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


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Shipping confidence dips but investment appetite remains undimmed

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

The average confidence level expressed by respondents fell to 6.0 out of a maximum score of 10.0, compared to the 6.3 recorded in August 2018.

Confidence on the part of all main categories of respondent was down, with the exception of brokers, where the rating increased from 4.9 to 5.2. Owners’ confidence fell to 6.4 from 6.8, which was originally the second highest achieved by this category of respondent in the life of the survey. The confidence rating for managers, meanwhile, was down from 6.2 to 6.0 and that for charterers from 7.0 to 6.8. The survey was launched in May 2008 with an overall rating for all respondents of 6.8 out of 10.0.

Confidence was down in Europe, from 6.2 to 6.1, and in North America, from 6.8 to 5.2, but held steady in Asia at 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 unchanged at 5.5 out of a maximum score of 10.0. Owners’ confidence was down from 6.5 to 6.3, but that for charterers was up from 4.0 to 6.6. Expectations of major investments were up in Asia from 6.1 to 6.2, but down in Europe from 5.3 to 5.2.

The number of respondents who expected finance costs to increase over the coming year was up from 59% to 67%. The figure for owners was up from 70% to 71%, while the figures for charterers and managers were up from 50% to 80%, and from 45% to 63% respectively. The rating for brokers was unchanged at 71%.

Competition, identified by 21% of respondents, overtook demand trends (20%) as the factor expected to influence performance most significantly over the next 12 months, with finance costs (16%) in third place.

The number of respondents expecting higher freight rates over the next 12 months in the tanker market was up by seven percentage points on the previous survey to 60%, while those expecting lower rates was up from 9% to 12%. In the dry bulk sector, expectations of rate increases were unchanged at 38%, accompanied by a four percentage point increase to 15% in the numbers anticipating lower rates. The numbers expecting higher container ship rates, meanwhile, fell by one percentage point to 25%, compared with 24% anticipating lower rates. Net freight rate sentiment in the tanker sector was +48, in dry bulk +23, and container ships +1.

In a stand-alone question, 24% of respondents said they expected the price differential between high-sulphur fuel oil and IMO-compliant low-sulphur fuel oil at 1 January 2020 to be between $250 and $324 per metric tonne. 23% put the figure at between $175 and $249, while 18% estimated it at between $325 and $399. 12% thought the cost differential would be between $100 and $174.

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says: “It is disappointing to close the year with a small downward tick in confidence. But shipping is nothing if not volatile, and there will always be ups and downs. We should not forget, either, that it was in 2018 that confidence reached a four-year high.

“It is encouraging to see that the appetite for new investment was not deterred by the drop in confidence. New investment is something that will clearly be needed moving forward, not least to fund expenditure on the technology necessary to achieve compliance with existing and evolving regulatory requirements, and this against a backdrop of rising finance costs over the coming year.

“It is noteworthy that almost a quarter of our survey respondents thought the price differential between high-sulphur fuel and IMO-compliant low-sulphur fuel come 1 January 2020 would be between $30 and $100 per metric tonne more than it is at present.

“Increased costs are inevitable. Increased earnings are essential.”

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

Ten years after, shipping industry confidence holds firm

Shipping confidence held steady in the three months to end-May 2018 according to the latest Confidence Survey from international accountant and shipping adviser Moore Stephens.

The average confidence level expressed by respondents was unchanged at the four-year high of 6.4 out of 10.0 recorded in February 2018. Confidence on the part of owners was also sustained at a four-year high, of 6.6, while managers’ confidence was up from 6.4 to 6.7. The rating for charterers was up to 6.7 from 5.0 and confidence in the broking sector was up from 6.1 to 6.3. The survey was launched in May 2008 with an overall rating for all respondents of 6.8.

The likelihood of respondents making a major investment or significant development over the next 12 months was down on the previous survey from 5.5 to 5.2 out of a maximum possible score of 10.0. Confidence was highest among charterers, followed by owners (down from 5.9 to 5.5), managers (down from 5.6 to 5.4) and brokers (down from 4.0 to 3.5).

The number of respondents who expected finance costs to increase over the coming year was down to 63% from 64% last time. Whereas, in the previous survey, charterers were unanimous in expecting finance costs to increase, just a third were of that opinion this time.

The number of respondents expecting higher freight rates in both the tanker and container ship sectors was up, from 39% to 50% and from 38% to 43% respectively. In the dry bulk trades, such expectations were unchanged at 54%. Net sentiment in the tanker sector was +41, in the dry bulk trades +43, and for container ships, +32.

When asked to estimate the level they expected the Baltic Dry Index (BDI) to reach in 12 months’ time, 42% of respondents anticipated a figure of between 1500 and 1999, compared to 25% a year ago. Meanwhile, 36% put the likely level at between 1000 and 1499, contrasting with 52% a year ago.

