Moore Stephens says ship operating costs are set to increase for 2015 and 2016

Vessel operating costs are expected to rise in both 2015 and 2016, according to the latest survey by international accountant and shipping consultant Moore Stephens. Crew wages, repairs and maintenance, and drydocking are the cost categories likely to increase most significantly over that period.

                                              

The survey is based on responses from key players in the international shipping industry, predominantly shipowners and managers in Europe and Asia. Those responses revealed that vessel operating costs are expected to rise by 2.8% in 2015 and by 3.1% in 2016.

Crew wages are expected to increase by 2.4% in 2015 and by 2.3% in 2016, with other crew costs thought likely to go up by 2.0% and 1.9% respectively for the years under review. The cost of repairs and maintenance is expected to escalate by 2.3% in 2015 and by 2.4% in 2016, while drydocking expenditure is predicted to increase by 2.6% and 2.3% in 2015 and 2016 respectively.

The cost of hull and machinery insurance is predicted to rise by 1.8% and by 1.9% in 2015 and 2016 respectively, while for P&I insurance the projected increases are slightly lower – 1.7% and 1.8% respectively.

Expenditure on spares is expected to rise by 2.3% in 2015 and by 2.2% in 2016, while for stores the corresponding projected increases are 1.8% and 1.9%. The increase in outlay for lubricants, meanwhile, is predicted to be 1.1% and 1.7% in 2015 and 2016 respectively, and that for management fees 1.7% in each of the two years under review.

 

The predicted overall cost increases for 2015 were highest in the offshore sector, where they averaged 3.4% against the overall survey increase of 2.8%. For 2016, it was the tanker sector which was predicted to experience the highest level of increases – 3.4% compared to the overall survey average of 3.1%. The container ship sector, meanwhile, was not far behind at 3.3%.

One respondent said, “We expect costs generally to increase as charter rates creep up, although they will probably lag behind the latter. With charter rates generally low at present, the provision of services to the shipping industry needs to remain competitive, with suppliers reluctant to put up charges too soon for fear of losing business.”

Elsewhere it was noted, “Future operating costs will increase exponentially due to innumerable new regulations, the low competence of seafarers, the high bargaining power of the oil majors, stricter rules regarding maintenance and repairs carried out in ports, the advent of more sophisticated onboard machinery, and increasing consolidation in the marine equipment and services sector, resulting in more bargaining power for fewer, larger companies.”

Another respondent highlighted the fact that ship managers are under increasing pressure, pointing out, “Overcapacity within the markets is driving charter rates down, owners are facing higher costs to finance vessels, and operators are fighting much harder for cargo. Ship managers are now required to look after much more for the same management fees.”

Another still emphasised, “Due to the high financial costs involved in operating a newer world fleet, and to an over-supply of tonnage and depressed freight markets, there will be increasing pressure to maintain or freeze operating cost levels in order for owners to remain competitive. This is likely to change between 2017 and 2020, however, with significant capital expenditure required for regulatory compliance.”

One respondent predicted, “Crew costs will continue to be the main area of increased operating expenditure,” a sentiment echoed by another, who referenced the effect of the Maritime Labour Convention 2006 in this regard to support this supposition. Elsewhere, however, it was noted, “Crew costs will remain stable because the workforce will always be recruited from cheap countries.”

‘Staggering’ cost increases due to redundancy in electronic navigation and communication equipment, and increased port dues, were among other issues deemed by respondents in the survey to be likely to result in an increase in operating costs.

Moore Stephens also asked respondents to identify the three factors that were most likely to influence the level of vessel operating costs over the next 12 months. Overall, the most significant factors identified by respondents were finance costs at 22% (compared to 21% in last year’s survey) and competition also at 22% (up from 18% last time). Crew supply was in third place with 17% (down 3 percentage points on last time), followed by demand trends (down by one percentage point to 16%) and labour costs, unchanged at 13%. The cost of raw materials was cited by 8% of respondents (compared to 10% in last year’s survey) as a factor that would account for an increase in operating costs.

Moore Stephens shipping partner Richard Greiner says, “The predicted increases in ship operating costs for this year and next compare to an average fall in 2014 of 0.8% in operating costs across all main ship types recorded in the recent Moore Stephens OpCost report. Nevertheless, the level of increases anticipated for 2015 and 2016 are low in comparison with many we have witnessed in recent years. Shipping has seen much worse, and prevailed. For example, many of the companies which endured a 16% rise in operating costs in 2008 are still operating successfully today.

“It is no surprise that crew wages feature near the top of the predicted operating cost increases for both 2015 and 2016, not least because of the entry into force of the Maritime Labour Convention 2006, which mandates the manner in which seafarers must be paid. For shipping, as for every industry, investment in good people will always be money well spent.

