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SHIP OPERATING COSTS EXPECTED TO RISE IN 2018 AND 2019

Friday, October 26, 2018 

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 its latest survey.

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. The survey 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 likely to go up by 1.5% in 2018 and by 1.8% in 2019.

The cost of both P&I and hull and machinery insurance is predicted to rise, while management fees, too, are expected to increase by up to 1.2%.

Predicted overall cost increases were once again highest in the offshore sector, with container ships close behind, followed by tankers and bulk carriers.

The survey highlighted regulations – notably ballast water and fuel sulphur limits – as a major area of concern for shipowners in general, expected to rise by 23%. The cost of fuel treatment, as well as low-sulphur bunkers, was mentioned by respondents.

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 potentially increase operating costs.

Richard Greiner, Moore Stephens partner, Shipping and Transport, says, “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.

“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.”

Greiner concluded: “There are more Ifs involved in the shipping industry than there are in Kipling’s poem.” He ended by quoting Benjamin Franklin: “Beware little expenses; a small leak will sink a great ship.”

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