Vessel operating costs expected to rise in 2019 and 2020

International accountant and shipping adviser BDO says total operating costs in the shipping industry are expected to rise by 2.5% in 2019 and by 2.7% in 2020.

Responses to the firm’s latest annual Future Operating Costs Survey revealed that insurance is the cost category likely to increase most significantly in both 2019 and 2020. In the case of protection and indemnity insurance, the predicted increase is 2.0% for each of the years under review, while hull and machinery insurance costs are expected to rise by 1.9% in both 2019 and 2020.

The cost of both dry docking and of repairs and maintenance is expected to increase by 1.8% in 2019 and by 1.9% in 2020, while expenditure on crew wages is predicted to rise by 1.9% in 2019 and by 1.8% in 2020. Other crew costs are expected to increase by 1.8% and 1.7% respectively.

The increase in expenditure for spares is expected to be 1.6% in 2019 and 1.8% in 2020. Meanwhile, projected increases in lubricants are 1.6% in each of the two years under review, while those for stores ae 1.3% and 1.4% respectively.

The predicted overall cost increases for 2019 were highest in the container ship sector, where they averaged 3.7%. These are heavily influenced by expected increases in both protection and indemnity and hull and machinery insurance costs. Predicted cost increases in the bulk carrier market in 2019, meanwhile, were 2.3%, as opposed to 2.5% in the tanker market and 2.6% in the offshore sector.

A slightly different pictured emerges in respect of 2020, where the highest operating cost increases are those amounting to 3.8% which are expected in the offshore sector. Operating costs for container ships, meanwhile, are expected to rise by 3.0% in 2020, and for bulk carriers and tankers by 2.7% and 2.1% respectively.

The cost of regulatory compliance was high on the list of concerns cited by respondents to the survey. One respondent said 2020 is “all about environmental regulations and the demand for - and cost of – fuel.” Elsewhere it was noted, the shipping market “will be dominated by the cost of new regulations, not least that relating to compliance with the IMO Sulphur 2020 regulation”.

Crew costs were the other factor uppermost in the minds of respondents. “Manning will continue to be a painful area for ship operators,” said one commentator. Another respondent observed that rising wage costs now represent a real threat to business models, while another anticipates a stronger dollar in 2019/2020, which will affect the main cost of paying seafarer wages.

The cost and availability of finance was another issue raised by a number of respondents, one of whom said, “finance – or a lack thereof – is driving consolidation as part of a trend towards creating mega-companies”. They added: “The market is being eroded by capital providers and hedge fund managers who shun efficiency in favour of scale.”

Overall, 25% of respondents (up from the figure of 23% recorded in last year’s survey) identified the cost of new regulation as the most influential factor likely to affect operating costs over the next 12 months. Finance costs featured in second place at15%, compared to 18% last year. In third place was crew supply at 14% up from 12% last year. Next came competition, down from 15% to 13%, followed by demand trends (12%) and labour costs, (11%), compared to last year’s figures of 10% and 8% respectively. Raw material costs, meanwhile, were up by one percentage point to 8%.

Richard Greiner, Partner, Shipping & Transport at BDO, says: “The predicted 2.5% and 2.7% increases in operating costs for 2019 and 2020 respectively compare to an average fall in actual operating costs in 2018 of 1.8% across all main ship types recorded in the recent BDO OpCost study.

“There were some interesting predicted cost increases in the individual market sectors. The increases in the container ship sector for 2019, for example, were the highest in every single individual category of expenditure with the exception of dry docking and management fees. The cost of hull and machinery insurance for container ships is predicted to increase by 4.8% in 2019 and by 3.3% in 2020. For protection and indemnity insurance, the comparable predicted increases are 4.1% and 3.3% respectively. By way of comparison, increases in protection and indemnity and hull and machinery insurance costs in the tanker sector for 2020 are predicated at 1.3% and 1.2% respectively.

