BDO / Moore Stephens merger strengthens shipping presence

The merger between leading accountants and advisers BDO LLP and Moore Stephens LLP in London was completed earlier this month.

Clients of the merged firm, BDO, will have access to offices in over 160 countries with a presence in every major shipping location in the world.

Michael Simms, Partner and Head, Shipping & Transport at BDO, says: “Both BDO and Moore Stephens LLP have for many years been leading accountants and advisers to the shipping and transport sector. We are confident our clients will now benefit greatly from having access to the combined resources of the two firms.

“The merger enables us to deliver the ever-increasing range and depth of solutions demanded by our clients, who can expect the same high-quality, industry-leading service to which they have become accustomed.”

The BDO Shipping & Transport team has extensive experience delivering accountancy, tax and advisory services to the sector worldwide. BDO delivers key information and insights to the shipping community, including the annual OpCost report, the quarterly Shipping Confidence Survey and a host of thought leadership on topical issues, such as regulatory developments and market conditions. https://www.bdo.co.uk/en-gb/industries/shipping-and-transport


Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.

Our clients are Britain’s economic engine – ambitious, entrepreneurially-spirited and high-growth businesses that fuel the economy.

We share our clients’ ambitions and their entrepreneurial mind-set. We have the right combination of global reach, integrity and expertise to help them succeed.

BDO LLP
BDO LLP operates in 17 locations across the UK, employing nearly 5,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP has underlying revenues of £590m and is the UK member firm of the BDO international network.

BDO’s global network
The BDO global network provides business advisory services in 162 countries, with 80,000 people working out of 1,600 offices worldwide. It has revenues of $9bn.

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Moore Stephens wins Lloyd’s List Greek Shipping Award for OpCost

OpCost, the market-leading ship operating costs benchmarking tool from international accountant and shipping adviser Moore Stephens, has won a prestigious Lloyd’s List Greek Shipping Award.

The Lloyd’s List Intelligence Big Data Award, sponsored by the Department of Merchant Shipping of the Republic of Cyprus, was presented jointly to Costas Constantinou, Managing Partner, Moore Stephens Chartered Accountants S.A., Greece and Richard Greiner, Partner, Shipping, Moore Stephens LLP, London. The award was presented by Marios Demetriades, Minister of Transport, Communications & Works, at the Lloyd’s List Greek Shipping Awards Ceremony & Gala Dinner at the Athenaeum InterContinental Hotel, Athens on Friday 2 December.

The award recognises the significant potential that big data has to transform shipping, from timely insights drawn from real-time monitoring and forecasting of events, to improved management of performance and risk. Candidates were required to demonstrate measurable results in areas such as strategic business/investment planning, performance monitoring and optimisation, condition-based and predictive maintenance, optimisation across systems and system overview of operations.

Costas Constantinou says: “Moore Stephens is delighted that its unique OpCost benchmarking tool has been recognized in the Lloyd’s List Greek Shipping Awards. OpCost is an excellent example of the type of innovative service and products which Moore Stephens provides to the shipping industry both in Greece, and internationally throughout the maritime industry.”

Richard Greiner, global project leader for OpCost, says: “With operating costs continuing to rise, owners and operators need accurate and reliable information on cost movements to help plan their budgets and business strategies accurately. OpCost can also be used for business and budget planning, and transfer pricing studies. The most widely respected barometer of ship operating costs in the industry, it is available in a user-friendly online format, and is continually supplemented with new data to provide the shipping industry with the information it needs to monitor and plan its expenditure.”

Moore Stephens is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Both Moore Stephens Chartered Accountants S.A. and Moore Stephens LLP are member firms of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 657 offices of independent member firms in 106 countries, employing 27,613 people and generating revenues in 2015 of US$2.7 billion. www.moorestephens.com


For more information:

Costas Constantinou
Moore Stephens Chartered Accountants S.A., Greece
Tel: +30 (213) 0186 100
costas.constantinou@moorestephens.gr

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

Moore Stephens says ship operating costs are set to increase for 2016 and 2017

Vessel operating costs are expected to rise in both 2016 and 2017, according to the latest survey by international accountant and shipping consultant Moore Stephens. Repairs and maintenance and spares are the cost categories which are likely to increase most significantly in each of the two years.

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 1.9% in 2016 and by 2.5% in 2017.

The cost of repairs and maintenance is expected to increase by 1.7% in 2016 and by 1.9% in 2017, while expenditure on spares is predicted to rise by 1.7% in 2016 and by 1.8% in 2017. The cost of drydocking expenditure, meanwhile, is predicted to increase by 1.5% and 1.8% in 2016 and 2017 respectively.