“Expenditure on repairs and maintenance, meanwhile, is expected to increase over the two-year period by the same aggregate amount as crew wages. Again, this is not a surprise. According to OpCost, repairs and maintenance expenditure was marginally down in 2014 on the previous year, attributable in part to world steel prices dropping to their lowest level in a decade during 2014/2015 and to disappointing freight rates. But things are likely to change. Steel prices are predicted to rise steadily over the next four years, there are realistic prospects of an improvement in the freight markets, and regulatory requirements are set to bite even harder. All these developments are likely to increase the industry’s repair and maintenance bill and will doubtless impact, also, on drydocking costs, which are predicted to be the subject of some of the biggest increases in 2015 and 2016. Lube costs are also set to increase in 2016 on the back of recovering oil prices.

"In addition to traditional operating costs, the level of which can generally be predicted to a certain degree, shipping has other potential costs hanging over its head which are more difficult to budget . For example, ratification of the Ballast Water Management Convention has seemingly stalled at the finish line. It has more than enough signatories, but still needs slightly more than an additional 2% in terms of tonnage to get itself on the books. Whilst  the  ratification is tardy, nobody doubts that it will cost owners and operators a lot of money once the convention enters into force.

"Meanwhile, a government spokesman for the Marshall Islands recently characterised the IMO secretary-general as a ‘danger to the planet’ for his alleged failure to endorse more stringent curbs on the shipping industry’s CO2 emissions. This is what Sherlock Holmes might have described as a ‘three-pipe problem’ – politics, gas and competition. It is not an unusual combination in shipping. In the end, however, it is likely to have an impact on the industry’s operating costs, and there is no accounting for that.”

Bone fide journalists can request an electronic copy of the Future Operating Costs Report by emailing chris@merlinco.com

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime 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 626 offices of independent member firms in 103 countries, employing 26,290 people and generating revenues in 2014 of $2.7 billion.      

For more information:                                                                        

Richard Greiner                                                               

Moore Stephens LLP                                                                 

Tel: +44 (0)20 7334 9191                                                           

richard.greiner@moorestephens.com      

Bureau Veritas publishes LNG fuel Gas-Prepared notation

Leading classification society Bureau Veritas has published requirements for ships which are designed and fitted out for dual-fuel or LNG fuel propulsion but which are not initially intended to use gas as a fuel. The requirements, set out in Rule Note NR 627 Gas-Prepared Ships, cover special arrangements for new ships that are designed with specific arrangements to accommodate future installation of an LNG fuel gas system.

Jean-Francois Segretain, Technical Director, Bureau Veritas Marine & Offshore Division, says, “Many owners consider that they will switch to LNG as a fuel in the future, but are not yet ready to make that change. It makes sense to build and lay out ships so they can easily be converted in the future. We were the first into dual-fuel ships and as the leaders we want to use our experience to help that process. The requirements of this notation set a benchmark or designers and yards so they can ensure that every ship is future-proofed and able to be easily converted to LNG as a fuel when the market conditions are right.”

NR 627 sets out how the initial design of the ship is to take into account the necessary spaces or zones to accommodate the following installations:

• LNG bunkering station

• LNG storage tanks

• Fuel gas handling system

• Ventilation systems

• GVU

• GCU, where required by NR529

• Vent mast.

Vessels meeting the standards will be awarded the notation Gas-Prepared.

The notation may be modified with the addition of:

• S when specific arrangements are implemented for the ship structure

• P when specific arrangements are implemented for piping

• ME-DF when the main engine(s) is (are) of the dual-fuel type

• AEB when the auxiliary engines and oil-fired boilers are either of the dual fuel type, or designed for future conversion to dual fuel operation.

For a copy of NR 627 e mail john@merlinco.com

VISIT BUREAU VERITAS at GASTECH Stand No C45

Bureau Veritas is a world-leading provider in testing, inspection and certification. Created in 1828, the Group has more than 66,500 employees in around 1,400 offices and laboratories located all across the world. Bureau Veritas helps its clients to improve their performance by offering services and innovative solutions in order to ensure that their assets, products, infrastructure and processes meet standards and regulations in terms of quality, health and safety, environmental protection and social responsibility. Bureau Veritas is listed on Euronext Paris and belongs to the Next 20 index. Compartment A, ISIN code FR 0006174348, stock symbol: BVI.

For more information, visit www.bureauveritas.com/marine-and-offshore

Marine client portal www.veristar.com

  

For more information:

Martial Claudepierre Bureau Veritas +33 (0)1 55 24 73 43 martial.claudepierre@bureauveritas.com

Bureau Veritas approves GTT pressure tank Bunkering Ship concept

Leading classification society Bureau Veritas has granted Approval in Principle to a 4,000 cu m Bunkering Ship concept developed by France’s world-leading LNG containment manufacturer, GTT. The concept is for a bunker tanker which could deliver LNG as ship’s fuel using tanks with a GTT Mark III Flex Cargo Containment system operating up to a pressure of 2 barg. Combining the membrane containment system with the ability to store LNG at pressure’s up to 2 barg allow the bunker vessel to have a higher capacity and increased operational flexibility.

