OpCost 2011
29 September 2011
Ship operating costs increase again but insurance
costs plummet
International
accountant and shipping consultant Moore Stephens says total annual operating
costs in the shipping industry increased by an average 2.2 per cent in 2010.
This compares with the 2.0 per cent average fall in costs recorded for the
previous year, which was the first time since 2002 that operating costs had
fallen. All cost categories showed an overall increase this time, with the
exception of stores and insurance – with the latter falling by 4.7 per cent
overall.
The findings are set
out in OpCost 2011, Moore Stephens’ unique ship operating costs benchmarking
tool, which reveals that all individual categories of vessel covered by the
research, with the exception of handysize product tankers, experienced an
increase in total operating costs in 2010, the financial year covered by the
survey. Costs for the three main sectors covered – bulkers, tankers and
container ships – were all up. The bulker index increased by 5 index points (or
2.9 per cent) on a year-on-year basis, while the tanker index witnessed a
two-index-point (1.1 per cent) rise. Meanwhile, the container ship index (with
a 2002 base year, as opposed to 2000 for the other two vessel classes) was up
three index points, or 1.9 per cent. The corresponding figures in last year’s
OpCost report showed falls in the bulker, tanker and container ship indexes of
1, 5 and 13 points respectively.
There was a 3.2 per
cent overall increase in 2010 crew costs compared to the 2009 figure, which
itself represented the most moderate increase for a number of years. In 2008,
the report revealed a 21 per cent increase in this category. Tankers overall
experienced increases in crew costs of 2.7 per cent on average, compared to 2.5
per cent in 2009. For bulkers, meanwhile, the overall increase in crew costs
was 4.0 per cent, while for container ships it was 2.9 per cent.
For repairs and
maintenance, there was an overall increase in costs of 4.5 per cent, compared
to the 11.3 per cent decrease recorded for 2009. The biggest increase here was
the 8.0 per cent recorded in the container ship category. For bulkers the
increase was 7.6 per cent, and for tankers just 0.8 per cent. There were
variations in the cost movements experienced within vessel categories. Whereas
operators of handysize bulkers spent an average of 12.0 per cent more on
repairs and maintenance in 2010, those running capsizes recorded an average
increase of just 3.7 per cent. And whereas the average increase in repair and
maintenance costs for panamax tankers was 8.4 per cent, operators of aframaxes
actually spent 1.3 per cent less than in 2009. In the container vessel sector,
meanwhile, increased repair and maintenance spend was fairly consistent across
all box ship tonnage sizes covered by the report.
For the second
successive year, OpCost reveals a fall in the level of spending on stores –
down by 1.0 per cent. Overall, expenditure in this regard was actually up in
the bulker sector, by 1.1 per cent, but down in the tanker trades (by 3.4 per
cent) and in the container ship market (also by 3.4 per cent).
The insurance
category showed the biggest movement in terms of costs – down overall by an
average of 4.7 per cent across all vessel types in 2010. For tankers, the
insurance spend was down by 7.9 per cent, for container ships by 3.8 per cent,
and for bulkers by 2.9 per cent. Panamax bulkers were the only individual class
of ship to spend more on insurance in 2010, while the likes of small chemical
tankers (10.4 per cent), VLCCs (9.8 per cent) and aframax tankers (9.0 per
cent) spent considerably less.
Moore Stephens
partner Richard Greiner says: “The movement in operating costs during 2010 is
fairly consistent with what we might have expected, bearing in mind the big
fall in costs in 2009 and the continuing economic downturn. The average overall
increase in crew costs of 3.2 per cent, up one per cent on the figure for 2009,
is clearly a matter of continuing concern for owners and operators. But it is
modest in comparison to some of the very significant increases recorded in this
category in earlier years. The industry must continue to invest in personnel,
and it is encouraging to see that it is not only doing so, but also doing so
without suffering the huge surge in outgoings that was giving such a lopsided
look to operating costs a couple of years ago.
“The 4.5 per cent
average increase in expenditure on repairs and maintenance compares with a
decrease of more than 11 per cent in 2009, but is significantly down on the 13
per cent-plus increases recorded in both 2007 and 2008. It is also an indicator
not only of increases in the costs of labour and raw materials, but of a
continuing willingness on the part of the industry to pay for the upkeep of its
ships which, with increasingly stringent national and international regulations
coming into force covering the likes of corporate and environmental
responsibility, is a prerequisite for the continuing ability to trade.
“Spending on stores
was down in 2010. This is perhaps something of a surprise, since the category
includes lube oils, the price of which continued to rise throughout 2010, along
with the cost of the additives which go into its manufacture. But the more widespread
fitting of Alpha-type lubricating systems, the fall-off in some areas of trade,
and the resort by some to slow steaming, appear to have made their effect felt
in this regard.
“Insurance costs were
the big mover in this year’s report, with spending down by almost 5 per cent.
Conditions in the insurance market were more benign in 2010 than for a number
of years. The general increases announced by the P&I clubs for 2011 are in
most cases at their lowest levels for more than ten years, reflecting improved
figures for 2010 and more optimistic forecasts for 2011 and 2012. The results
of OpCost also point to a level of informed discernment in the commercial
underwriting sector, with the likes of chemical tankers – notoriously ‘safe’
ships – paying over ten per cent less for their insurance in 2010 than in the
previous year. Tighter regulation and stricter port state control should result
in fewer accidents and, in an ideal world, will feed through to more favourable
insurance rates.
“The global economic
outlook remains both bleak and uncertain. Like other industries, shipping will
both play a part in its recovery and suffer from its consequences. But the
indications from OpCost 2011 are that operating costs are under a measure of control,
which could prove crucial over the next couple of years.”
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