“One year ago, overall expectations of operating cost increases for 2019 averaged 3.1%. The fall now to an estimated 2.5% must be regarded at first blush as good news. But this must be tempered by the knowledge that some significant items of big-ticket expenditure – notably those relating to the cost of complying with new regulations - are waiting in the wings.

“It is clear that shipping is well aware of the need to achieve regulatory compliance on a scale not previously envisaged or encountered by previous generations of the industry. This is only the third time that the cost of new regulations has been included in our Future Operating Costs Report, but for the second successive year it has emerged as the factor deemed most likely to have a significant influence on operating costs.

“This is not surprising, given that the immediacy of IMO‘s Sulphur 2020 regulation is enshrined in the name of the regulation itself, while the time is fast approaching for owners to make a decision on the respective merits of Ballast Water Management Convention compliance solutions.

“Shipping and its regulators have demonstrated their ongoing commitment to improving the industry’s carbon footprint, but it is clear that this will come at a price, as will the continuing drive towards greater innovation and technical excellence. A cleaner, greener and more efficient shipping industry will ultimately impact favourably on both operating costs and investor appetite. But, perversely, the process of attaining environmental and technical proficiency will add to such costs in the shorter term.

“Experienced owners and managers are well-used to optimising operating cost efficiencies, with one respondent in the survey noting how for some years now the combination of a soft insurance market, cheaper finance and a decline in crew costs had helped to keep operating cost increases below 2% over the past eight years. Current indications are that the influence of such factors is declining and on their own they are unlikely to be enough to stay ahead of the game in the coming years.

“Finance is available for viable projects, but will not come cheap. Crew costs are likely to go up rather than down in the short term. And, perhaps most significantly of all, insurance outgoings are predicted to rise over the next two years at a rate not seen for some time. There have certainly been a number of recent indications that the prolonged soft insurance market conditions in both the commercial and mutual sector may soon start to change. The reasons for this are not entirely clear, but may involve the recent deterioration in technical performance by both the protection and indemnity clubs and hull and machinery underwriters, which could in turn lead to a firming of the rates which owners are required to pay. Then again, we have seen before how difficult it can be to make premium increases stick, particularly in the commercial market.

“Shipping faces some major challenges over the next two years as it seeks to position itself as an environmentally-aware, technically-savvy industry. It must expect fluctuations in the level of operating costs caused by a variety of factors ranging from movements in oil prices to shifts in levels of manpower, from fluctuations in the value of the dollar to the ramifications of geopolitical developments around the world. The movement in some costs is easier to map and predict than in others. The movement in others still, such as the cost of regulation, is becoming easier to predict as implementation deadlines draw ever closer. The movement in yet others, such as the cost of fighting cyber-crime, can only be guessed at for the moment.

“One thing is clear. The cost of operating effectively and profitably in the modern shipping industry must be met chiefly by revenues generated from day-to-day operations. Shipping remains an optimistic industry but, if the evidence of the freight markets is to be believed, it may not be charging enough for the unique service that it provides.”


Note to editors

The BDO (formerly Moore Stephens LLP) 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


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 is the UK member firm of the BDO international network.

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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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Ship operating costs decline for seventh year in succession

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

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

There was a 1.1% overall average decrease in 2018 crew costs, compared to the 2017 figure of 0.1%. By way of comparison, the 2008 report revealed a 21% increase in this category. Tankers overall experienced a fall in crew costs of 1.8% on average, compared to the 0.5% fall recorded last year. All categories of tankers reported a reduction in crew costs for 2018 with the exception of Panamax Tankers, which recorded an increase of 0.1%, compared to a reduction for 2017 of 0.7%. The most significant reduction was the 2.7% recorded by Aframax Tankers, which also recorded the biggest reduction in 2017 at 1.7%.

For bulkers, meanwhile, the overall average fall in crew costs in 2018 was 1.1%, compared to 0.6% recorded for the previous year. Handymax Bulkers recorded a 2.3% fall in 2018, with a 1.7% fall for Panamax Bulkers and 0.1% for Handysize Bulkers. Capesize Bulkers were the only category of bulker to record an increase in crew costs, of just 0.1%, compared to the fall the previous year of 0.8%.

