrease of 11.3 per cent, which was the biggest decrease across all cost categories, was in stark contrast to the increase of 13.5 per cent for 2008 and of 12.8 per cent for 2007. There were variations in the cost movements experienced within vessel categories. In general, bulkers recorded an overall decrease of 11.1 per cent, while for tankers and container ships the decrease was 12.6 per cent and 15.9 per cent respectively.
Stores experienced the second biggest decrease, of 6.7 per cent, across all the main tonnage types, and 7.9 per cent across all vessel categories used to produce the indices. This item includes lube oils and other stores expenditure.
The insurance category showed an average marginal decrease of 1.5 per cent, compared to the previous year’s increase of 8.0 per cent. In the cost breakdown, P&I insurance increased by 3.4 per cent on average, while other marine insurance decreased by 5.2 per cent. In general, insurance dropped by 3.4 per cent for bulkers, 4.1 per cent for tankers and 4.9 per cent for container ships.
Moore Stephens partner Richard Greiner says, “These decreases have long been anticipated and are due mainly to the marked fall in costs for stores, repairs and maintenance. The period covered by the report embraces the very peak of the worldwide economic recession, and the effects of that can be seen in each of the cost categories.
“Repair and maintenance costs, for example, were down by more than eleven per cent in 2009, having shown an average increase over the previous two years of more than 13 per cent. But 2007 and 2008 were comparative years of plenty for shipping, while 2009 saw reduced pressure on labour and material costs at repair yards due to demand reductions.
“The rise in P&I costs was to be expected, given the clubs’ need to recover the costs of a number of expensive casualties and to meet the requirements of the regulator in the run-up to Solvency II. And the fall in the cost of other marine insurance is no surprise, given that particular sector’s continuing competitive appetite for business and the decline in vessel values.
“Finally, the rise in crew costs, albeit by only just over one-tenth of the figure for the previous year, shows that, despite technical innovation, people are still shipping’s most valuable, and scarcest, asset.
“Ultimately, costs are a reflection of what the market will bear. Confirmation of the overall fall in operating costs, coinciding as it does with evidence to suggest that confidence in the industry generally is holding up comparatively well, indicates that shipping is sufficiently robust to survive even the most severe economic downturn.”