Bulk carrier managers and operators did not see any significant
reduction in maintenance costs last year. But with newbuilding
orders across the major ship sectors subject to mass delays and
cancellations, are repair and dry docking costs set to tumble? Michael
King finds out.

Pinning down exact repair and maintenance costs for bulk
carriers is difficult. Demand for repair facilities varies
geographically and by ship category, while fluctuations in oil and
other commodity prices used as raw materials in products such
as lubes and paints, and in the production of spare parts, tend
only to be reflected in product prices at point of use after a lag
The most recent comprehensive study of bulk carrier
operation costs was produced by accountants Moore Stephens.
OpCost 2009 included a detailed examination of repair,
drydocking and maintenance costs including machinery and
other equipment, coatings, welding, accommodation, certification,
safety audits and welding.
This revealed that repair and maintenance costs rose for
bulkers by 16.6% year-on-year during 2008. The largest increase
was suffered by Handysize carriers at 19.1%, a similar rise as in
2007 when the sector also saw the biggest increase among bulk
carriers at 18.2%, a trend largely attributable to the age-profile
of the fleet.
Capesize and Handymax bulkers also saw significant year-onyear
increases of 18.7% and 18.1%, respectively. Panamax
bulkers saw the lowest increase at 6.7% compared to 2007’s hike
of 13.5%.
Bulk carrier operators also saw the cost of lubricants
increase year-on-year across the range, from 6.1% for Capesize
bulkers to 12.2% for Handymax bulkers.
Drydocking costs for all vessel types were generally higher in
2008 than in 2007, with bulkers experiencing an average increase
of 33% year on year, compared to 29% and 9% for container
ships and tankers, respectively.
“As expected, the larger vessels in each category spend more
on drydocking costs than their smaller peers, with the exception
of Handymax bulkers, which was marginally below the drydock
cost of the next size of vessel within bulkers,” said the report.
Average drydock costs for bulk carriers ranged from
US$1,105,981 to US$1,909,589 with Capesize bulk carriers
suffering the second highest cost for dry docking across the
shipping sectors after VLCCs, with Handymax bulkers the least
Analyzing repair and maintenance costs more recently means
relying on anecdotal evidence. Kishore Rajvanshy, managing
director of Hong Kong-based ship manager Fleet Management
Limited, said that with yards less busy and the order book
evaporating, maintenance and repair costs declined in 2009.
“The steep fall in steel prices helped bring repair costs down,”
he explained. “While costs of paints and consumables remained
more stable, prices of lubricants fell with the declining prices of
crude oil.”
Peter Cremers, chief executive officer of Anglo-Eastern
Group, concurred that the price of oil was the key factor in lube
oil and coatings costs last year. “Both lube oil and paint costs
went down for a while due to the fluctuation of crude oil prices,
it just took some time and it works both ways — there’s also a
delay when oil goes up,” he said.
Looking forward, Rob Grool, group managing director of
Wallem Group, the Hong Kong-based third party ship
management company, predicted the price of many repair and
maintenance inputs would fall this year. “Ship repair yards have
capacity again, steel prices have come down, but lubes only come
down in price when base stocks and chemical additives come
down in price,” he explained. “This has to do with crude oil
prices, refinery capacity, the degree to which light distillates are
extracted from the crude and the price and availability of
Offering a different view point, Captain Ian Mathison, marine
and safety director at Bibby Ship Management, told DCI he had
so far seen little sign of a reduction in the level of repair costs
during dry docking. “It is very much a seller’s market in favour
of the yards,” he added. “Ships have to be dry-docked at
specified intervals and in line with regulators’ requirements, so
owners have little alternative but to pay.
“The secret of effective dry-docking operations is to have a
robust specification. Costs can escalate whenever unscheduled
items come to light.”
And an escalation in costs is not something bulk carrier
operators need right now. Although bulk carrier freight rates
did recover on the back on demand from China during 2009,
earnings remain below the levels expected by many operators
when they originally committed funds to fleet expansion. Most
have taken steps over the last year to reduce operating costs
but cutting expenditure on maintenance and repair is not a
sensible operational or commercial strategy, according to one
leading classification society, because of the potential for higher
future costs in hull maintenance, steelwork and machinery.