As was the case in 2017, there was zero overall increase in expenditure on crew costs in the container ship sector in 2018. The last overall movement for this category of ship was the 1.1% fall recorded for 2016. With the exception of vessels of between 2,000 and 6,000 teu, all categories of container ships recorded a fall in crew operating costs in 2018. In the case of ships between 6,000 and10,000 teu, the fall was 2.7%, equalling the figure recorded by Aframax Tankers as the largest reduction in crew costs recorded in OpCost 2019.

Expenditure on stores was down by 4.9% overall, compared to the fall of 3.5% in 2017. Mirroring the results in the previous year, all vessels in all categories recorded a fall in stores costs for 2018, none bigger than the 7.6% recorded by container ships of between 2,000 and 6,000 teu. In the tanker sector, the most significant fall was the 6.4% posted by Aframax Tankers. Panamax Bulkers and Capesize Bulkers led the way in the bulker sector, each recording a 6.7% reduction in stores expenditure.

For tankers overall, stores costs fell by an average of 4.8%, compared to the 4.5% recorded for 2017, while in the bulker sector the reduction was 6.1%, compared to a fall of 3.6% in 2017. In the container ship sector, meanwhile, there was a 5.7% fall in stores expenditure, compared to a drop of 3.4% the previous year.

There was an overall increase in repairs and maintenance costs of 0.6% in 2018, compared to the reduction of 1.7% in 2017. Both categories of chemical tanker posted increases, led by the 1.6% increase posted by Chemical Tankers 40,000 to 50,000 dwt. There were also significant increases in the container ship sector, most notably in the case of ships of between 1,000 and 2,000 teu and between 2,000 and 6,000 teu (3.1% and 2.9% respectively).

In the tanker sector, Suezmax owners spent 2.3% more on repairs and maintenance in 2018 than they did in the previous year, while increases were also posted for Tankers 5,000 to 10,000 dwt (1.2%) and Handysize Product Tankers (1.1%). Repairs and maintenance costs were also up in the bulker sector for Capesize Bulkers (1.5%) and Handysize Bulkers (0.3%). Product Tankers, meanwhile, recorded the largest fall of 1.6% across all categories.

For tankers and bulkers overall, there was zero overall increase in repairs and maintenance costs in 2018, compared to the falls of 3.4% and 1.5% recorded in 2017. In the container ship sector, however, there was a 3.2% overall increase in repairs and maintenance costs in 2018, compared to zero movement the previous year.

The largest overall drop in operating costs in 2018 was the 7.1% fall recorded for insurance, compared to the 4.1% fall in 2017. Ro-Ros were the only category of vessel to record any increase in insurance costs (1.7%). Everywhere else, there were sizeable reductions in insurance outgoings, none bigger than the 9.9% posted for Handysize Product Tankers. Not far behind were Chemical Tankers 15,000 to 40,000 dwt (9.8%), Panamax Bulkers (9.7%) and container ships of between 1,000 and 2,000 teu (9.3%).

For tankers overall, there was an 8.3% fall in insurance costs in 2018, compared to the 3.4% reduction in 2017. For bulkers, the reduction was 8.5%, compared to 6.0% the previous year, and for container ships the corresponding figures were 7.6% and 5.8%.

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

“In 2018, as was the case the previous year, the biggest cost reductions were to be found in insurance, reflecting, among other things, the intense competition for business in insurance markets throughout the world. The next biggest level of reductions came, as was again the case in 2017, in the stores category, a trend largely driven by the fall in the cost of lube oils.