Richard Greiner, Moore Stephens partner, Shipping & Transport, says, “It is two years since our survey reflected any decline in confidence. Net freight rate sentiment was significantly up in all the main tonnage categories. Shipping still has problems to overcome, but it continues to punch above its weight in terms of optimism.”

The survey was launched in 2008 just months before the Lehman Brothers bankruptcy which was to trigger a protracted global financial recession. Shipping markets were buoyant at the time, with an average confidence level of 6.8 out 10.0.

Over the past ten years, confidence averages out at 5.8 out of 10.0. The low point was the 5.0 out of 10.0 recorded in February 2016, since when it has only improved or been maintained. The 2010 financial crisis in Greece may have been a prime factor in the fall in confidence to 5.3 in August 2011, but thereafter began a period of fluctuation before a gradual recovery beginning in 2016 which appears not to have been affected by the birth of Brexit that year.

Over the life of the survey, demand trends have been the factor deemed most likely to affect performance, identified by an average 24% of respondents, followed by competition (20%) and finance costs (16%).

The ten-year averages for operating costs (10%), fuel costs (8%) and crew supply (5%) are all below the corresponding averages of 12%, 11%, and 11% for May 2008, doubtless due to the effects of the economic downturn and fluctuations in the price of oil. Ten years ago, regulation was cited by just 2% of respondents as a significant performance-affecting factor. Today it stands at 10% and averages 4% over the decade.

Over the last decade, an average of 48% of respondents have been of the view that finance costs were likely to rise over the coming year. When the survey was launched in May 2008, 66% of respondents were of that opinion. By February 2009, the numbers had dropped to 47% and, by 2015, to 32%. Today, the figure stands at 63%.

Ten-year averages for the freight markets reveal a sizeable increase in expectations of higher dry bulk and container ship rates. Net sentiment in dry bulk was -3 in May 2008, but the 10-year average is +24. The corresponding figures for container ships are +2 and +15. Ten-year net sentiment in the tanker sector, meanwhile, was +20 in 2008, and averaged +19 over the decade. In all three tonnage categories, current expectations of higher rates are significantly above those of ten years ago.

When the survey was launched, respondents rated at 5.9 out of 10.0 the likelihood of making a major investment or development over the next twelve months. The average for the ten-year period is 5.3. Expectations peaked at 6.0 out of 10.0 in August 2010 but reached a low of 4.8 in February 2016.

Richard Greiner says, “The survey reflects the sentiments of a volatile industry in a particularly volatile decade. Significant events have included the peak of a boom, a prolonged global financial recession, crises in the banking sector, the collapse of stock markets, the Greek debt crisis, Brexit, and an unprecedented level of government and industry bail-outs.

“Ten years is a long time in shipping, and the past decade has doubtless felt a lot longer still to those industry participants who have lived through it, even those inured to the peculiar cyclicality of the industry. Confidence may have fluctuated, but it has never collapsed, and portents for the coming decade can reasonably be expected to be better.”

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

Shipping confidence at highest level for three-and-a-half years

Shipping confidence held steady at its highest rating in the past three-and-a-half years in the three months to end-November 2017, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

The average confidence level expressed by respondents was unchanged at the level of 6.2 out of 10.0 recorded in the previous survey in August 2017. Confidence on the part of charterers was significantly up, from 4.7 to 7.7, the highest rating recorded for this category of respondent since the survey was launched in May 2008 with an overall rating of 6.8. Managers (up from 5.8 to 6.1) were also more optimistic, while brokers’ confidence was unchanged at 6.3. The rating for owners, however, fell from 6.5 to 6.4. Confidence levels were down in Asia, from 6.4 to 5.7, and unchanged in Europe and North America, at 6.3 and 5.8 respectively.

The likelihood of respondents making a major investment or significant development over the next 12 months was down from 5.4 to 5.3 out of 10.0. Charterers’ confidence, however, was up from 4.0 to 6.2. Expectations on the part of owners and brokers were up from 5.8 to 5.9 and from 4.4 to 5.3 respectively, but down from 5.4 to 5.3 for managers. Asian respondents (down from 5.9 to 5.0) were less confident in this regard, but in North America the rating was up from 4.9 to 5.4. In Europe, expectations held steady at 5.2.

Although overall expectations of making major investments over the next 12 months were marginally down on the three-year high recorded in the previous survey, several respondents saw encouraging signs of recovery, and potential for further improvement, particularly in the dry bulk sector. One respondent said: “Undeniably, things are a little better, but there is not such a significant improvement that we can break out the champagne and celebrate a recovery.”

59% of respondents expected finance costs to increase over the coming year, up from 50% last time to equal the highest figure since October 2008. Owners’ expectations were up from 48% to 54%, while the increase for charterers was from 67% to 83%, and for brokers from 42% to 60%. Managers, meanwhile, recorded a fall from 62% to 61%.

