Moore Stephens OpCost Report 2012

Moore Stephens annual OpCost report for the financial year of 2011 has been released this month. According to OpCost 2012 report the total annual operating costs in the shipping industry have been increased by an average 2.1% in 2011. This compares with the 2.2% average rise in costs recorded for the previous year. Crew costs were the main reason for the overall increase in 2011, a 3.3% overall increase in 2011 crew costs compared to the 2010 figure has been reported. Insurance fell for the second year in succession.

The latest report marks the twelfth year of publication for OpCost, which this time includes data from more than 2,700 ships, a record number. Running cost information is obtained on a confidential basis from clients of Moore Stephens, and from other shipowners and ship managers who submit data for inclusion. Moore Stephens OpCost provides analysis and detailed information on all of the following areas:

• Crew – Wages, provisions, and other crew costs
• Stores – Lubricating oils, and stores
• Repairs & maintenance, and spares.
• Insurance – P&I insurance, marine insurance
• Administration – Annual registration costs, management fees, and sundry expenses
• Drydocking – Average drydocking costs and drydock days for class scheduled drydocking surveys

OpCost 2012 reveals that the total operating costs for the three main tonnage sectors covered, that is bulkers, tankers and container ships, were all up in 2011.  Both the bulker and tanker indices increased by 3 index points (or 1.7%) on a year-on-year basis, while the container ship index (with a 2002 base year, as opposed to 2000 for the other two vessel classes) was up 5 index points, or 3.1%.

While crew costs remain the single biggest contributor to higher operating costs, they are still modest in comparison to some of the hefty increases posted in earlier years. The crew costs increase per vessel type can be summarized as follows:

• Tankers overall experienced increases 2.2% on average, compared to 2.7% in 2010. Within the tanker sector, Suezmaxes reported an overall increase of 3.4%.
• LPG carriers of between 3,000 and 8,000 cbm the crew bill was up by 6.7%.
• For bulkers the overall increase was 2.8%, compared to 4.0% the previous year, with the operators of Panamax bulkers paying 5.4% more than in 2010.
• For container ships, the increased spend on crew averaged 3.4% (as opposed to 2.9% in 2010), with smaller vessels (up to 1,000 teu) paying 3.9% more than last year.
• Operators of larger dry cargo ships (above 25,000 dwt) and of smaller LPG carriers (between 3,000 and 8,000 cbm), however, experienced the biggest increase in crew expenditure – 6.7% in each case.

For repairs and maintenance, there was an overall fall in costs of 1.1%, compared to the 4.5% increase recorded for 2010. The over 1% fall in repairs and maintenance expenditure, despite continuing increases in the cost of labour and raw materials can be attributed to the economic downturn, which shipping has weathered better than many other industries. Moreover the reduced activity due to the economic crisis plays another role in the fall in repairs and maintenance. The repairs and maintenance costs per vessel type can be summarized as follows:

• Container ships showed an increase with repairs and maintenance costs up by 3.7%. The bigger vessels (between 2,000 and 6,000 teu) spent 4.4% more on repairs and maintenance. Container ships up to 1,000 teu, meanwhile, spent 3.2% more, and the increased repairs and maintenance expenditure for box ships between 1,000 and 2,000 teu was 1.5%.
• For tanker there was no overall increase in these costs in repairs and maintenance.
• For bulker a 1.9% fall in such expenditure has been observed. Handysize and Handymax were the only bulker types to spend more on repairs and maintenance in 2011, and Handysize product tankers were alone among tankers in this respect.

For stores after two successive years of declining expenditure a 2.7% increase in the level of such spending has been observed. The increase on stores expenditure is no surprise due to the fact that this category includes  lube oils, the price of which continued to rise throughout 2011 along with the price of crude oil. Moreover it should be noted that new technology in lube manufacture promises to make ships more environmentally friendly, and more efficient, but that that will come at greater financial cost. The stores costs per vessel type can be summarized as follows:

• In the tanker sector Suezmaxes, spent 5.5% more on stores than in the previous year, and Aframaxes 5.4% more. Panamaxes, where the stores spend was down by 2.4%, were the only category of tanker to show black ink in this regard.
• Operators of LPG carriers of between 70,000 and 85,000 cbm payed 6.5% more compared to 2010.

Expenditure on insurance dipped overall by 1.5%, this following a 4.7% fall in 2010. According to Richard Greiner,  Moore Stephens partner, this is not a surprise but an anomaly, given the economic climate and the pure underwriting figures for recent years. The age of the ship remains a greater concern for underwriters than its size.The insurance spend per vessel type for the last year:

• For bulkers  and tankers an overall drop of 4.5 and 3.4% respectively has been reported.
• For container ships, though, it was more of a mixed picture. The larger box ships paid 0.7% less for their insurance in 2011 and operators of smaller container ships paid 3.5% more.

According to Richard Greiner,  Moore Stephens partner, although costs continue to rise they are not rising as fast, or as steeply, as they were three or four years ago, and are in fact pretty much in line with predictions.

Source: Moore Stephens