All cost types contribute to ship operating costs decline for sixth successive year

International accountant and shipping consultant Moore Stephens says total annual operating costs in the shipping industry fell by 1.3% in 2017. This compares with the 1.1% average fall in costs recorded for 2016. For the third successive year, all categories of expenditure in 2017 were down on those for the previous 12-month period, most notably for insurance costs and stores.
The findings are set out in OpCost 2018 (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 2017, the financial year covered by the study. On a year-on-year basis, the tanker index was down by 3 points, or 1.7%, while the bulker index also fell by 3 points, or 1.9%, with the decline in both indices repeating that seen in the previous year at 3 points, or 1.7%, for tankers and 3 points, or 1.9%, for bulkers. The container ship index, meanwhile, was down by 2 points, or 1.3%, compared to the fall in the previous year of 1 point, or 0.6%.
There was an 0.1% overall average fall in 2017 crew costs, compared to the 2016 figure, which itself was 0.4% down on the previous year. By way of comparison, the 2008 report revealed a 21% increase in this category. Tankers overall experienced a fall in crew costs of 0.5% on average, compared to the 1.8% fall recorded in 2016. All categories of tankers reported a reduction in crew costs for 2017 with the exception of Tankers 5,000 to 10,000 dwt, and VLCCs, which recorded increases of 1.9% and 0.5% respectively, compared to reductions for 2016 of 2.8% and 0.5%. The most significant reduction in tanker crew costs was the 1.7% recorded by Aframax Tankers.
For bulkers, meanwhile, the overall average fall in crew costs in 2017 was 0.6%, the same as the figure recorded for the previous year. Panamax Bulkers and Handysize Bulkers each reported increases in crew costs, of 0.5% and 0.4% respectively, while for Capesize Bulkers and Handymax Bulkers there were reductions in spending compared to 2016 of 0.8% and 0.6% respectively.
There was no overall increase in expenditure on crew costs in the container ship sector in 2017, this compared to the 1.1% fall recorded for 2016. Smaller vessels in this category reported an increase in crew costs for 2017 (1.0% for container ships of between 100 and 1,000 teu and 1.2% for ships of between 1,000 and 2,000 teu). But for ships of between 2,000 and 6,000 teu there was a fall in such costs of 1.7%.
Expenditure on stores was down by 3.5% overall, compared to the fall of 2.9% in 2016. All vessels in all categories recorded a fall in such costs for 2017, none bigger than the 8.4% drop recorded by VLGCs of between 70,000 and 85,000 cbm. In the tanker sector, the most significant fall in such costs was the 5.5% posted by VLCCs. Handymax Bulkers led the way in the bulker sector with a 5.2% reduction in stores expenditure, while in the container ship sector vessels of between 6,000 and 10,000 teu spent 5.8% less on stores than they did in 2016.
For tankers overall, stores costs fell by an average of 4.5%, compared to the 2.2% recorded for 2016, while in the bulker sector the reduction in such costs was 3.6%, compared to a fall of 4.2% in 2016. In the container ship sector, meanwhile, there was a 3.4% fall in stores expenditure, compared to a drop of 5.2% the previous year.
There was an overall fall in repairs and maintenance costs of 1.7%, compared to the reduction of 0.8% in 2016. The only vessels to record increases in such costs were Capesize Bulkers and Panamax Bulkers (2.4% and 1.4% respectively), Tankers 5,000 to 10,000 dwt (2.6%), and container ships of between 1,000 and 2,000 teu (2.7%). The biggest fall in such costs was the 4.9% recorded by Chemical Tankers 40,000 to 50,000 dwt, followed by VLCCs (4.8%), and Handysize Product Tankers (4.5%).
For tankers overall, repairs and maintenance costs fell by 3.4%, compared to the 2016 figure of 1.7%, while in the bulker sector the reduction in such costs was 1.5%, compared to a fall of 2.2% in 2016. In the container ship sector, meanwhile, there was no increase in repairs and maintenance outlay, compared to the 1.6% fall recorded last time.
The overall drop in costs of 4.1% recorded for insurance compares to the 3.0% fall recorded for 2016. As was the case last year, all vessels in all tonnage and size categories included in OpCost paid less on average for their insurance in 2017 than in 2016. Bulkers paid 6.0% less overall (compared to 5.0% last year), tankers paid 3.4% less (2.6% in 2016), and for container ships the insurance outlay was down by 5.8%, as opposed to a fall in 2016 of 4.9%. The biggest reduction in insurance costs was the 6.5% recorded by container ships of between 6,000 and 10,000 teu and by Capesize Bulkers, followed by Suezmax Tankers (6.2%), and Handymax Bulkers, container ships of between 2,000 and 6,000 teu, and VLCCs (all at 6.0%).
