Ship Operating Costs Continue to Rise

OpCost 2007, Moore Stephens’ unique ship operating cost benchmark, reveals that all vessel categories covered by the report experienced an annual average increase of 8.5 per cent in total operating costs in 2006, the financial year covered by the survey, and that, generally, the increases were more marked than in the previous year.

The OpCost bulker index increased by thirteen index points (10.7 per cent) on a year-on-year basis, with handymax bulkers recording the biggest increase (14.8 per cent) in 2006. The tanker index, meanwhile, experienced an index rise of twelve points (9.1 per cent).

For the first time this year, OpCost includes a container ship index. This, using 2002 as its base year, showed a rise of thirteen index points (10.8 per cent) in operating costs in 2006.

While expenditure on repairs and maintenance was up by an average of 9.7 per cent across all vessel categories, the biggest percentage increase -- a hefty twenty per cent - was recorded in respect of stores. Moore Stephens partner Richard Greiner says, “So far as repairs and maintenance is concerned, there were significant variations in the cost movements experienced within individual vessel categories. These ranged from the 19.6 per cent recorded for handymax bulkers to the 6.0 per cent for reefers. In the container ship category, the increase was just over ten per cent.

“It is perhaps not surprising that the biggest increase in all but one vessel category was recorded in respect of stores. A significant part of this will doubtless be attributable to increased costs and supply shortages in the lube oil markets, which are themselves attributable to underlying increases in the price of oil and other base materials. Although these increases first hit the shipping market some eighteen months ago, it seems likely that their effect on operating costs -- offset in some cases by price advantages built into term contracts with suppliers - has taken a little while to filter through.”

Elsewhere, insurance and crew costs were down on the double-digit increases recorded in both categories in OpCost 2006, but still showed percentage rises of 7.9 and 7.6 respectively. Once again, there were wide variations between different vessel types in both categories.

Richard Greiner says, “OpCost has established itself as the primary source of operating cost information for the international shipping industry, and we continue to add new information and new lines of analysis. In addition to the main indices, we have created indices this year for each main vessel type (bulkers, tankers and container ships) in the four main categories of crew costs, stores, repairs and maintenance, and insurance. We have also added three vessel types -- bulkers (10,000 to 20,000 dwt), tankers (5,000 to 10,000 dwt) and dry cargo vessels of 25,000 dwt and over.

“OpCost helps owners, and financiers, to identify areas of operation which are experiencing critical cost increases over a sustained period of time. Running cost information is obtained on a confidential basis from shipping clients of Moore Stephens, and from shipowners and ship managers who voluntarily submit accounts for inclusion. It is now widely used for benchmarking running costs, the preparation and ongoing monitoring of business plans and in forensic accounting”

About Moore Stephens LLP

Founded in London in 1907, the firm is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting networks, with 593 offices of independent member firms in 93 countries employing 17,499 people. Fee income increased in 2006 by some US$200 million to US$1,544.7 million, a growth rate over the last two years of over two thirds, making Moore Stephens International the world’s fastest growing network from 2004 to 2006.

For a copy of OpCost 2007, email: chris@merlinco.com