The survey revealed that the outlay on crew wages is expected to increase by 1.3% in 2016, rising to 1.8% in 2017, with other crew costs thought likely to go up by 1.2% and 1.4% respectively for the years under review.

The increase in outlay for lubricants is predicted to be 0.8% and 1.4% in 2016 and 2017 respectively, and that for stores 1.3% and 1.7%. Meanwhile, projected increases in management fees are 1.0% and 1.2% in the two years under review.

The cost of hull and machinery insurance is predicted to rise by 0.9% and 1.1% in 2016 and 2017 respectively, while for P&I insurance the projected increases are 1.1% and 1.2%.

The predicted overall cost increases for 2016 were highest in the container ship sector, where they averaged 3.3% against the overall survey increase of 1.9%. By way of contrast, predicted cost increases for 2016 in the offshore sector were just 0.2%. Container ships also headed the expected cost increases for 2017, at 3.4% compared to the overall survey average of 2.5%. Tankers featured in second place for both years at 2.5% for 2016 and 2.9% for 2017.

The mood of respondents generally was quite pragmatic, with many referencing the need to address such familiar problem areas as over-tonnaging, excessive competition, a paucity of finance, rising fuel costs and burgeoning regulation and legislation. “An even greater discrepancy is expected between operating costs and freight rates,” said one respondent. “Owners will manage to make ends meet, but barely.”

Despite the expectation of increased crew costs, one respondent predicted, “Crew wages will drop as owners look for cheaper nationalities or mixed crewing,” while another said, “Reduced global trade demand will offset pressure for higher crew salaries.” Elsewhere it was noted, “Crew costs are very much dependent on the employment of ships. The whole management process will undergo substantial restructuring, with flags and other stakeholders needing to be more pragmatic regarding MLC compliance and vessel operation.” Another respondent, meanwhile, said that sourcing good quality crew could be a problem as “many have changed profession.”

The cost of meeting regulatory requirements was high on the list of concerns cited by respondents, one of whom noted, “Operating costs will rise for technical expenses such as maintenance and repair held over from previous years, while the cost of ballast water treatment plant will have to be taken into consideration in 2017 drydocking budgets.” Another respondent pointed out, “With the Ballast Water Management (BWM) convention coming into force in 2017, drydocking costs will increase significantly, depending on the type and size of ship involved.” And yet another warned, “As the quality and reliability of machinery and equipment in general deteriorates, then so the cost of maintenance increases.” Elsewhere it was noted, “The new international standards for limiting NOx, SOx and PM emissions from vessels will substantially increase operating costs.”

More than one respondent emphasised the need to keep down labour and management costs without sacrificing quality. One said, “Operating budgets have been pushed further and further south, with numerous managers willing to ‘low-ball’ operating budgets to catch the eye of new and existing owners. This can cause severe risk to the operating condition of vessels, but it appears that owners are willing – or have no choice but – to accept operating budgets which include unattainable assumptions and to fund additional cash call requirements where they become necessary.”

Respondents were also asked to identify the three factors that would most affect operating costs over the next 12 months. Overall, 20% of respondents (compared to 22% in last year’s survey) identified finance costs as the most significant factor, followed by competition at 19% (down from 22% last time). Crew supply was in third place with 18% (up one percentage point on last time), followed by demand trends (up by one percentage point to 17%) and labour costs, unchanged at 13%. The cost of raw materials was cited by 11% of respondents (compared to 8% in last year’s survey) as a factor that would account for an increase in operating costs.

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says, “The predicted increases in ship operating costs for 2016 and 2017 compare to an average fall in operating costs in 2015 of 2.4% across all main ship types recorded in the recent Moore Stephens OpCost study. And whilst the level of predicted increases for this year and next will undoubtedly be of concern to owners and operators, seasoned market operators and observers alike will not need particularly long memories to call to mind increases of more than eight times the levels predicated for 2016. In 2008, for example, the average operating cost increase absorbed by the industry was no less than 16%. Meanwhile, one year ago, expectations of operating cost increases in 2016 were 2.8% on average, so the fall in that expectation to 1.9% is of note.

“It is some time since crew wages failed to register the highest level of predicted cost increases in our survey, but such was the case with the forecasts for 2016, where repairs and maintenance costs headed the list, together with spares. This may be due to a number of factors, including the need to commit to repairs and maintenance deferred in earlier years, and the opportunity to do so at a time when the alternative may be to struggle to compete in a difficult economic and industry climate.

“Repairs and maintenance also topped the predicted operating cost increases for 2017, at 1.9%, ahead of crew wages, drydocking and spares, all at 1.8%. This is not a surprise given predicted increases in global steel prices and the fact that regulation and legislation, mandated and enforced mainly by IMO and Port State Control respectively, are now so tight in terms of both safety and environmental preparedness and responsibility. Above all, shipping needs safe ships and safety-minded crews to stay afloat, and both come with a heavy price-tag.