Richard Greiner, Moore Stephens partner, Shipping and Transport, says, “This is the sixth successive year-on-year reduction in overall ship operating costs. The biggest cost reductions were once again to be found in the Insurance category. This may be due in part to a significant reduction in the overall incidence of large, expensive casualties over the past couple of years. But the size and frequency of the cost reductions is still worthy of note, given the cumulative cost of comparatively smaller but still expensive claims routinely fielded by hull and machinery underwriters. It is perhaps not surprising, then, that the International Union of Marine Insurance recently called for a better understanding by underwriters of the assets being insured in the marine market.
“Expenditure on Protection and Indemnity insurance was also down, which is again a reflection of the relative dearth of major casualties over the course of the year. The International Group through its pooling agreement, reinsurers, and owners themselves will have felt the benefit of that in their pockets.
“The next biggest level of cost reductions came, as was the case in 2016, in the Stores category. This is likely to change in the near future, however, if shipping markets continue to display signs of a recovery - if not to the heady days of ten years ago, then at least to more profitable levels. The tangible uptick in world oil prices will also have a knock-on effect on lube oil costs.
“The third biggest reduction in 2017 operating costs was in the Repairs and Maintenance category. Again, this is likely to change sooner rather than later. Shipping remains a highly competitive industry, but one where tighter regulation and better oversight by the likes of Port State Control should mean that there are fewer sustainable employment opportunities than at any time in recent memory for poorly maintained vessels.
“The smallest reduction in operating costs in 2017 came in the crew costs category – just 0.1%, this in a study which over the years has recorded increases of 20% and more. In some sectors, a weaker trading environment in 2017 could be one of the reasons behind this. So, too, may be the emergence of a new era of reportedly impressive seafarers entering the market from new training institutes in developing countries. A more pressing concern may be the difficulties being experienced by owners and operators in finding experienced crews for specialist ships, which will clearly come at a price. It is perhaps significant, for example, that crew cost increases for 2017 were recorded by the owners of both chemical tankers and LPG carriers.
“Overall, confidence in the shipping industry held up well in 2017, and has continued to do so this year. There remains an appetite for investment, and recourse to the necessary finance. Oil prices are going up, and the Baltic Dry Index, although somewhat volatile, is gradually leaving the really bad days behind. Given a favourable geopolitical wind, that should lead to increased activity, and most likely to higher operating costs.
“There are some big challenges ahead for the industry which will test owners, operators, charterers and investors alike. Planning must continue for implementation of the Ballast Water Management Convention, and decisions made on how to finance it. Measures to detect and eliminate cyber-crime will come at a price in terms of hardware, software and manpower.
“Meanwhile, owners and operators are still pondering the optimum way to meet the challenge of complying with the IMO’s 0.50% global limit on the sulphur content of fuel oil used on board ships from 1 January 2020. Compliance with this regulation can be achieved either by switching to low-sulphur fuel or by installing the likes of scrubbers. The first option is expensive. The second is both expensive and disruptive and moreover will be accompanied by an increase in operating costs. Decisions will be influenced by individual risk profile and commercial strategy, but will undoubtedly be costly.
“Shipping is used to fluctuations in costs and in industry fortunes. For example, OpCost records that, at year-end 2008, the average daily operating cost for a Handysize Bulker was US$5,139. In 2017, it was US$ 4,929. For an Aframax Tanker, the comparable figures are US$8,374 and US$7,640.
“The likelihood is that operating costs will increase when the markets improve significantly. Such increases must, however, be balanced against the technological advances which have already started to make shipping markedly more efficient and more cost-efficient. There will be more significant operating efficiencies - and more fluctuations in overall operating costs - to come. That is what makes shipping such a challenge.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 614 offices of independent member firms in 112 countries, employing 30,168 people and generating revenues in 2017 of $2.9 billion. www.moorestephens.co.uk/shipping-transport