“The smallest of the reductions in operating expenditure in 2018, as was the case in the previous year, came in the crew costs category, down by just over 1% on the previous year. Crew costs have been one of the most volatile elements of operating expenditure in the modern shipping industry, but there are reasons to believe that such volatility is likely to decrease. There are a variety of factors impacting crew costs, including fluctuating trade levels, the improved bargaining position enjoyed by seafarers under the MLC 2006 Convention, the emergence of professionally trained crews from dedicated institutions in developing countries, technological advances resulting in reduced manpower requirements, and the continuing difficulty of finding sufficient numbers of certain specialist officers and crew. These factors should balance each other out over time so that increases of more than 20% in crew costs are at least unlikely to be seen - increases the industry has witnessed and survived in previous years.

“Shipping is used to fluctuations in costs and industry fortunes. For example, OpCost records that, at year-end 2008, the average daily operating cost for a Panamax Bulker was US$6,321; in 2018, it was US$5,472. For a Handysize Product Tanker, the comparable figures are US$7,908 and US$7,285.

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

The BDO (formerly Moore Stephens LLP) 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


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 is the UK member firm of the BDO international network.

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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.
Press office:
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media@bdo.co.uk

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Moore Stephens reports small decline in 2013 ship operating costs

International accountant and shipping consultant Moore Stephens says total annual operating costs in the shipping industry fell by an average of 0.3 per cent in 2013. This compares with the 1.8 per cent average fall in costs recorded for the previous year. Crew costs was the only category this time to show an increase over the 12 month period, indicating that ship owners continued to focus on managing costs and conserving cash in 2013.

The findings are set out in OpCost 2014 (www.opcostonline.com), Moore Stephens’ unique ship operating costs benchmarking tool, which reveals that total operating costs for the tanker sector were up in 2013, the financial year covered by the study, but down in the bulker and container ship sectors. The tanker index was up by 2 points, or 1.1 per cent, while both the bulker index and the container ship index were down by 2 points, or 1.2 per cent, on a year-on-year basis. The corresponding figures in last year’s OpCost study showed falls of 5 points, 7 points and 3 points respectively in the tanker, bulker and container ship indices.

There was a 0.2 per cent overall average rise in 2013 crew costs compared to the 2012 figure, which itself was 0.2 per cent down on 2011. (By way of comparison, the 2008 report revealed a 21 per cent increase in this category.) Tankers overall experienced an increase in crew costs of 1.8 per cent on average, compared to the 2.3 per cent fall recorded in 2012. Within the tanker sector, Handysize product tankers reported an overall increase of 3.3 per cent in crew costs, while for operators of Suezmaxes and product tankers the increases were 2.5 per cent and 1.9 per cent respectively. The only tanker category to show a fall in crew costs was VLCCs, down by 0.9 per cent.

For bulkers, meanwhile, the overall average fall in crew costs was 0.5 per cent, the same as in the previous year. The operators of Panamax bulkers paid 2.3 per cent less in crew costs than in 2012, but there was a 1.2 per cent increase in this respect for Handysize bulkers, this following a 4.8 per cent reduction for 2012. Expenditure on crew costs remained unchanged over the 12 month period in the container ship sector, although operators of vessels of between 100 and 1,000 teu did record a 1.7 per cent increase in such costs for 2013.

Expenditure on stores was down this time by 1.9 per cent overall, compared to the fall of 2.1 per cent in 2012. The biggest fall in such costs was the 5.5 per cent recorded by VLCCs. For bulk carriers overall, stores costs fell by an average of 4.1 per cent, while in the tanker and container ship sectors the overall reductions in costs were 2.1 per cent and 3.4 per cent respectively. The most significant increase in stores expenditure was that recorded by the operators of tankers in the 5,000-to-10,000 dwt range (6.0 per cent).

There was an overall fall in repair and maintenance costs of 0.4 per cent, compared to the 1.9 per cent reduction recorded for 2012. The most significant cost reduction here was that recorded for bulkers of between 10,000 and 20,000 dwt (7.2 per cent), while the highest recorded increase was that for 40,000-to-50,000 cbm chemical tankers (3.6 per cent).