Philippe Donche-Gay, Executive Vice President and head of BV’s Marine and Offshore Division says,  “Practical LNG bunker tankers are the key to building a viable LNG supply chain on which to develop LNG as a ship’s fuel. This pressurised membrane tank concept from GTT means LNG bunker tankers can manage Boil Off Gas (BOG) better and increase loading and delivery flow rates. Our studies show it is both safe and practical. We look forward to seeing the concept taken forward to a new construction.”

Under GTT’s system the BOG management during loading and bunkering operations is made more flexible because of the wide vapour pressure operating range. Vapour can be buffered and condensed in the tanks to help the fuelled ship or feeding facility handle the vapour. Condensation may be performed by spraying LNG into the vapour phase. The higher pressure also means that during voyage and stand-by mode, the duration before gas pressure in the bunker tanker’s tanks reaches the upper limit is longer. This improves the holding time when BOG is not being consumed and reduces the use of reliquefaction plant, diminishing costs.

To download a graphic of the bunker tanker concept go to: http://bit.ly/1As4kK8  or e mail john@merlinco.com

VISIT BUREAU VERITAS at GASTECH 2015   Stand No C45

Martial Claudepierre

Bureau Veritas

+33 (0)1 55 24 73 43

martial.claudepierre@bureauveritas.com

Philippe Cambos

Bureau Veritas

+33 (0) 1 55 24 74 11

philippe.cambos@bureauveritas.com

Bureau Veritas publishes LNG Bunkering notation

Leading classification society Bureau Veritas has published requirements for LNG Bunkering tankers. The requirements, set out in Rule Note NR 620 LNG Bunkering Ship, cover special arrangements for ships carrying LNG which will transfer that LNG to ships using LNG as fuel.

Jean-Francois Segretain, Technical Director, Bureau Veritas Marine & Offshore Division, says, “Establishing a secure and safe LNG bunkering chain is the key to a swift uptake of LNG fuel across shipping. We believe that small-scale LNG bunker vessels will play a key role in developing that chain. These rules help ensure safe development of this new type of ships. Of the fifteen or so small-scale LNG ships ordered so far ten are to BV class so we are driving this sector forward.”

NR 620 covers the design and installation of the LNG transfer systems from bunkering ship to the receiving ship and the vapour transfer system from the receiving ship to bunkering ship, including LNG hoses, transfer arms and auxiliary systems for handling the LNG system. The design and installation of the equipment intended for boil-off gas management on the bunkering ship and the design and installation of the gas piping system of the bunkering ship are also set out. There is a separate section on safety arrangements.

Vessels meeting the standards will be awarded the notation LNG Bunkering Ship.

For ships which provide extra facilities or services set out in the rule note additional notations will cover:

RE The additional service feature RE is assigned to LNG bunkering ships designed to receive LNG from a gas-fuelled ship for which the LNG fuel tanks have to be emptied.

Initial-CD  The additional service feature Initial-CD is assigned to LNG bunkering ships designed for initial cooling down of the receiving ship LNG fuel tank.

IG-Supply  The additional service feature IG-Supply is assigned to LNG bunkering ships designed to supply inert gas and dry air, to ensure gas freeing and aeration, to a gas-fuelled ship which is designed in accordance with IGF Code, paragraph 6.10.4.

BOG  The additional service feature BOG is assigned to LNG bunkering ships designed to receive and manage the boil-off gas from the receiving ship generated during the bunkering operation.

For a copy of NR 620 e mail john@merlinco.com

VISIT BUREAU VERITAS at GASTECH Stand No C45

Bureau Veritas is a world-leading provider in testing, inspection and certification. Created in 1828, the Group has more than 66,500 employees in around 1,400 offices and laboratories located all across the world. Bureau Veritas helps its clients to improve their performance by offering services and innovative solutions in order to ensure that their assets, products, infrastructure and processes meet standards and regulations in terms of quality, health and safety, environmental protection and social responsibility. Bureau Veritas is listed on Euronext Paris and belongs to the Next 20 index. Compartment A, ISIN code FR 0006174348, stock symbol: BVI.

For more information, visit www.bureauveritas.com/marine-and-offshore

Marine client portal www.veristar.com

  

For more information:

Martial Claudepierre Bureau Veritas +33 (0)1 55 24 73 43 martial.claudepierre@bureauveritas.com Carlos Guerrero Bureau Veritas +33 1 55 24 72 35 carlos.guerrero@bureauveritas.com

RINA Group widens gas sector services

International classification, certification and engineering group RINA has widened its services to the global gas industry. While its traditional classification society arm RINA Services has recently approved a new Compressed Natural Gas carrier to aid the exploitation of marginal fields, the groups’ engineering arm, D’Appolonia, is delivering geotechnical, social and environmental services to the Mozambique LNG development.