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

Liberia calls for early reporting on 2020-compliant fuel availability

Liberia has submitted a paper to the IMO Marine Environment Protection Committee (MEPC) calling for early reporting on the availability of fuel oil that is compliant with the new 0.50 percent global fuel oil sulphur limit well in advance of 1 January 2020, the effective date the new fuel oil must be used on board ships.

David Pascoe, Senior VP, Maritime Operations and Standards, Liberian International Ship & Corporate Registry (LISCR), the US-based manager of the Liberian Registry, says, “Shipowners and operators hold a disproportionate responsibility in meeting the challenges associated with implementation of the 0.50 percent m/m global fuel oil sulphur limit and should not need to guess where or whether compliant fuel will be available.

“Smooth and effective implementation requires co-operation and compliance by all stakeholders, including states and fuel oil suppliers. It is critical that states carry out their responsibilities under MARPOL and SOLAS to promote the availability of fuel oils that are safe and which comply with the new sulphur limit, and report availability in their ports and terminals to IMO. IMO has established the means for states to effectively report through IMO’s Global Integrated Shipping Information System (GISIS).

“We are therefore urging IMO to issue a resolution or circular calling on states to report the availability of compliant fuel oil well in advance of 1 January 2020 to help shipowners and operators meet their responsibilities and to gain experience on the carriage and use of the new fuels on their ships, to test implementation plans, and to assist in a smooth and effective transition to the new regulatory requirements.”

Liberia’s submission to IMO comes after its co-sponsorship, together with major flags and industry organizations, of an IMO paper proposing the establishment of an Experience Building Phase (EBP) to help address the safety implications and other challenges associated with 2020-compliant fuels. Contrary to some inaccurate media reports, the paper proposing the EBP is not intended to delay the 1 January, 2020 compliance date. That date has been agreed previously and supported by Liberia.”


The Liberian Registry has a long-established track record of combining the highest standards of safety for vessels and crews with the highest levels of responsive and innovative service to owners. Moreover, it has a well-deserved reputation for supporting international legislation designed to maintain and improve the safety and effectiveness of the shipping industry and protection of the marine environment. www.liscr.com

Confidence slips marginally on geopolitical fears

Shipping confidence dipped very slightly in the three months to end-August 2018, according to the latest Confidence Survey from international accountant and shipping adviser Moore Stephens.

The average confidence level expressed by respondents was down to 6.3 out of a maximum possible score of 10.0, this compared to the four-year-high of 6.4 recorded in May 2018. Confidence on the part of owners, however, was up from 6.6 to 6.8, equalling the highest level achieved by this category of respondent when the survey was launched in May 2008, with an overall rating for all respondents of 6.8 out of 10.0.

Confidence on the part of charterers was also up, from 6.7 to 7.0, the highest level for nine months. The rating for managers, however, was down from 6.7 to 6.2, and for brokers from 6.3 to 4.9. Confidence in Asia was up from 6.1 to 6.3, equalling the highest rating achieved over the past 12 months.


The likelihood of respondents making a major investment or significant development over the next 12 months was up from 5.2 to 5.5 out of 10.0. Owners’ confidence was up from 5.5 to 6.5, but charterers recorded a drop from 6.7 to 4.0. Expectations of major investments were up in both Asia (from 5.9 to 6.1) and Europe (from 4.8 to 5.3).

The number of respondents who expected finance costs to increase over the coming year was down to 59% from 63% last time. Owners (up from 64% to 70%) and charterers (up from 33% to 50%) expected such costs to increase, but managers (down from 65% to 45%) and brokers (down from 75% to 71%) were of the opposite opinion.

The number of respondents expecting higher rates over the next 12 months in the tanker trades was up by 3 percentage points to 53%. In the dry bulk sector, there was a 16 percentage-point fall, to 38%, in the numbers anticipating higher rates, while the numbers expecting higher container ship rates fell from 43% to 26%. Net sentiment in the tanker sector was +44, in the dry bulk trades +27, and for container ships +3.

Demands trends were identified by 28% of respondents as the factor likely to influence performance most significantly over the coming 12 months. Competition (23%) was in second place, followed by finance costs (17%).

In a stand-alone question, 44% of respondents said they expected tariff wars to have “some” impact on the industry over the next 12 months. Meanwhile, 42% categorised such impact as “considerable,” and 11% felt that it would be “minimal”.

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says, “A small dip in confidence is not the news the industry wanted to hear, but confidence remains at its second-highest level for four-and-half years. Moreover, it is significant that the confidence of both owners and charterers actually increased.

“Concerns about geopolitical factors dominated the comments from respondents. These were led by President Trump’s efforts to transform US trade relations, but also included state support for shipping in China and South Korea. Shipping will always stand to reap the benefits of its global identity and presence, but will also court the risks that this must inevitably embrace.

“Fortunately, shipping is accustomed to playing on the big stage, against a volatile backdrop and to a demanding audience. The Baltic Dry Index is up on a year ago and oil prices are on the rise. These and other positive portents encourage the belief that shipping is starting to recover, albeit slowly, from a ten-year downturn.”


Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 614 offices of independent member firms in 112 countries, employing 30,168 people and generating revenues in 2017 of $2.9 billion. www.moorestephens.co.uk/shipping-transport


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

Liberia renews historic China agreement

On 5 September, the People’s Republic of China (PRC) and the Republic of Liberia renewed their historic maritime agreement for an additional five years. The unprecedented five-year extension further strengthens the close relations between the governments of the two countries, and their long-term co-operation in the field of maritime transport.

Under this renewal, Liberian-flag vessels will continue to enjoy their preferential rate for tonnage dues when visiting any port in China. These savings - a 28% port dues reduction - can translate to an effective net increase in time-charter equivalent rates of $1,000 per day based on a 100-day voyage. Furthermore, it has been agreed to establish a technical co-operation committee so that both countries can collaborate in areas such as port state control, crew training and future maritime regulatory policy.

The agreement gives Liberia a clear advantage over other flag states, such as the Marshall Islands, that do not have diplomatic relations with the PRC and do not get any port dues discounts in the PRC. Moreover, the recent maritime law amendments introduced by Liberia which allow a financing charter to be recorded as a mortgage are likely to strengthen still further the high level of mutually beneficial co-operation which exists between Liberia and its Chinese partners.

The agreement was signed by China’s Minister of Transport Li Xiaopeng and Liberian Maritime Authority Commissioner James F Kollie. Minister Li noted how the agreement had injected new vitality into the friendly bilateral relations established between the PRC and Liberia over recent years. He said that renewal of the agreement will further strengthen co-operation in the shipping, maritime, port and transport infrastructure sectors, as well in the training and education of seafarers.

Commissioner Kollie thanked China President Xi Jinping and the Chinese people for their strong support for the economic and social development of Liberia and other African countries. He said renewal of the maritime agreement underlines the strong friendship which exists between the two countries and further promotes the strengthening of their pragmatic levels of co-operation, resulting in mutual and tangible benefits for all concerned. “Renewal of the agreement,” he concluded, “takes relations between the two countries to a new level.”


The Liberian Registry is 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 and innovative service to owners. Moreover, it has a well-deserved reputation for supporting international legislation designed to maintain and improve the safety and effectiveness of the shipping industry and protection of the marine environment. www.liscr.com

Antwerp Towage celebrates tenth anniversary

Harbour towage specialist Antwerp Towage marked its tenth anniversary on 6 September with a ceremony at Waterfront Bar & Resto in Antwerp which was attended by many prominent industry representatives and port users.

Antwerp Towage NV was established in 2008 as a joint-venture between leading towage and salvage service providers Fairplay Towage and Multraship Towage & Salvage. It provides ship owners and operators with competitive harbour towage services at all river terminals and locks along the River Scheldt in the port of Antwerp, co-ordinating its state-of-the-art operations from dedicated offices at Tavernierkaai.

Antwerp Towage general manager Robert Van Hees says, “Starting a new venture in towage ten years ago was arguably a less daunting prospect than it would be today. But it still required a leap of faith, and a commitment to investment in hardware and manpower, based on the conviction that we could provide an improved and more competitive service to the users of the Port of Antwerp than was available to them at that time.

“Ten years on, we believe we have achieved that objective, and established Antwerp Towage as a highly respected brand in its specialist area of operation. The fact that we have been able to do that is due mainly to the hard work and dedication of our workforce, and to the loyalty of our customers, some of whom have been with us since the beginning.

“Harbour towage in Europe is a fiercely competitive sector, and we must expect clients to come and go and - in some cases - to come back again. That has certainly been the case over the past decade, and we expect it to continue in the future. The important thing is that users of the Port of Antwerp have continued access to competitive, quality harbour towage services.

“Ten years is a long time in shipping. We look forward to the next ten as we continue to give users of the Port of Antwerp the service they want and deserve.”

Moore Stephens identifies weak spots in shipping risk management

Confidence in the ability of sound risk management to contribute to commercial success in the shipping industry has fallen in the last 12 months, according to the latest annual Shipping Risk Survey from leading accountant and shipping adviser Moore Stephens.

Respondents to the survey rated the extent to which enterprise and business risk management is contributing to the success of their organisation at an average 5.9 out of a possible score of 10.0, compared to 6.8 in the 2017 survey.

Brokers returned the highest rating, followed by ship managers. For the first time in the four-year life of the survey, Europe was behind Asia in terms of geographical sentiment, but it was the Middle East which once again returned the highest figure (6.8).

Overall, respondents rated the extent to which enterprise and business risk was being managed effectively by their organisations at 7.3 out of 10.0, up from the rating of 7.1 recorded last time to the highest figure in the life of the survey. Charterers expressed the highest level of confidence in this regard.