“First of all it is unfortunate that we are in the situation
where owners may be forced to reduce budgets for
maintenance,” said a spokesman for Det Norske Veritas.
“Further, the quality conscious
owners, which are the great
majority, are well aware of both the
future costs and the possible
dangers of reducing budgets. It is
important that, for example, class
can support the owners with
solutions which are affordable but
still safe.”
Cremers said that none of the
owners on Anglo Eastern’s books
had taken the potentially dangerous
and costly decision to cut
maintenance budgets because of
financial constraints. But he
admitted that some less respectable
owners could potentially be
tempted by this course of action.
“Luckily none of our owners are
in this position but for those that
are, the long-term downside can be
significant in terms of future off-hire
due to equipment breakdowns, if
vessels are not properly
maintained,” he explained. “We not
only can, but have, for many years
been helping owners to save money
through our Anglo-Eastern
preventive maintenance programme.
Our first aim at all times is to do
nothing that would jeopardize
Maintenance and
repair during lay-up
The much anticipated cold lay-up of
bulk carriers in early 2009 largely
failed to materialize. As freight
rates recovered, the incentive to
take a vessel out of the market for
an extended period evaporated,
although scrapping rates did
increase. But the patchy nature of
bulk carrier demand last year did
not take away the desire for some to pursue more short-term
‘hot’ lay-ups and this trend is likely to continue in 2010.
Bibby Ship Management is involved in a joint lay-up venture
with Gulf Agencies (GAC) known as Gulf Lay Up Solutions
(GLUS). Captain Ian Mathison, marine and safety director at
Bibby, told DCI the company saw “a rise in demand for laying-up
services for all types of vessels” including bulk carriers in 2009.
“The main thrust of this burgeoning demand has been the
world economic downturn and the significant cost pressures on
owners, rather than any long-term decline in the condition or
maintenance of vessels,” he said.
Whether an owner considers a short term ‘hot’ or long term
‘cold’ lay-up, the main technical challenge is ensuring the client’s
asset can trade quickly once the decision is made to reactivate
the vessel.
“Laying-up has become a viable option for many owners and
there is a highly controlled process for reactivation which
incorporates all aspects of a ship’s safety,” he said.
Apart from considering a lay-up site, mooring arrangements
and manning issues, owners opting for a ‘hot’ lay-up must also
evaluate the potential maintenance and repair demands that
having a vessel laid-up can involve.
“A key operational issue for owners is the potential hull
fouling during the lay-up period,” said Gijsbert de Jong, product
manager for dry bulk carriers at classification society Bureau
He said BV had seen little demand for cold lay-ups “as ship
owners generally want to have the possibility to quickly re-enter
the market if trading conditions improve”.
But he warned that even during a relatively short time of
inactivity, hull fouling may result in considerable additional hull
resistance. “This will negatively impact fuel consumption,” he
A 'hot' lay-up condition is normally appropriate for up to 12
months out of commission and P&I policies normally require the
ship to be laid-up for at least 30 consecutive days in order to
qualify for a laid-up premium return.
During a hot lay-up the ship has reduced crew on-board as
the ship’s manning is generally reduced below the manning level
required under the Flag State safe manning document. The ship’s
machinery is maintained under working conditions and kept
operational by the skeleton crew on-board. “The ship can be
reactivated with reduced cost, time and effort, normally in the
range of less than one week re-commissioning time,” said De
Where an owner opts for a ‘cold’ lay-up, the recommissioning
process can be expensive depending on the
scope of maintenance and preservation implemented by the
owner. For example, said De Jong, the ship might need to be
directly dry-docked before trading, depending on the efficiency
of the hull preservation during the lay-up period, on the
possible hull degradation, and depending on the classification
requirements for maintenance of class, for example if a dry-dock
bottom survey became overdue during the lay-up period.
Peter Cremers, chief executive officer of Anglo-Eastern
Group which has helped put a limited number of bulkers into
cold lay-up recently, said the long-term costs were often higher
than many companies imagined. “Owners should be aware that
reactivation costs out of cold layup can be higher than expected
specially, on older tonnage,” he said.