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Incorporating Clean Shipping International

SURVEY SHOWS SHIP OPERATING COSTS CONTINUE TO DECLINE

Tuesday, September 17, 2019 

International accountant and shipping consultant BDO says total annual operating costs in the shipping industry fell by an average of 1.8% in 2018, compared to the 1.3% fall for 2017, with all categories of expenditure in 2018 down overall on those for the previous 12-month period, with the exception of repairs and maintenance costs.

The findings are set out in OpCost 2019, BDO’s ship operating costs benchmarking tool, which reveals that total operating costs for the tanker, bulker and container ship sectors were all down in financial year 2018. On a year-on-year basis, the tanker index was down by 4 points, or 2.4%, compared to the 3 points (1.7%) fall the previous year. The bulker index, meanwhile, fell by 4 points, or 2.6%, compared to the 3 points (1.9%) fall recorded in last year’s OpCost. The container ship index was down by 2 points, or 1.3% - identical to the fall recorded for the previous 12 months.

There was a 1.1% overall average decrease in 2018 crew costs, compared to the 2017 figure of 0.1%. By way of comparison, the 2008 report revealed a 21% increase in this category. Expenditure on stores was down by 4.9% overall, compared to the fall of 3.5% in 2017. There was an overall increase in repairs and maintenance costs of 0.6% in 2018, compared to the reduction of 1.7% in 2017. Some tanker sectors and container ships posted significant increases, The largest overall drop in operating costs in 2018 was the 7.1% fall recorded for insurance, compared to the 4.1% fall in 2017m with ro-ros the only category of vessel to record any increase in insurance costs (1.7%).

Richard Greiner (pictured), Partner, Shipping & Transport at BDO, said: “This is the seventh successive year-on-year reduction in overall ship operating costs recorded by OpCost, and will doubtless be regarded as good news throughout the industry. However, at the same time, the solitary overall increase across all categories of operating costs in 2018, that in respect of repairs and maintenance, should be regarded as encouraging news on a number of levels. It indicates an ongoing commitment to the increasing imperative of regulatory compliance, to maintaining safety and protecting the environment, and to continued operation. Moreover, it does nothing to confound the incipient belief that shipping may be displaying signs of a slow recovery to improved profitability. Nobody spends money on repairs and maintenance for vessels that are not expected to trade. Increasingly, vessels that do not meet industry standards will find it difficult to continue trading as regulation bites harder and more comprehensively on a global scale.

"Shipping’s fortunes will continue to fluctuate, but confidence is holding up well, notwithstanding the impact of political and economic issues. It should continue to do so, given a favourable wind and a continuing appetite for investment in an industry which is increasingly embracing technological innovation and environmental awareness as a means to increase efficiency and improve cost-efficiency. Whilst there remains the need to fund the costs of technological improvements, over time that investment should lead to improved profitability.”

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