(EnergyAsia, October 2 2012, Tuesday) — Crew costs are once again the main factor driving up the operating expenses of shipping companies, said international accountant and shipping consultant Moore Stephens.
In its latest survey covering more than 2,700 vessels, the firm said the industry’s total annual operating costs rose by an average 2.1% last year compared with 2.2% in 2010. Crew costs were the main reason for the overall increase in 2011, while the cost of insurance fell for the second year in succession.
The findings are set out in OpCost 2012, Moore Stephens’ ship operating costs benchmarking tool, which reveals that total operating costs for the three main tonnage sectors covered – bulkers, tankers and container ships – were all up in 2011.
Both the bulker and tanker indices increased by 3 index points (or 1.7%) on a year-on-year basis, while the container ship index (with a 2002 base year, as opposed to 2000 for the other two vessel classes) was up 5 index points, or 3.1%.
The corresponding figures in last year’s OpCost report showed increases in the bulker, tanker and container ship indices of 5, 2 and 3 points respectively, said Moore Stephens.
There was a 3.3% overall increase in 2011 crew costs compared to the 2010 figure.
Tanker operators reported a 2.2% increase in crew costs compared to 2.7% in 2010, with operators of LPG carriers of between 3,000 and 8,000 cbm experiencing the highest rise of 6.7% followed by Panamax bulkers’ 5.4%. The Suezmax category reported an increase of 3.4% while bulkers said theirs grew by 2.8% compared to four percent the previous year.
For container ships, the increased spend on crew averaged 3.4%, up from 2.9% in 2010, with smaller vessels up to 1,000 teu paying 3.9% more than last year. There was good news for repairs and maintenance as the industry paid 1.1% less compared to the 4.5% increase recorded for 2010. The only category of tonnage to show an increase here was container ships, where repairs and maintenance costs were up 3.7%.
There was no overall increase in these costs in the tanker sector, and a 1.9 per cent fall in such expenditure for bulkers. Handysize and Handymax were the only bulker types to spend more on repairs and maintenance in 2011, and Handysize product vessels were alone among tankers in this respect.
But large container ship of between 2,000 and 6,000 teu spent 4.4% more on repairs and maintenance. Container ships up to 1,000 teu spent 3.2% more, while operators of box ships of between 1,000 and 2,000 teu reported a 1.5% rise in their repairs and maintenance bills.
Moore Stephens said the shipping industry’s insurance expenditure fell by 1.5% last year to continue the 4.7% decline in 2010. The insurance spend was down for bulkers and tankers overall by 4.5% and 3.4% respectively.
Operators of large container ships paid 0.7% less for their insurance in 2011, but those with smaller container ships paid 3.5% more.
Moore Stephens partner Richard Greiner said: “OpCost 2012 contains both good and bad news for the shipping industry. The bad news is that costs continue to rise. The good news is that costs are not rising as fast, or as steeply, as they were three or four years ago, and are in fact pretty much in line with predictions.
“Once again, it was an increase in crew costs which was the headline figure for the industry in 2011. The average overall increase in crew costs was in fact marginally down on the figure for 2010. This may be a reflection of the economic climate, and a consequence of more companies going out of business and more ships going into lay-up.
“While crew costs remain the single biggest contributor to higher operating costs, they are still modest in comparison to some of the hefty increases posted in earlier years. Investing in good people is a must for the shipping industry, and will justify the price tag in the long term.
“There was a fall of just over one per cent in repairs and maintenance expenditure, this despite continuing increases in the cost of labour and raw materials. Again, this may be a direct result of the economic downturn, which shipping has weathered better than many other industries. But nevertheless there has been reduced activity, a number of victims, and significant pressure on spending in many of those companies that have survived.
“Spending on stores was up in 2011. This is no surprise since the category includes the likes of lube oils, the price of which continued to rise throughout 2011 along with the price of crude oil. New technology in lube manufacture promises to make ships more environmentally friendly, and more efficient, but that will come at greater financial cost.
“Insurance costs were down again, which is not a surprise but an anomaly, given the economic climate and the pure underwriting figures for recent years. In a classic underwriting market undistorted by rampant competition, rates would be going up. As it is, with very few exceptions, they are going down.
“The global economic outlook remains uncertain. Confidence in the shipping industry, while fragile, has held up remarkably well given the financial and political difficulties of recent years. Shipping will not welcome an increase in operating costs.
“But there should be some solace to be had from confirmation that the increases are more or less in line with predictions. In shipping, as elsewhere, it is easier in difficult times to plan for a probability than for an unexpected contingency. And better analysis and risk management makes an unexpected contingency less likely.”