The gas market and technology are constantly changing, and RINA Services and D’Appolonia lead those changes. The first offshore FSRU, the first FLNG project, the first marine CNG ship and the longest offshore pipeline were all delivered with RINA expertise and assistance.

Mozambique LNG project

D’Appolonia has completed a major near shore site investigation for ENI’s Mozambique LNG project. The survey included environmental, geophysical and geotechnical teams, utilizing two jack up platforms, three survey spreads, a mobile field laboratory and over fifty site personnel. Data will be used for design of the marine facilities of the terminal and the landfall for the gas pipeline arriving from the offshore wells. The terminal will consist of gas receiving and processing, liquefaction facilities, cryogenic storage tanks and loadout facilities to export the liquefied gas via tankers.

D’Appolonia is also acting as the Independent Environmental and Social Consultant foreseeing the development of offshore production facilities, subsea gas pipelines, and onshore LNG processing facilities. D’Appolonia’s Lenders Engineering division is currently undertaking the Environmental and Social Due Diligence (ESDD) for the Mozambique LNG Project, which is a first of its kind LNG facility on the east coast of Africa.

Approval in Principle for CNG Carrier

RINA Services has approved in principle the Fincantieri Offshore CNG32000 ship design which is aimed at delivering a cost-effective solution for monetizing marginal gas fields using Compressed Natural Gas technology. The vessel has a double-hull and a cutting-edge system of racks that are separately demountable for in-depth and safer maintenance.

RINA Services has developed rules to cover the safety issues related to CNG transportation, with the aid of Approval in Principle and Technology Qualification certifications to cover the most important aspects relevant to the fitness for service.

Transporting natural gas under pressure as CNG instead of liquefying it offers advantages of simplicity and much lower cost and so makes viable alternative means of exploiting isolated or marginal gas fields which will not support a full infrastructure.

The CNG32000 design features a CNG cargo handling system and a CNG storage system. This entails 500 racks of metallic vessels at 166 bar and 25°C, each rack accommodating twelve pressure vessels of about 5.35 cu m arranged in ten cargo holds giving an overall transport volume of 32,000 cu m (1.13 MMscf).

The design follows the recently issued RINA Rules for the Classification of CNG Carriers and IGF Code, and is supported by extensive risk assessment studies on the ship safety, safe operations and environmental protection, including collision studies, which are being carried out in the expected areas where the CNG32000 will trade.

VISIT RINA AT GASTECH STAND Hall 4 stand C390

D’Appolonia S.p.A provides integrated engineering services to the public and private markets in the areas of the environment, oil and gas, infrastructure and transport, electronics and telecommunications. D’Appolonia is part of the RINA Group, a leading international classification, verification and certification provider.

www.dappolonia.it

RINA Services is the RINA group company which delivers ship classification, and testing, inspection and certification services. www.rina.org

RINA is a multi-national group which delivers verification, certification, conformity assessment, marine classification, environmental enhancement, product testing, site and vendor supervision, training and engineering consultancy across a wide range of industries and services. RINA operates through a network of companies covering Marine, Energy, Infrastructures & Construction, Transport & Logistics, Food & Agriculture, Environment & Sustainability, Finance & Public Institutions and Business Governance. With a turnover of over 330 million Euros in 2014, over 2,750 employees, and 163 offices in 60 countries worldwide, RINA is recognized as an authoritative member of key international organizations and an important contributor to the development of new legislative standards. www.rinagroup.org

           
Contacts:

Giulia Faravelli

Head of Media & Internal Communication RINA

+39 010 5385505

giulia.faravelli@rina.org

Victoria Silvestri

Media Relations RINA

+39 010 5385555

victoria.silvestri@rina.org

Bureau Veritas to class unique Arctic ice-breaking LNG carriers

Leading international classification society Bureau Veritas is to class the series of innovative Arctic-capable LNG carriers which will be built in Korea’s DSME yard to service the Yamal LNG project in Russia’s high Arctic.

Exporting LNG from Yamal calls for a type of LNG carrier never built before. A series of fifteen vessels will be built, each capable of transporting 172,000 cu m of LNG and operating in second year ice up to 2.5 m thick. YAMAL LNG has awarded Sovcomflot, MOL, Teekay and Dynagas one, three, six and five vessels respectively. They will be built to dual Bureau Veritas/Russian Register class.

Philippe Donche-Gay, Executive Vice President and head of BV’s Marine and Offshore Division says, “We have made extensive investments in research into ice loads and navigation in ice, working with major Russian institutions and Asian shipyards. This effort, coupled with our world-leading expertise in large LNG carriers gives us a strong technical base to class these highly sophisticated vessels.”

