Crew expenses the big factor as ship operating costs are set
to rise over the next two years.
Vessel operating costs are expected to rise by 3.2% in
2010 and by 3.5% in 2011, with crew costs identified as the
category most likely to produce the highest levels of increase,
according to a new survey by international accountant and
shipping consultant Moore Stephens.
The survey is based on responses from key players in the
international shipping industry, predominantly ship owners and
managers in Europe and Asia. And those responses revealed
an overall expectation that crew costs would rise by 2.7% in
2010 and by 3.0% in 2011. “It’s all about crew,” noted one
respondent. “With fewer experienced crew available for
worldwide fleet expansion, labour costs will rise.” Another
commented, “In order to keep the present pool of seafarers
and improve performance, we will need to look at increases
in wages and other benefits for seafarers so that they are
attracted to work on board, rather than take up lucrative jobs
ashore.”
Responses to the survey indicated that the cost of
lubricants is expected to increase by 2.4% and 2.7% in 2010
and 2011 respectively, with repair and maintenance
expenditure likely to rise by 2.6% in each year. The category
deemed most likely to produce the lowest level of increases
in both 2010 and 2011 was management fees, at 1.6% and
1.8% respectively.
Respondents also expressed concern over rising insurance
costs. “The dark horse is insurance costs,” remarked one
respondent, “due to the fact that ordinary planned
maintenance in many cases will be either reduced or ignored
as vessel income cannot finance the costs, and banks will not
provide or extend credit lines. More incidents will be
reported to insurers, with a consequential increase in
premiums.”
There were also concerns that operating costs would
increase due to the weakness of the dollar. “Operating costs
over the next two-to-three years may not show any
substantial increase as the world economy continues to
stagnate,” said one respondent, “but costs will increase due to
the devaluation of the dollar, which inflates overall costs”.
Asked to nominate the three factors most likely to
influence the level of vessel operating costs over the next
twelve months, 43% of respondents identified crew supply as
the most significant, followed closely by finance costs at 39%
and then by demand trends, at 22%. Crew supply and finance
costs were also the top two factors in Moore Stephens’ 2009
survey, although then finance costs led the way at 26%, with
crew supply at 22%. The third most significant factor in 2009
was competition, at 16%.
Moore Stephens shipping partner Richard Greiner says,
“Ship operating costs have been running at increasingly high
levels in recent years but our OpCost benchmarking tool
shows that, in 2009, total annual operating costs fell — for
the first time in eight years — across all the main ship types
by an average of 2.0%. It is no surprise now to find that the
industry is expecting costs to increase this year and next, nor
to learn that crew costs are likely to lead the way in this
regard. But it does seem that some of the volatility of recent
years has gone out of ship operating costs, and that is good
news for shipping. Any repeat of the huge increases recorded
in recent years would be unsustainable in the current
economic climate.”
Moore Stephens LLP is noted for a number of industry
specializations and is widely acknowledged as a leading
shipping and insurance adviser. Moore Stephens LLP is a
member firm of Moore Stephens International Limited, one of
the world's leading accounting and consulting associations,
with 630 offices of independent member firms in 98
countries, employing 20,864 people and generating revenues
in 2009 of $2,078 million.