Ship operating costs to rise by 3% in two years

Shipowners and managers expect that vessel operating costs, lead by crewing and repairs, will increase 2.9% in the next two years, according to a Moore Stephens survey.

Respondents to the survey indicated that crew wages were expected to increase 2.4% by the end of 2014 and 2.6% in 2015, while repairs and maintenance would go up 2.3% and 2.4%, P&I by 2.0% and 2.2%, drydocking by 2.1% and 2.2%, and management costs by 1.2% and 1.5%, respectively.

Expected crew cost increases followed the implementation of the Maritime Labour Convention (MLC) 2006 which was “likely to be a significant factor in higher labour and crewing costs”, as well as “the strong presence of labour unions in the shipping industry,” and shortages of officers and engineers, according to various responses.

Meanwhile shipowners would be hit by a combination of depressed freight rates, increased operating costs – with a “particularly severe impact on running costs for ships bought prior to 2009” – as well as increasingly expensive regulatory compliance.

One response read: “Most of the costs we have experienced are based on legislation and more and more government interference with doing business”.

Another highlighted the US ballast water treatment rules, and a further response making particular mention of the the 0.1% sulphur emissions cap in the North Sea and North American ECAs, which “will have a serious impact on ships’ equipment maintenance costs.”

“The predicted increases in ship operating costs for this year and next follow the findings in our recent OpCost report that ship operating costs fell by an average of 0.3% across all the main ship types in 2013.

“But the level of increases anticipated for 2014 and 2015 are, at just under 3%, still way below many of those we have seen in recent years. In 2008, for example, operating costs rose by 16%. But there are a number of factors which are likely to drive up costs both this year and next.

 

“Sensible owners with adequate funding are planning for the future by investing in eco-friendly ships and by weighing up the advantages of LNG propulsion. Such initiatives will bring long-term benefits but are likely to increase costs in the short term because new technology and associated research and development costs do not come cheap. On the plus side, oil and gas prices are falling, which should translate into savings for owners and operators, and shipping continues to attract new money from both internal and external investors,” said Moore Stephens shipping partner Richard Greiner.