8/3/2019 Latest Ship Operating Cost Data

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Latest Ship Operating Cost Data

Thursday, August 19, 2010

According to Drewerys latest ship operating cost data, its a tough trading environment for vessel operators and thesigns are that it will be difficult to keep a lid on escalating operating costs. Drewry has just published its latest

annual analysis of ship operating costs, covering eight vessel sectors and over 35 different sizes of vessel plus

detailed operating budgets for a range of oil tankers, chemical tankers, gas carriers, dry bulk vessels, containervessels, ro-ro, general cargo and reefer vessels; making it the most comprehensive survey of this crucial area ofvessel management.

With major economies staggering to get back on their feet and emerging economies finding theirs, the trading

environment for vessel operators has been extremely difficult. Operating costs have therefore taken on a greater

significance in the pursuit of business survival, with repair and maintenance, personnel and administration the

softer targets - taking centre stage. If owners and operators timed their contract negotiations well, they will not have

been hit by increased lube and steel prices. However, the less forward thinking or plain unlucky will in 2010 haveexperienced increases in repairs and maintenance (R&M) and lubes. Without a degree of currency hedging, they

may have been hit by a double-whammy.

2010 sees headline operating costs increase by an average of 1.7 to 2% after falling back by an average of 1.5% in

2009. Generally, there was operational cost deflation in 2009 particularly in manning, insurance, administration and

stores. R&M costs rose marginally as there were increases in zinc, copper and steel prices. (Figures 1 to 4 Evolutionof Total operating costs), these raw material price increases also inflated dry docking costs.

Paula Puszet, managing editor commented, Last year saw a retrenchment in the costs of running fleets, the signs are

pointing to an upsurge in 2010/11. The key message being that if owners and managers do not have contracts,

particularly for items such fuel and lubes and repairs and maintenance, they could find their budgets blown to thefour winds."

Main cost heads

Equally important, the Report focuses on the main cost heads Manning, Insurance, Stores & Supplies, Repairs &

Maintenance and Management & Administration with projections for how these areas will perform up to 2014.Some of the key areas to be addressed by fleet owners and managers to keep costs contained:

ManningLate 2008 and 2009 did see soaring wage levels flatten off as global economic growth stalled. However, as there is a

return to growth, and an expanded global fleet, this will create a manning supply/demand imbalance that will drive

wages upwards.

Insurance

From an operating cost aspect, the insurance sector has some good news for vessel owners whose premiums should

have fallen in line with downgraded vessel values (although this doesnt help company balance sheets). Bad news

for the insurers though who are experiencing a drop in revenues.

Stores & Supplies

The headline news here is the decreasing supply of lubes as the number of refineries producing these products has

fallen to a mere handful. The savvy contract negotiators will win out by having secured their supplies; the laggers

will have a problem.

Repairs & MaintenanceFleet owners have been reducing maintenance schedules as much as they dare but the rising cost of raw materials

crude oil and therefore paints, coatings etc is forcing general maintenance costs up.

Management & Administration

The old chestnut of in-house vs third party will have been debated more keenly. The big squeeze on costs has meantcapital projects new systems, new technologies have been put on hold but they cannot be postponed indefinitely.

If things werent tough enough, there are growing compliance and environmental issues with cost implications.