“One highly influential factor behind the anticipated rise in drydocking costs, most notably in 2017, is the entry into force of the Ballast Water Management Convention in September 2017, before which date some owners may choose to put their ships into drydock to ready them for the new legislation.

“The anticipated rise in crew wages and other crew costs, meanwhile, is arguably lower than anticipated, and there was indeed a feeling on the part of some respondents that, despite the entry into force of the Maritime Labour Convention 2006, wages could stabilise this year or even go down, due largely to the combination of a reduction in global trade and wider recourse to cheaper, less experienced manning alternatives.

“Shipping faces a number of potentially costly compliance responsibilities, including the imposition of an 0.5% global cap on sulphur emissions with effect from 2020. Other operating issues include predicted increases in the price of fuel, albeit from comparatively low levels, as OPEC looks to reduce oil production levels. This will have a knock-on effect on lube oil costs.

“Shipping is an industry suffering from an imbalance in supply and demand, illustrated by the chronic overcapacity in many trades, never mind that BIMCO recently reported that the shipbuilding sector faces its lowest level of newbuildings for 20 years. But it is an industry with a guaranteed future, witness the recent decision of lMO to select ‘Shipping: Indispensable to the World’ as its theme for World Maritime Day 2016. Just how healthy that future will be depends on the ability to generate sustainable profits after operating costs have been met.”

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 657 offices of independent member firms in 106 countries, employing 27,613 people and generating revenues in 2015 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

Moore Stephens reports fourth successive year of decline in operating costs

International accountant and shipping consultant Moore Stephens says total annual operating costs in the shipping industry fell by an average of 2.4% in 2015. This compares with the 0.8% average fall in costs recorded for 2014, and is the fourth successive overall year-on-year reduction in such costs. All categories of expenditure were down on those for the previous 12-month period. This suggests continued pragmatic management of costs by ship owners and operators, as well as a reduction in active trading for some owners as a result of the prolonged worldwide economic downturn.

The findings are set out in OpCost 2016 (www.opcostonline.com), Moore Stephens’ unique ship operating costs benchmarking tool, which reveals that that total operating costs for the tanker, bulker and container ship sectors were all down in 2015, the financial year covered by the study. On a year-on-year basis, the tanker index was down by 4 points, or 2.2%, while the bulker index fell by 6 points, or 3.6%. The container ship index, meanwhile, was also down by 6 points, or 3.7%. The corresponding figures in last year’s OpCost study showed falls of 2 points in both the tanker and container ship index, and of 1 point in the bulker index.

There was a 1.2% overall average fall in 2015 crew costs, compared to the 2014 figure, which itself was 0.1% down on 2013. By way of comparison, the 2008 report revealed a 21% increase in this category. Tankers overall experienced a fall in crew costs of 1.3% on average, compared to the 0.4% fall recorded in 2014. All categories of tankers reported a reduction in crew costs for 2015 with the exception of Panamaxes and VLCCs, which recorded increases of 1.4% and 1.2% respectively, compared to reductions for 2014 of 2.2% and 0.6%. The most significant reduction in tanker crew costs for 2015 was the 3.6% recorded by Product Tankers.

For bulkers, meanwhile, the overall average fall in crew costs in 2015 was 1.1%, having stabilised 12 months ago at 2013 levels. The operators of Handysize Bulkers paid 2.3% more on crew costs than in 2014, but the operators of other categories of bulker paid less, in the case of Panamax Bulkers to the tune of 3.2%.

Expenditure on crew costs was down 3.3% in the container ship sector, having stabilised in 2014 at the previous year’s level. The biggest fall in crew costs in this category was the 3.6% reduction recorded for vessels of between 2,000 and 6,000 teu.

Expenditure on stores was down by 4.3% overall, compared to the fall of 2.4% in 2014. The biggest fall in such costs was the 8.5% recorded by operators of Capesize Bulkers, with Panamax Bulkers (8.2%) not far behind. Other significant reductions included 2,000-6,000 teu Container Ships (8.0%) and Handymax Bulkers (7.5%). For bulk carriers overall, stores costs fell by an average of 7.7%, compared to a fall of 3.7% in 2014, while in the tanker and container ship sectors the overall reductions in stores costs were 4.3% and 5.5% respectively, compared to the corresponding figures of 0.7% and 3.0% for 2014. The only rise in stores expenditure by any category of vessel was the 1.5% increase recorded by Tankers 5,000 to 10,000 dwt.