The 300 m loa vessels will carry 172,000 cu m LNG in four membrane tanks. The tank membranes will be of the GTT NO 96 type. The hull form is designed with a moderate ice bow forward and a heavy ice-breaking profile aft. The ship is dual-acting, navigating in light ice or open sea bow first, then navigating astern to break heavy ice. The astern ice breaking mode is assisted by the unique podded propulsion system which consists of three pods delivering around 45MW of power. Separate engine rooms housing the diesel generator power plants will be encased in a double hull to give protection from the ice and a high level of redundancy.

The ships will be built to Russian Register Arc7 standard, equivalent to an intermediate level between Polar Class 3 and Polar Class 4 of Bureau Veritas rules, for year-round operation in second-year ice with old ice inclusions with ice thickness of 2.5 m. The vessels will be highly winterised with Bureau Veritas winterization notation COLD (-45,-52) which means that the hull is prepared for operation in -45 Celsius ambient temperature and the equipment should be able to work at -52 Celsius.

Safety of the vessels and care for the environment will be enhanced by a forward and aft ice belt to add strength to the hull in key areas and a very detailed fatigue life analysis to ensure the structure can with withstand the expected extreme stresses for the life of the vessel. Bureau Veritas’ IceSTAR tool is being used to assess the hull ice loads.

To download a selection of graphics of the new vessel go to: http://bit.ly/1As4kK8

 or e mail john@merlinco.com

VISIT BUREAU VERITAS at GASTECH 2015   Stand No C45

Bureau Veritas is a world-leading provider in testing, inspection and certification. Created in 1828, the Group has more than 66,500 employees in around 1,400 offices and laboratories located all across the world. Bureau Veritas helps its clients to improve their performance by offering services and innovative solutions in order to ensure that their assets, products, infrastructure and processes meet standards and regulations in terms of quality, health and safety, environmental protection and social responsibility. Bureau Veritas is listed on Euronext Paris and belongs to the Next 20 index. Compartment A, ISIN code FR 0006174348, stock symbol: BVI.

For more information, visit www.bureauveritas.com/marine-and-offshore

Marine client portal www.veristar.com

For more information:

Carlos Guerrero Bureau Veritas +33 1 55 24 72 35 carlos.guerrero@bureauveritas.com

Bureau Veritas issues Design Approval for Mark V containment system

Leading classification society Bureau Veritas has issued Design Approval for the new Mark V LNG membrane containment system designed by France’s GTT. This clears the way for the system to be used in new LNG carriers and FLNGs.

The Mark V technology is an optimised version of GTT’s Mark III system. It is composed of double insulation with reinforced polyurethane foam. The new system also includes an innovative nickel-steel alloy corrugated secondary membrane and offers a significant improvement in the warranted daily boil off rate.

Jean-Francois Segretain, Technical Director, Bureau Veritas Marine & Offshore Division, says, “GTT’s Mark V system offers considerable benefits for new LNG projects and after rigorous examination we are very happy to award Design Approval to the system. GTT is the world leader in LNG containment and we have a long relationship with them. We look forward to working on the first newbuildings with the Mark V system.”

Download a graphic of the Mark V system from http://bit.ly/1As4kK8 or email john@merlinco.com

VISIT BUREAU VERITAS at GASTECH Stand No C45

Bureau Veritas is a world leader in laboratory testing, inspection and certification services. Created in 1828, the Group has more than 66,000 employees in around 1,400 offices and laboratories located all across the globe. Bureau Veritas helps its clients to improve their performance by offering services and innovative solutions in order to ensure that their assets, products, infrastructure and processes meet standards and regulations in terms of quality, health and safety, environmental protection and social responsibility. Bureau Veritas is listed on Euronext Paris and belongs to the Next 20 index.

Compartment A, ISIN code FR 0006174348, stock symbol: BVI.

Corporate website www.bureauveritas.com/marine-and-offshore

Marine client portal www.veristar.com

  

For more information:

Carlos Guerrero

Bureau Veritas

+33 1 55 24 72 35

carlos.guerrero@bureauveritas.com

London P&I Club says digital cameras can provide vital evidence in defending claims

THE London P&I Club has recommended that ship owners and operators keep a good-quality digital camera on board their vessels as part of their attempts to collect and preserve evidence in the event of claims arising, particularly as a result of damage to fixed or floating objects.

The club points out that experts need clear images to provide early remote assistance with incidents and the immediate actions required, and that insurers need evidence of the alleged damage and the losses suffered.

Writing in the latest issue of the club’s StopLoss Bulletin, Mike Harrison of marine consultancy Solis Marine Consultants Ltd, says, “For many fixed object damage claims – broken fenders, concrete or pile damage, crane contact – there can be little for experts or insurers to go on, perhaps a quick sketch, a few pixelated images and a remarkably large bill for repairs and loss of use.

