September 28, 2010
Survey shows ship operating costs fell in 2009
International accountant and shipping consultant Moore Stephens reports an average fall of 2.0 percent in total annual vessel operating costs in OpCost 2010, its ship operating costs benchmarking tool.
This is the first time since 2002 that OpCost has revealed a fall in total operating costs. And it contrasts with a 15.8 percent 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 indicates that the majority of vessel categories had 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 containerships - were down. The bulker index decreased by 4 index points (or 2.3 percent) on a year-on-year basis, while the tanker index witnessed a bigger decrease this year of 5 index points (2.7 percent). The containership index (with a 2002 base year) experienced the biggest decrease of 13 index points (7.5 percent), having recorded the smallest increase amongst the three sectors the year before.
Increases in crew costs in 2009 were at their most moderate levels for a number of years. They were up overall by 2.2 percent, compared to 21 percent the previous year. All tankers experienced increases in crew costs of 2.5 percent on average. For bulkers, meanwhile, crew costs for smaller tonnage increased by 2.9 percent on average, but those for the bigger vessels - panamax and capesize - decreased by an average of 2.0 percent. The box trades experienced decreases in crew costs ranging from 1.2 percent for containerships to 5.2 percent and 4.5 percent 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 percent, which was the biggest decrease across all cost categories, was in stark contrast to the increase of 13.5 percent for 2008 and of 12.8 percent for 2007. There were variations in the cost movements experienced within vessel categories. In general, bulkers recorded an overall decrease of 11.1 percent, while for tankers and container ships the decrease was 12.6 percent and 15.9 percent respectively.
Stores experienced the second biggest decrease, at 6.7 percent, across all the main tonnage types, and 7.9 percent 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 percent, compared to the previous year's increase of 8.0 percent. In the cost breakdown, P&I insurance increased by 3.4 percent on average, while other marine insurance decreased by 5.2 percent. In general, insurance dropped by 3.4 percent for bulkers, 4.1 percent for tankers and 4.9 percent for container ships.
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 percent in 2009, having shown an average increase over the previous two years of more than 13 percent. 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."
Mr. Greiner said the rise in P&I costs "was to be expected," while the fall in the cost of other marine insurance was "no surprise, given that particular sector's continuing competitive appetite for business and the decline in vessel values."
"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," he said.
"Ultimately," said Mr. Greiner, "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."
The latest report marks the tenth year of publication for OpCost, which this time includes data from a record 2,550 ships, more than 16 percent up on the previous year. It also incorporates a new vessel category - LPG carriers of 10-40,000 cu. m. Running cost information is obtained on a confidential basis from clients of Moore Stephens, and from other shipowners and ship managers who submit data for inclusion. OpCost is widely used for benchmarking running costs, the preparation and ongoing monitoring of business plans and in forensic accounting. Copies of the OpCost 2010 report are available free to owners who submit their data for inclusion, or can be purchased by contacting Richard Greiner at Moore Stephens London.