Moore Stephens analysis
According to Moore Stephens, total annual operating costs in the shipping industry fell by an average 1.8 per cent in 2012. This compares with the 2.1 per cent average rise in costs recorded for the previous year. There was a significant reduction in costs across all categories and it was clear that ship owners had been focusing on managing costs and conserving cash in 2012.
The findings are set out inOpCost 2013,unique 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 down in 2012, the financial year covered by the survey. The bulker index was down by 7 points, or 3.9 per cent, on a year-on-year basis, while the tanker index fell by 5 points, or 3.0 per cent. The container ship index was meanwhile down by 3 index points, or 1.8 per cent. The corresponding figures in last year’s OpCost report showed 3-point increases in both the bulker and tanker indices, and a 5-point increase in the container ship index.
There was a 0.2 per cent overall average fall in 2012 crew costs compared to the 2011 figure. (By way of comparison, the 2008 report revealed a 21 per cent increase in this category.) Tankers overall experienced a fall in crew costs of 2.3 per cent on average, compared to the 2.2 per cent increase recorded inOpCost 2012. Within the tanker sector, Aframaxes reported an overall fall of 5.2 per cent in crew costs, while for operators of Suezmaxes and product tankers the reductions were 4.0 per cent and 3.8 per cent respectively. The only tanker categories to show significant increases in crew costs were 3,000-8,000 cbm LPG carriers and Panamax tankers, where such costs were up by 5.2 per cent and 2.8 per cent respectively.
For bulkers, meanwhile, the overall average fall in crew costs was 0.5 per cent, compared to a 2.8 per cent increase the previous year. The operators of Panamax bulkers paid 3.7 per cent less than in 2011. Handysize bulkers and those in the 10,000-20,000 dwt range, meanwhile, each experienced crew cost reductions of 4.8 per cent. For container ships, the reduced spend on crew averaged 1.0 per cent (as opposed to a 3.4 per cent increase in 2011), although operators of reefer tonnage did pay 3.7 per cent more than in the previous year.
For repairs and maintenance, there was an overall fall in costs of 1.9 per cent, compared to the 1.1 per cent increase recorded for 2011. The only categories of tonnage to show a significant increase here were dry cargo ships of 25,000 dwt and above (5.0 per cent) and 70,000-85,000 cbm LPG carriers (3.2 per cent). The overall fall in repairs and maintenance costs for the bulker sector averaged out at 4.6 per cent, for the tanker sector it was 2.9 per cent, and for container ships it was 2.0 per cent.
Expenditure on stores was down this time by 2.1 per cent overall, having risen by 2.7 per cent inOpCost 2012. The biggest fall in such costs was the 7.7 per cent recorded by bulk carriers in the 10,000-20,000 dwt range. For bulk carriers overall, stores costs fell by an average of 4.5 per cent, while in the tanker and container ship sectors the overall reductions in costs were 2.9 per cent and 1.4 per cent respectively. The most significant increases in stores expenditure was recorded by the operators of 40,000-50,000 dwt chemical tankers (4.5 per cent).
The biggest overall drop in operating costs was the 6.2 per cent recorded in respect of insurance. Only RoRos (5.1 per cent), LPG carriers of between 70,000 and 85,000 cbm (3.0 per cent) and very large container ships (1.4 per cent) actually spent more on insurance in 2012 than in 2011. Reefer operators actually spent 16.4 per cent less, but it was the bulker sector which recorded the biggest reduction in terms of its overall payments to underwriters, averaging out across all tonnage sizes at 8.9 per cent, compared to 7.0 per cent for tankers.
Richard Greiner says: “There is a lot of ‘red ink’ in costs, which actually translates into ‘black ink’ in the bottom line for owners. Significantly, 2012 recorded a year-on-year reduction in operating costs, only the second time this has occurred since OpCost was launched.
“It is no coincidence that, during the operating period covered byOpCost 2013, confidence levels in the shipping industry dropped to their lowest point in the past five years, according to the Moore StephensShipping Confidence Survey. So it is unsurprising to find that expenditure declined. The industry generally was under extreme pressure during an extended global economic downturn, and attending to items of manageable cost control was an imperative at a time when revenues were declining.
“That said, however, the 6.2 per cent overall fall in insurance costs across all tonnage types is something of a surprise, given the repeated warnings issued by hull underwriters of the dangers of pitching rates too low. It is perhaps simply the case that declining vessel values are being reflected in declining premium costs.
“The fall in operating costs recorded inOpCost 2013 is good news for owners and operators. So, too, is the fact that the global economic outlook is starting to look brighter. But any optimism should be tempered with caution. Foreseeable – if not entirely quantifiable – costs, not least those related to regulatory compliance, have the potential to make a large hole in the industry’s cashflow over the coming year. So a mix of optimism, forward planning, and ongoing risk management would seem to be a good recipe for the future.”
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