“In many cases, the immediate task of collecting and preserving evidence lies with the master and crew. Good photographs taken as soon as possible after the event are invaluable, and can easily be shared by email with a remote expert for instant advice on key issues. The expert can then identify where further detail might be useful, the signs of prior damage and perhaps dilapidation or poor design.

“These days, $100 buys a camera capable of storing and taking quality images. There is no need to compromise on quality or quantity. The bridge kit should include as a minimum:
a digital compact camera with at least 8X optical zoom, built-in flash and video function; camera image quality of at least 10 megapixels; two 8GB or larger blank SD cards (preformatted) and checked for operation; spare battery pack; mains charger with ship-compatible plug

“The camera should be kept on the bridge, fully charged with an empty storage card. Most cameras have an internal clock which should be checked and set to UTC. This time-stamp is used when the image file is stored, essential when the chronology of events could be questioned.”

www.londonpandi.com

Underwriters fall out with expert witness over valuation of fire-damaged vessel

International Transport Intermediaries Club (ITIC) has reported a case in which hull & machinery insurance underwriters instituted proceedings against a marine consultancy firm for alleged negligence in failing to properly review shipyard quotes in respect of the cost of repairing a fire-damaged vessel.

The insured vessel had suffered extensive fire damage. The owners claimed that the ship was a Constructive Total Loss (CTL), alleging that the cost of repairing it was in excess of its insured value. The insurers rejected this claim, maintaining that the vessel was capable of economic repair. The vessel was ultimately scrapped, and the only remaining dispute was over the amount which the insurers were obliged to pay under the policy.

At an early stage, the owners made an offer to settle the claim by accepting $1.136m, plus their legal costs. Underwriters did not accept the offer, and litigation was started by the owners. The underwriters engaged a marine consultancy firm to provide expert advice/evidence on what it would have cost to repair the vessel. The consultants issued a report stating that the vessel was not a CTL. This report was based, among other information, on two independent quotations from Chinese shipyards and detailed calculations from the builder of the vessel which indicated that the steel weight for the vessel’s accommodation block was 312 tonnes.

The owners in turn submitted the report of their technical expert, which had been prepared using a different, ‘newbuild’ approach. This report used an estimated steel weight total of 542 tonnes to repair the accommodation block, and concluded that the total cost of repairing the vessel was $6m, a figure that would have made the vessel a CTL.

Following a joint experts’ meeting, underwriters’ counsel asked the consultants to prepare their own steel weight calculations, inclusive of the accommodation block, in order to rebut the owners’ report. Drawing from their own calculations, the consultants concluded that the shipbuilder’s initial steel weight figure was inaccurate and that the cost of repairing the vessel was about $3.9m in excess of the total insured value. On the basis of this new advice, underwriters settled with the owners for $1.3m, plus the owners’ costs.

Underwriters then started proceedings against the consultants on the basis that they had been negligent in not properly reviewing the shipyard quotes. The underwriters claimed that, had they been properly advised, they would have been able to settle for a lower amount at an earlier stage. This would have reduced their own costs and their liability for the owners’ costs.

The consultants pointed out that the underwriters had rejected the owners’ earlier offer before they had been engaged, and argued that, for their part, they had relied on the figures provided by the underwriters. Moreover, it was not until after the joint experts’ report that they were asked to make their own assessment.

Reporting that the issue was finally settled at mediation, ITIC says, “It is four years since the English Supreme Court held that expert witnesses involved in legal proceedings no longer enjoy protection from liability for negligence. It was a feature of this dispute that there was no document specifying what the consultants had been engaged to do. A large number of disputes involving consultants and other advisers would be avoided if the scope of work was clearly defined beforehand.”

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com



For more information:
Charlotte Kirk
ITIC
Tel. +44 (0)20 7338 0150
Fax. +44 (0)20 7338 0151
charlotte.kirk@thomasmiller.com

Liberian Registry appoints new investigations vice-president

The Liberian Registry has appointed Dodge Kenyon as Vice-President of its Investigations Division. Dodge joins from Holland America Group, where he was Manager of Technical Operations, Auditing and Compliance and Chairman of the Fleet Health, Environmental, Safety and Security Committee. His previous experience includes twelve years as a vessel inspector and investigator with the State of Washington Department of Ecology Spills Prevention Programme and over two years as a marine surveyor for American Bureau of Shipping in Los Angeles.

The Liberian Registry takes a highly proactive approach to the investigation of maritime casualties, personnel accidents and other related incidents with the objective of preventing marine casualties and marine incidents in the future. Its Investigation Division has, over the past decade, earned a superior reputation for conducting marine investigations with speed, efficiency and competence.

Incidents which come within the remit of Liberia’s Investigation Division may include events directly involving a ship, such as a casualty, a contravention of rules or regulations or an oil spill. Casualty investigations also include investigation of possible violations of law or failure on the part of personnel, shipowners, or ship operators. They may be personnel-related, such as death or injury, failure to properly perform duties, crew grievances, or acts of fraud or misconduct.

