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And the survey says: Ship operating costs to rise in 2018 and 2019

Written by Nick Blenkey
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Richard Greiner, Moore Stephens partner, Shipping and Transport

OCTOBER 25, 2018 — Total shipping industry operating costs are expected to rise by 2.7% in 2018 and by 3.1% in 2019, according to the latest annual Future Operating Costs Survey by international accountant and shipping consultant Moore Stephens.

Drydocking is the cost category likely to increase most significantly, up by 2.1% in 2018 and by 2.3% in 2019, with spending on repairs and maintenance is predicted to rise by 2.0% in 2018 and by 2.3% in 2019.

The increase in expenditure for lubricants is expected to be 1.9% in 2018 and 2.1% in 2019.

Projected increases in spares are 1.9% and 2.2% in the two years under review, while those for stores are 1.6% and 1.9% respectively. The survey also indicated that the outlay on crew wages is expected to increase by 1.3% in 2018 and by 1.9% in 2019, with other crew costs thought likely to go up by 1.5% in 2018 and by 1.8% in 2019.

The cost of hull and machinery insurance is predicted to rise by 1.3% and 1.6% in 2018 and 2019 respectively, while for protection and indemnity insurance the projected increases are 1.2% and 1.4% respectively. Management fees, meanwhile, are expected to increase by1.0% in 2018, and by 1.2% in 2019.

The predicted overall cost increases were once again highest in the offshore sector, where they averaged 4.1% and 4.2% respectively for 2018 and 2019. In contrast, predicted cost increases in the bulk carrier sector were 1.8% and 2.6% for the corresponding years. Operating costs for tankers, meanwhile, are expected to rise by 2.4% in 2018, and by 2.9% the following year, while the corresponding figures for container ships are 4.2% and 3.8%.

“The predicted 2.7% and 3.1% increases in operating costs for 2018 and 2019 respectively compare to an average fall in actual operating costs in 2017 of 1.3% across all main ship types recorded in the recent Moore Stephens OpCost study,” says Richard Greiner, Moore Stephens partner, Shipping and Transport. “One year ago, expectations of operating cost increases in 2018 averaged 2.4%, so the increase now in that expectation to 2.7% must be regarded as sobering – if not unexpected –news. Projected increases in operating expenditure are part and parcel of the workings of any industry, and must be factored into budget projections. But these latest predicted increases, whilst a cause for concern, should not unduly surprise or concern shipping, an industry which has seen – and in many cases endured – much larger increases during the past decade.”

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