There was an overall fall in repairs and maintenance costs of 4.3%, compared to the 0.6% reduction recorded for 2014. Only VLCCs and Container Ships of between 1,000 and 2,000 teu recorded increased expenditure on repairs and maintenance, of 0.1% and 1.3% respectively. Otherwise it was a case of reduced spending everywhere, the most significant example being the 7.9% fall recorded for Coastal Dry Cargo ships.

The overall drop in costs of 3.2% recorded for insurance compares to the 0.4% fall recorded for 2014. No vessels in the bulker category paid more for their insurance in 2015 than in 2014. Handysize Bulkers paid considerably less (5.7%) as did Panamax Bulkers (5.3%). Product Tankers and Tankers 5,000 to10,000 dwt were the only vessels in the tanker category to pay more for their insurance in 2015 than in the previous year, to the tune of 1.3% and 0.6% respectively. The biggest increase in insurance costs, however, was the 2.6% recorded by LPG carriers in the 10,000 to 40,000 cbm range. Perversely, gas carriers are historically regarded as among the safest vessels afloat, perhaps reflecting the effect on premium levels of the cost of potential claims rather than the legacy of claims records.

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says: “This is the fourth successive year-on-year reduction in overall ship operating costs. The reduction is three times that recorded 12 months ago, and a reduction at this level had not been widely anticipated. The fall in operating costs is likely to be due in part to continuing good husbandry in a difficult operating environment for many, and partly to an extremely difficult market and wider economic climate.

“The biggest cost reductions were predictably those in the Stores and Repairs and Maintenance categories. Falling world oil prices continued to have a knock-on effect on lube oil costs in 2015, while increasing numbers of owners were looking to strategic short-term lay-up rather than spending on maintenance and repair.

“The fall in crew costs arguably came as more of a surprise to an industry which has over the years absorbed increases of this type in excess of 20% and lived to tell the tale, but it was doubtless largely a consequence of reduced levels of trading. The fall in insurance costs, meanwhile, will come as no surprise to anybody in the light of warnings from the London market that hull rates for many major fleets continue to reach new lows.

“Last year was a particularly difficult one for shipping. Confidence reached its lowest level for seven years, according to the Moore Shipping Confidence Survey. Operators were not overly optimistic about making new investments in the short-term, while finance costs were predicted to rise. Nobody was expecting good news on dry bulk freight rates, and the outlook for tanker and container ship earnings was little better. The Baltic Dry Index, meanwhile, was getting ready to plumb the depths. It was not an auspicious time to be planning new ventures; rather, it was a time for taking stock. In short, for many, it was a time for keeping operating costs to a minimum.

“Against a background of declining confidence in 2015, oil prices were on a steady downward trend, and the slowdown in the Chinese economy was becoming increasingly evident. Neither of these factors was wholly good news for shipping and both, in different ways, served as a brake on 2015 operating costs.

“A fall in operating costs is good news for shipping, particularly at a time when earnings from the freight market, for many, are so disappointing. But the portents are not so encouraging. Oil prices are predicted to start recovering significantly in the second half of 2017, while the price of steel, the bedrock of the shipbuilding industry, could increase much sooner. The cost of manpower, meanwhile, is only likely to move in an upward direction under the terms of the Maritime Labour Convention 2006.

“While the Ballast Water Management Convention still seemed a long way away from entering into force in 2015, it wasn’t! Now the convention has been ratified, the cost of trying to achieve compliance should become clearer over the next 12 months, as should the cost of making shipping safer and more secure against threats from the likes of cyber-attacks and fraud.

“In conclusion, shipping can draw some comfort from a fourth successive annual fall in operating costs. But it should remember that costs can move both ways. OpCost records that, at year-end 2001, for example, the average daily operating cost for a Handymax Bulk Carrier was US$3,578. In 2015, it was US$ 5,604. For a Suezmax Tanker, the comparable figures are US$4,916 and US$9,170.

“The indications from the freight markets are that shipping is still selling itself too cheaply. Inflationary pressures on operating costs will remain, so maintaining the status quo will not be a viable option. For many, the freight markets will remain challenging and so to remain competitive, shipowners need to continue to improve efficiency, innovate with new technology and harness the considerable benefits of ‘big’ data without delay.”

Bone fide journalists can request an electronic copy of OpCost 2016 by emailing chris@merlinco.com

OpCost, the Moore Stephens vessel operating cost benchmarking study, is now in its 16th year of publication. The 2016 edition is available online, on a new website, providing optimum reporting functionality and tools, creating an easier experience 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 2016 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, 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 657 offices of independent member firms in 106 countries, employing 27,613 people and generating revenues in 2015 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