Dodge Kenyon says, “I have seen first-hand the responsible and proactive manner in which the Liberian Registry responds to investigative issues. It is an exciting new career challenge for me to now be part of the registry’s decision-making process in this respect, and I look forward to working with LISCR’s team of experienced maritime professionals.”

Scott Bergeron, CEO of the Liberian International Ship & Corporate Registry (LISCR), the US-based manager of the Liberian Registry, says, “Dodge has almost thirty years’ experience of working in the shipping industry in both the public and private sector. His first-hand knowledge of safety, loss prevention, and technical and operational compliance will prove invaluable to the registry and its continually expanding fleet.”

The Liberian Registry is one of the world’s largest and most active shipping registers and has long been considered the world’s most technologically advanced maritime administration. It has a long-established track record of combining the highest standards of safety for vessels and crews with the highest levels of responsive service to owners.

www.liscr.com

Moore Stephens reports small decline in 2014 ship operating costs

International accountant and shipping consultant Moore Stephens says total annual operating costs in the shipping industry fell by an average of 0.8% in 2014. This compares with the 0.3% average fall in costs recorded for 2013. All categories of expenditure were down on those for the previous 12-month period, confirming that ship owners and operators continued to manage costs sensibly and to watch their cash carefully in 2014.

The findings are set out in OpCost 2015 (www.opcostonline.com), Moore Stephens’ unique ship operating costs benchmarking tool, which reveals that total operating costs for the tanker, bulker and container ship sectors were all down in 2014, the financial year covered by the study. On a year-on-year basis, the tanker index was down by 2 points, or 1.1%, while the bulker index fell by one point, or 0.6%. The container ship index, meanwhile, was down by 2 points, or 1.2%. The corresponding figures in last year’s OpCost study showed a rise of 2 points in the tanker index, and falls of 2 points in the bulker and container ship indices.

There was an 0.1% overall average fall in 2014 crew costs, compared to the 2013 figure, which itself was 0.2% down on 2012. (By way of comparison, the 2008 report revealed a 21% increase in this category.) Tankers overall experienced a fall in crew costs of 0.4% on average, compared to the 1.8% increase recorded in 2013. Within the tanker sector, Suezmax Tankers reported an overall increase of 1.6% in crew costs, while for operators of Handysize Product Tankers the increase was 0.2%. All other vessels in the category showed a fall in crew costs for 2014.

For bulkers, meanwhile, crew costs were unchanged, having recorded an 0.5% average fall for the previous year. The operators of Handymax Bulkers and Handysize Bulkers paid 2.3% and 0.5% more, respectively, in crew costs than in 2013, but there was a 2.0% fall in this respect for Capesize Bulkers, and an 0.5% drop for Panamax Bulkers.

Expenditure on crew costs was unchanged in the container ship sector, having stabilised in 2013 at the previous year’s level. The 2.5% increase in crew costs recorded for Container Ships in the 1,000 - 2,000 teu category contrasted with the 1.4 % fall in such costs for bigger Container Ships (2,000 - 6,000 teu).

Expenditure on stores was down by 2.4% overall, compared to the fall of 1.9% in 2013. The biggest fall in such costs was the 5.3% recorded by operators of Handysize Bulkers, closely followed by container ships in the 1,000 - 2,000 teu range (5.1%). For bulk carriers overall, stores costs fell by an average of 3.7%, compared to a fall of 4.1% in 2013, while in the tanker and container ship sectors the overall reductions in costs were 0.7% and 3.0% respectively. The only increases in stores expenditure were those recorded by Panamax Tankers and Suezmax Tankers (each 1.2%), and by the operators of Dry Cargo vessels in the 5,000 - 25,000 dwt range (0.8%).

There was an overall fall in repairs and maintenance costs of 0.6%, compared to the 0.4% reduction recorded for 2013. The most significant cost reductions here were those recorded for tankers of between 5,000 and 10,000 dwt (3.3%), and for 1,000 - 2,000 teu Container Ships (3.2%). Bucking the trend, VLCCs recorded an increase in repairs and maintenance costs of 2.5%, and Capesize Bulkers of 1.8%.

The overall drop in costs of 0.4% recorded for insurance compares to the 0.3% fall recorded for 2013, and is the lowest in this category for a number of years. There were wide divergences, even within general tonnage categories. Whereas operators of Capesize Bulkers paid 5.1% more for their insurance in 2014, Panamax Bulkers paid 3.8% less.

Moore Stephens partner Richard Greiner says: “This is the third successive year-on-year reduction in overall operating costs. This comes as something of a surprise, and is contrary to earlier forecasts. Shipping is clearly watching the pennies, and it may also be the case that more competitive pricing for goods and services has had a part to play in holding down expenditure. Beyond that, as always, the impact of exchange rate changes cannot be determined readily.

