Vessel operating costs are expected to rise in both 2015 and 2016, particularly for crew wages, repairs and maintenance, and drydocking, according to the latest survey results from Moore Stephens.
Key players in the international shipping industry, predominantly ship owners and managers in Europe and Asia, indicated they expect operating costs to rise by 2.8% in 2015 and by 3.1% in 2016.
The industry forecast of increases in operating costs for this year and next contrasts with a slight decline in 2014, said the report.
Shipping partner Richard Greiner says, “The predicted increases in ship operating costs for this year and next compare to an average fall in 2014 of 0.8% in operating costs across all main ship types recorded in our recent OpCost report. Nevertheless, the level of increases anticipated for 2015 and 2016 (is) low in comparison with many we have witnessed in recent years. Shipping has seen much worse, and prevailed. For example, many of the companies which endured a 16% rise in operating costs in 2008 are still operating successfully today.”
Crew wages are expected to increase by 2.4% in 2015 and by 2.3% in 2016, with other crew costs thought likely to go up by 2.0% and 1.9%, respectively, for the years under review. The report said the entry into force of the Maritime Labour Convention 2006, which mandates the manner in which seafarers must be paid, is a key consideration for the hike in crew salaries.
The cost of repairs and maintenance is expected to escalate by 2.3% in 2015 and by 2.4% in 2016, while drydocking expenditure is predicted to increase by 2.6% and 2.3% in 2015 and 2016, respectively.
Hull and machinery insurance is predicted to incur higher costs, too, rising 1.8% and 1.9% in 2015 and 2016, respectively, while for protection and indemnity insurance the projected increases are slightly lower at 1.7% and 1.8%, respectively.
Expenditure on spares is expected to rise by 2.3% in 2015 and by 2.2% in 2016, while for stores the corresponding projected increases are 1.8% and 1.9%. The increase in outlay for lubricants, meanwhile, is predicted to be 1.1% and 1.7% in 2015 and 2016, respectively, and that for management fees 1.7% in each of the two years under review.
The predicted overall cost increases for 2015 are highest in the offshore sector, where they average 3.4% against the overall survey increase of 2.8%. For 2016, it is the tanker sector which is predicted to experience the highest level of increases—3.4% compared to the overall survey average of 3.1%. The container ship sector, meanwhile, is not far behind at 3.3%.
On the three factors that are most likely to influence the level of vessel operating costs over the next 12 months, respondents identified as the most significant being finance costs at 22% (compared to 21% in last year’s survey) and competition also at 22% (up from 18% last time). Crew supply is in third place with 17% (down 3 percentage points on last time).
Other factors seen to have a hand in bolstering operating expenses are demand trends, labor costs, and cost of raw materials.
In addition to traditional operating costs, shipping has other potential costs hanging over its head, said the report. These include the ratification of the Ballast Water Management Convention, which though it has seemingly stalled for now, would inflate cost for owners and operators should the convention enter into force.
Photo: BlairSnow