Demand trends was cited by 17% of respondents (up from 16% in the previous survey) as the factor likely to pose the highest level of risk to their organisation. The cost and availability of finance (up from 13% to 16%) featured in second place, followed by competition, down from 14% to 13%. Operating costs were ranked in fourth place at 9% compared to 10% last year. There were also significant increases for bunker and fuel costs (up from 4% to 7%) and geopolitics (up from 4% to 6%). Meanwhile, supply of crew declined from 6% to 3%.

Geographically, demand trends remained the number one concern in Europe, Asia and the Middle East.

Respondents to the survey felt that the level of risk posed by most of the factors which impacted their business would remain steady over the next 12 months, with the exception of demand trends, fuel emissions, bunker and fuel costs and geopolitics, which were all perceived to have the potential for increased risk.

Overall, 73% of respondents (compared to 69% last time) felt that the senior managers in their organisations had a high degree of involvement in enterprise and business risk management. Meanwhile, 16% said that senior management’s involvement was limited to ‘periodic interest if risks materialise’, while 10% said that senior management ‘acknowledged but had a limited involvement in’ enterprise / risk management.

Overall, 36% of respondents (compared to 30% in the previous survey) confirmed that enterprise and business risk was managed by means of discussion without formal documentation, while 48% noted that risk was documented by the use of spreadsheets or written reports, compared to 45% previously. Third-party software was employed by 4% of respondents (14% last time) to manage and document risk, while 7% used internally developed software, as opposed to 10% at the time of the previous survey.

On a scale of 1.0 (low) to 10.0 (high), changes to legislation were deemed the factor most likely to result in a material misstatement in companies’ period-end financial statements. Next came estimates of claims and provisions, vessel impairment, disclosure of commitments and contingencies, and loan covenant non-compliance.

Michael Simms, Moore Stephens partner, Shipping Industry Group, says: “Shipping is a high-risk industry, and one where inattention to the proper identification and management of risk can have catastrophic consequences. It is not possible to take the risk out of shipping. But it is possible to reduce the levels of risk by identifying potential hazards and then putting in place measures to eliminate or reduce them.

“Traditionally, this has not been something at which shipping has excelled. Too often in the industry, the risk has outweighed the reward. But there has never been a more pressing need for shipping to address the way in which it analyses and manages risk.

“The nature of risk itself is changing, not least with the insidious increase in levels of cyber-crime. And the need to manage risk effectively is the subject of increasing legislation, notably in the form of the UK Corporate Governance Code and more stringent requirements in other jurisdictions.

“Our survey reveals that shipping is responding on some levels to existing and new challenges relating to the management of risk, but falling short in others. The disappointing news is that the respondents to our survey emerged as significantly less satisfied than they were 12 months ago that sound enterprise and business risk management was contributing to commercial success.

“On the plus side, almost three-quarters of respondents reported that their senior managers had a high level of involvement in risk management. There was a small increase in the number of respondents who noted that risk was managed by the use of proper written documentation, accompanied by an increase in the level of undocumented risk management discussions. But there was a 10% drop in the use of third-party software, and a smaller decline in the use of software developed internally.

“The findings of the survey suggest that shipping still has some way to go in order to significantly improve its risk management profile. This is particularly relevant if, as seems likely, we are beginning to see the start of a recovery in the industry’s fortunes after a ten-year slump. New opportunities will bring more – and some new – risks, and these will need careful management.

“Respondents to our survey deemed demand trends to be the biggest risk they face. They also identified fuel emissions, bunker and fuel costs, and geopolitics as posing an increased risk to their businesses over the next 12 months.

“There are sound reasons to explain why respondents should identify the potential risks to business posed by these classic elements of shipping practice. But it is open to question whether it is entirely prudent to classify certain other risks as merely ‘steady’, including the risk posed by the likes of cyber security, which is an increasing threat in shipping, as are changes to corporation tax and transfer pricing legislation around the world.

“This is not the time for shipping to be taking its eye off the risk ball. The tone at the top is everything, the starting point for good practice and transparent management which can improve the confidence of investors and other stakeholders. Shipping businesses which fail to recognise and address their genuine level of exposure to threat are at great risk of both financial and reputational damage.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 614 offices of independent member firms in 112 countries, employing 30,168 people and generating revenues in 2017 of $2.9 billion. www.moorestephens.co.uk/shipping-transport


For more information:
Michael Simms
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
michael.simms@moorestephens.com">michael.simms@moorestephens.com