“By far the biggest reduction in operating costs, for example, was seen this time in the Stores category. This can be largely explained by the knock-on effect which the fall in oil prices has had on lube oil costs. Such ‘benefits’ do not come often to any industry, and are usually not without a downside, as has been the case in shipping.

“Crew costs were down, albeit marginally, for the first time in recent memory. This could be an indication of a higher level of idle tonnage during the period under review, but is nevertheless welcome news for an industry which has seen crew cost increases of more than 20% at their peak.

“Expenditure on repairs and maintenance was also marginally down on 2013, possibly attributable in part to weak steel prices and in part to the fact that poor freight rates arguably do not encourage owners and operators to engage in anything but the most essential repairs and maintenance. It is to be hoped that there is not a future price to be paid in this respect in terms of either safety or performance.

“The bill for insurance coverage was also down, which will come as little or no surprise in view of the high level of competition in the insurance market, which is arguably even fiercer than that in the shipping industry.

“A third successive annual fall in operating costs must be good news for an industry already facing serious financial challenges and preparing to meet still more. But a bigger-picture view provides an insight into just how much operating costs have increased in recent years. OpCost is now in its fifteenth year of publication. At year-end 2001, the average daily operating cost for a Panamax Bulk Carrier was US$3,565. In 2014, it was US$6,046. For a Handysize Product Tanker, the comparable figures were US$4,164 and US$7,931.

“The challenge for shipping is how to build the cost of operation into freight rates in a way which allows for a reasonable profit margin in an industry which is driven by competition and characterised by overtonnaging. Given that, over the next few years, annual seaborne trade is projected to grow at a reasonable rate, and that the cost of regulatory compliance is likely to increase significantly, one would expect operating costs to rise over the same period. Two things are certain. Firstly, the business of operating ships will remain a costly undertaking. Secondly, the impetus for higher freight rates will not come from the shipping industry’s customers.”


Bone fide journalists can request an electronic copy of OpCost 2015 by emailing chris@merlinco.com

OpCost, the Moore Stephens vessel operating cost benchmarking study, is now in its 15th year of publication. The 2015 edition is available online, providing optimum reporting functionality for users, wherever they may be. 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. OpCost is widely used for benchmarking running costs, the preparation and ongoing monitoring of business plans and in forensic accounting. Access to OpCost 2015 is available free to owners who submit their data for inclusion, or can be purchased by contacting Richard Greiner at Moore Stephens.

Moore Stephens LLP is noted for a number of industry specialisations 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 626 offices of independent member firms in 103 countries, employing 26,290 people and generating revenues in 2014 of $2.7 billion. www.moorestephens.co.uk

For more information:
Richard Greiner
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
richard.greiner@moorestephens.com

Shipping experts identify realities of risk in ITIC panel debate

The need for proper training, sound risk management, and contractual expertise were among the issues identified as essential to commercial success in a panel debate following the annual board meeting of the International Transport Intermediaries Club (ITIC) in Athens on 24 September.

The panel, moderated by ITIC’s underwriter for Greece, Robert Hodge, and comprising Tim Jones of Barry Rogliano Salles (BRS), Bob Bishop of V Ships, Bjorn Tonsberg of Wilhelmsen Ships Service and Paul Herring of Ince & Co, was asked to debate The Realities of Risk, and what kept them awake at night.

Tim Jones referred to a case where a junior broker reportedly concluded a fixture using social media. A dispute arose post-fixture on the terms of the agreement but, since the broker had left the company by the time the dispute arose, it was not possible to obtain the necessary information from the social media site. Jones emphasised that BRS’s policy is to only use company emails when negotiating fixtures.

Bob Bishop observed that it was relatively easy to monitor the performance of machinery and that problems could be predicted and fixed. Monitoring the performance of staff was harder, but an essential task in managing a service company. He added that training is essential within any company, to ensure that the younger generation has the knowledge to avoid the mistakes of the past.

Bjorn Tonsberg emphasised that risk management is a key factor, an important part of which is to carry out due diligence, in order to establish exactly who one is dealing with. Commenting that he was aware of ship agents offering to act for agency fees far lower than commercial rates, Tonsberg stressed that it was essential for owners to carry out due diligence on the agent, including whether or not that agent had professional indemnity insurance in the event of a loss.

Paul Herring noted that good contractual management, including the use of standard trading conditions, enabled businesses to sleep better at night, a sentiment with which all the panel were in agreement.

Following questions from the audience, attendees retired to a drinks reception on the balcony of the Hilton Athens as the sun set over the Acropolis.

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com



For more information:
Charlotte Kirk
ITIC
Tel. +44 (0)20 7338 0150
Fax. +44 (0)20 7338 0151
charlotte.kirk@thomasmiller.com