Ship Operating Costs Expected to Rise

International accountant and shipping consultant Moore Stephens says total vessel operating costs in the shipping industry are expected to rise by 2.7 percent in 2018 and by 3.1 percent in 2019.

Responses to the firm’s latest annual Future Operating Costs Survey revealed that drydocking is the cost category likely to increase most significantly in both 2018 and 2019, accompanied in the latter case by repairs and maintenance. The cost of drydocking is expected to increase by 2.1 percent in 2018 and by 2.3 percent in 2019, while expenditure on repairs and maintenance is predicted to rise by 2.0 percent in 2018 and by 2.3 percent in 2019.

The increase in expenditure for lubricants is expected to be 1.9 percent in 2018 and 2.1 percent in 2019. Meanwhile, projected increases in spares are 1.9 percent and 2.2 percent in the two years under review, while those for stores are 1.6 percent and 1.9 percent respectively. The survey also revealed that the outlay on crew wages is expected to increase by 1.3 percent in 2018 and by 1.9 percent in 2019, with other crew costs thought likely to go up by 1.5 percent in 2018 and by 1.8 percent in 2019.

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

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

Respondents to the survey highlighted various areas of concern likely to result in increased operating costs over the next two years. Regulation was high on the list, with one respondent noting: “New regulations will lead to extra costs for all owners, for example the Ballast Water Management Convention and IMO’s 0.50 percent global limit on the sulfur content of fuel oil used on board ships.”

On the subject of crew costs, one respondent said, “We do not expect any major variations in 2019. Basic crew wages for Filipino seafarers, however, will come under review in this period, and we may see some increase there.”

Fuel costs were referenced by a number of respondents. “The cost of fuel treatment equipment will increase in the next two years,” said one, while another remarked, “The sulfur 2020 rules will have a significant impact.”

One respondent noted, “Maintenance in general has been somewhat on hold, and we will see a correction in that in 2018 and 2019,” while another said, “We will see an increase in costs for automation and communications, not least because electronics have a shelf life.”

On a more general level, respondents voiced concerns about environmental issues, trade wars, the cost of securing finance, and the global economic recession, all of which were perceived to have the potential to result in increased operating costs.

Overall, the cost of new regulation was identified as the most influential factor likely to affect operating costs over the next 12 months, at 23 percent, up from equal third place at 15 percent last year. 18 percent of respondents identified finance costs in second place, down from 20 percent and first place last year. Competition ranked in third place at 15 percent as it had last year. Meanwhile crew supply fell to 12 percent compared to 19 percent and second place in last year’s survey.