The overall drop in costs of 0.3 per cent recorded in respect of insurance compares to the 6.2 per cent fall recorded for 2012, and was the lowest in this category for a number of years. The operators of all categories of bulkers paid less for their insurance in 2013 than they did in 2012, in the case of Handysize bulkers to the tune of 4.1 per cent. In the tanker category, all but two types of vessel – 5,000-to-10,000 dwt tankers and Handysize product tankers – paid less than in 2012, while operators of 100-to-1,000 teu container ships paid 2.7 per cent more in 2013 than in 2012.

Moore Stephens partner Richard Greiner says: “This is the second successive year-on-year reduction in operating costs. The fall in costs for 2013, however, is 1.5 per cent below that recorded for 2012, and coincides with a period of slowly returning confidence in the shipping industry, according to the Moore Stephens Shipping Confidence Survey.

“Crew costs were the only category of expenditure to show an increase over the 12-month period covered by the survey. This time it was a comparatively small rise for an industry which had seen increases of more than 20 per cent at their peak. The fact that crew costs were the only category to show an increase for 2013 is perhaps a reflection of a diminution in the number of owners and operators exiting the industry and a reminder that investment in good people is a must.

“Expenditure on repairs and maintenance and on stores was down in 2013, but by a smaller margin than in 2012, so it is to be hoped that owners and operators are continuing to pursue the sort of sound husbandry which competition and regulation demand. Meanwhile, the fall in insurance costs this time of 0.3 per cent is significantly down on the 6.2 per cent decrease for 2012, suggesting that underwriters in the hull market are taking a harder line.

“Overall, the fall in operating costs recorded in OpCost 2014 must be good news for owners and operators. So, too, must the gradual and continuing improvement in the global economic climate, if not the current political unrest. Shipping operates on a global stage and must inevitably be affected by international events.

“Shipping is an expensive business in which to operate, and revenues earned in the freight markets must ultimately be sufficient not only to cover operating costs but also to generate a reasonable return. While slowly emerging from an extended global economic downturn, the industry remains under pressure to manage and reduce operating costs wherever possible, whilst making suitable budgetary provision for achieving forthcoming regulatory compliance, which is likely to be significant.”

Bone fide journalists can request an electronic copy of OpCost 2014 by emailing chris@merlinco.com

OpCost, the Moore Stephens vessel operating cost benchmarking study, is now in its 14th year of publication. The 2014 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 2014 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 667 offices of independent member firms in 105 countries, employing 27,081 people and generating revenues in 2013 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

Focus on cash control impacts ship operating costs

International accountant and shipping consultant Moore Stephens says total annual operating costs in the shipping industry fell by an average 1.8 per cent in 2012. This compares with the 2.1 per cent average rise in costs recorded for the previous year. There was a significant reduction in costs across all categories and it was clear that ship owners had been focusing on managing costs and conserving cash in 2012.

The findings are set out in OpCost 2013, Moore Stephens’ unique ship operating costs benchmarking tool, which reveals that total operating costs for the three main tonnage sectors covered – bulkers, tankers and container ships – were all down in 2012, the financial year covered by the survey. The bulker index was down by 7 points, or 3.9 per cent, on a year-on-year basis, while the tanker index fell by 5 points, or 3.0 per cent. The container ship index was meanwhile down by 3 index points, or 1.8 per cent. The corresponding figures in last year’s OpCost report showed 3-point increases in both the bulker and tanker indices, and a 5-point increase in the container ship index.

There was a 0.2 per cent overall average fall in 2012 crew costs compared to the 2011 figure. (By way of comparison, the 2008 report revealed a 21 per cent increase in this category.) Tankers overall experienced a fall in crew costs of 2.3 per cent on average, compared to the 2.2 per cent increase recorded in OpCost 2012. Within the tanker sector, Aframaxes reported an overall fall of 5.2 per cent in crew costs, while for operators of Suezmaxes and product tankers the reductions were 4.0 per cent and 3.8 per cent respectively. The only tanker categories to show significant increases in crew costs were 3,000-8,000 cbm LPG carriers and Panamax tankers, where such costs were up by 5.2 per cent and 2.8 per cent respectively.

