In­ter­na­tional ac­coun­tant and ship­ping con­sul­tant Moore Stephens says to­tal ves­sel oper­at­ing costs in the ship­ping in­dus­try are ex­pected to rise by 2.7% in 2018 and by 3.1% in 2019, ac­cord­ing to our lat­est sur­vey.

Financial Mirror (Cyprus) - - SHIPPING -

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% in 2018 and by 2.3% in 2019, while ex­pen­di­ture on re­pairs and main­te­nance is pre­dicted to rise by 2.0% in 2018 and by 2.3% in 2019.

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

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

The pre­dicted over­all cost in­creases were once again high­est in the off­shore sec­tor, where they av­er­aged 4.1% and 4.2% re­spec­tively for 2018 and 2019. By way of con­trast, pre­dicted cost in­creases in the bulk car­rier sec­tor were 1.8% and 2.6% for the cor­re­spond­ing years.

Oper­at­ing costs for tankers, mean­while, are ex­pected to rise by 2.4% in 2018, and by 2.9% the fol­low­ing year, while the cor­re­spond­ing fig­ures for con­tainer ships are 4.2% and 3.8%.

Reg­u­la­tion main con­cern

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% global limit on the sul­phur 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 Sul­phur 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%, up from equal third place at 15% last year. 18% of re­spon­dents iden­ti­fied fi­nance costs in sec­ond place, down from 20% and first place last year. Com­pe­ti­tion ranked in third place at 15% as it had last year. Mean­while crew sup­ply fell to 12% com­pared to 19% and sec­ond place in last year’s sur­vey.

“The pre­dicted 2.7% and 3.1% in­creases in oper­at­ing costs for 2018 and 2019 re­spec­tively com­pare to an av­er­age fall in ac­tual oper­at­ing costs in 2017 of 1.3% across all main ship types recorded in the re­cent Moore Stephens OpCost study,” said Richard Greiner, Moore Stephens part­ner, Ship­ping and Trans­port.

Ex­pec­ta­tions of cost rises sober­ing

“One year ago, ex­pec­ta­tions of oper­at­ing cost in­creases in 2018 av­er­aged 2.4%, so the in­crease now in that ex­pec­ta­tion to 2.7% must be re­garded as sober­ing – if not un­ex­pected –news. Pro­jected in­creases in oper­at­ing ex­pen­di­ture are part and par­cel of the work­ings of any in­dus­try, and must be fac­tored into bud­get pro­jec­tions. But these lat­est pre­dicted in­creases, whilst a cause for con­cern, should not un­duly sur­prise or con­cern ship­ping, an in­dus­try which has seen – and in many cases en­dured – much larger in­creases dur­ing the past decade,” Greiner said.

“New reg­u­la­tions were in­cluded this year for only the sec­ond time in the life of the sur­vey among the list of fac­tors which re­spon­dents could cite as most likely to in­flu­ence the level of oper­at­ing costs over the next 12 months. This has proved to be a timely ad­di­tion, with 23% of re­spon­dents cit­ing new reg­u­la­tion as an in­flu­en­tial fac­tor, rank­ing it in first place. The Bal­last Wa­ter Man­age­ment Con­ven­tion (BWM) and Sul­phur 2020 are the ma­jor items on the list of in­cip­i­ent ship­ping leg­is­la­tion, but the in­dus­try is be­com­ing more tightly reg­u­lated gen­er­ally in terms of both safety and en­vi­ron­men­tal re­spon­si­bil­ity, so com­pli­ance with evolv­ing na­tional and in­ter­na­tional reg­u­la­tion is likely to re­main a sig­nif­i­cant item in oper­at­ing cost analy­ses and pro­jec­tions for the fore­see­able fu­ture.

“The fact that dry­dock­ing emerged as the cost cat­e­gory likely to in­crease most sig­nif­i­cantly in both 2018 and 2019 is un­sur­pris­ing, given the need to com­ply with the ex­ist­ing and emerg­ing reg­u­la­tory frame­work within which the in­dus­try is be­ing obliged to op­er­ate. The same may be said of re­pairs and main­te­nance, where any pre­vi­ous de­lay in at­tend­ing to items of a non-crit­i­cal na­ture will need to be ad­dressed.

Es­ti­mates re­lat­ing to the likely in­crease in

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