For bulkers, meanwhile, the overall average fall in crew costs was 0.5 per cent, compared to a 2.8 per cent increase the previous year. The operators of Panamax bulkers paid 3.7 per cent less than in 2011. Handysize bulkers and those in the 10,000-20,000 dwt range, meanwhile, each experienced crew cost reductions of 4.8 per cent. For container ships, the reduced spend on crew averaged 1.0 per cent (as opposed to a 3.4 per cent increase in 2011), although operators of reefer tonnage did pay 3.7 per cent more than in the previous year.

For repairs and maintenance, there was an overall fall in costs of 1.9 per cent, compared to the 1.1 per cent increase recorded for 2011. The only categories of tonnage to show a significant increase here were dry cargo ships of 25,000 dwt and above (5.0 per cent) and 70,000-85,000 cbm LPG carriers (3.2 per cent). The overall fall in repairs and maintenance costs for the bulker sector averaged out at 4.6 per cent, for the tanker sector it was 2.9 per cent, and for container ships it was 2.0 per cent.

Expenditure on stores was down this time by 2.1 per cent overall, having risen by 2.7 per cent in OpCost 2012. The biggest fall in such costs was the 7.7 per cent recorded by bulk carriers in the 10,000-20,000 dwt range. For bulk carriers overall, stores costs fell by an average of 4.5 per cent, while in the tanker and container ship sectors the overall reductions in costs were 2.9 per cent and 1.4 per cent respectively. The most significant increases in stores expenditure was recorded by the operators of 40,000-50,000 dwt chemical tankers (4.5 per cent).

The biggest overall drop in operating costs was the 6.2 per cent recorded in respect of insurance. Only RoRos (5.1 per cent), LPG carriers of between 70,000 and 85,000 cbm (3.0 per cent) and very large container ships (1.4 per cent) actually spent more on insurance in 2012 than in 2011. Reefer operators actually spent 16.4 per cent less, but it was the bulker sector which recorded the biggest reduction in terms of its overall payments to underwriters, averaging out across all tonnage sizes at 8.9 per cent, compared to 7.0 per cent for tankers.

Moore Stephens partner Richard Greiner says: “There is a lot of ‘red ink’ in costs, which actually translates into ‘black ink’ in the bottom line for owners. Significantly, 2012 recorded a year-on-year reduction in operating costs, only the second time this has occurred since OpCost was launched.

“It is no coincidence that, during the operating period covered by OpCost 2013, confidence levels in the shipping industry dropped to their lowest point in the past five years, according to the Moore Stephens Shipping Confidence Survey. So it is unsurprising to find that expenditure declined. The industry generally was under extreme pressure during an extended global economic downturn, and attending to items of manageable cost control was an imperative at a time when revenues were declining.

“That said, however, the 6.2 per cent overall fall in insurance costs across all tonnage types is something of a surprise, given the repeated warnings issued by hull underwriters of the dangers of pitching rates too low. It is perhaps simply the case that declining vessel values are being reflected in declining premium costs.

“The fall in operating costs recorded in OpCost 2013 is good news for owners and operators. So, too, is the fact that the global economic outlook is starting to look brighter. But any optimism should be tempered with caution. Foreseeable – if not entirely quantifiable – costs, not least those related to regulatory compliance, have the potential to make a large hole in the industry’s cashflow over the coming year. So a mix of optimism, forward planning, and ongoing risk management would seem to be a good recipe for the future.”

Bone fide journalists can request an electronic copy of OpCost 2013 by emailing chris@merlinco.com

OpCost, the Moore Stephens vessel operating cost benchmarking report, is now in its 13th year of publication. The 2013 edition is available for the first time online, providing increased 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. Copies of the OpCost 2013 report are 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 624 offices of independent member firms in over 100 countries, employing 21,224 people and generating revenues in 2012 of $2.3 billion. www.moorestephens.co.uk


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