Despite a fall from 27% to 23%, demand trends continued to be the factor expected to influence performance most significantly over the coming 12 months followed by competition and finance costs. One respondent said: “Shipping continues to be volatile and unstable, with an oversupply of tonnage, and new finance continuing to pour in, while geopolitical issues and new regulations are causing disruption.”

The number of respondents expecting higher freight rates over the next 12 months in the tanker market was down by 1% on the previous survey to 44%, while there was a one percentage-point fall, to 13%, in those anticipating lower rates. There was a six percentage-point fall, to 50%, in the numbers expecting higher rates in the dry bulk sector, and a five percentage-point increase to 12% in the numbers anticipating lower rates. In the container ship sector, the numbers expecting higher rates dropped by four percentage points to 36%, while there was a two percentage-point fall, to 15%, in those anticipating lower container ship rates.

Net sentiment was positive in all the main tonnage categories. It was unchanged in the tanker market at +31, but down in the dry bulk market from +49 to +38, and in the container ship sector from +23 to +21.

In a stand-alone question, respondents were asked to estimate where the US Federal Reserve’s Federal Funds Rate would stand in 12 months’ time. 35% put the figure at 1.50%, with 24% opting for 1.75%. While 6% of respondents thought the figure would be 2.00%, 19% opted for 1.25%. Levels of 1.00% and less than 1.00% were each cited by 8% of all respondents, just 1% of whom expected the rate to be more than 2.00%. One respondent said: “Increased economic uncertainty, relations with North Korea, and Iran trade restrictions are among the factors which will increase the risk level in the market and lead to higher interest rates.” Another simply said: “Rates will continue to rise until there is a market correction.”

Richard Greiner, Moore Stephens partner, Shipping & Transport, says, “Confidence is at its highest level for three-and-a-half years, testament to the industry’s remarkable durability.

“Charterers are leading the way in terms of improved confidence and appetite for new investment. There is optimism in the dry bulk trades, and evidence of continuing improved confidence in the gas sector. The Baltic Dry Index, meanwhile, has risen by over 50% in the past six months, and net sentiment in all three main tonnage categories remains positive.

“Not all our respondents were upbeat and uncertainty persists, for example, over how and when to comply with the Ballast Water Management Convention and the true extent of cyber-crime. But the portents, overall, are encouraging.

“A slowdown in newbuilding activity has started to redress the imbalance in supply and demand, and that should be reflected in improved freight rates. There is an appetite for investment, and finance is available. The shipping recovery might not yet be fully under way, but 2017 may come to be regarded as the year when the downward spiral was halted.”

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 626 offices of independent member firms in 108 countries, employing 27,997 people and generating revenues in 2016 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 fifth 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 1.1% in 2016. This compares with the 2.4% average fall in costs recorded for 2015. For the second successive year, all categories of expenditure were down on those for the previous 12-month period, most notably for insurance costs and stores.

The findings are set out in OpCost 2017 (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 2016, 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%. The container ship index, meanwhile, was down by 1 point, or 0.6%. The corresponding figures in last year’s OpCost study showed falls of 6 points in both the bulker and container ship index, and of 4 points in the tanker index.

There was a 0.4% overall average fall in 2016 crew costs, compared to the 2015 figure, which itself was 1.2% down on 2015. 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 1.3% fall recorded in 2015. All categories of tankers reported a reduction in crew costs for 2016 with the exception of Aframax Tankers and Suezmax Tankers, which recorded increases of 0.8% and 0.2% respectively, compared to reductions for 2015 of 1.9% and 2.6%. The most significant reductions in tanker crew costs for 2016 were the 2.8% and 2.7% recorded by Tankers 5,000 to 10,000 dwt and by Handysize Product Tankers respectively.

For bulkers, meanwhile, the overall average fall in crew costs in 2016 was 0.6%, compared to 1.1% recorded 12 months ago. All categories of bulkers reported a reduction in crew costs, the biggest fall being the 1.2% reduction in spending by the owners of Capesize Bulkers.

Expenditure on crew costs in the container ship sector, meanwhile, was up by 1.1% compared to the fall of 3.3% recorded for 2015. The biggest increase in this category was the 2.1% recorded for ships of between 2,000 and 6,000 teu, which in 2015 led the reductions in the container ship crew costs category with a fall in expenditure of 3.6%.

Expenditure on stores was down by 2.9% overall, compared to the fall of 4.3% in 2015. The biggest fall in such costs was the 5.1% recorded by owners of container ships of between 100 and 1,000 teu. In the same tonnage category, the fall in stores costs for owners of container ships of between 1,000 and 2,000 teu was 4.9%, the same figure as that recorded in the tanker sector for Aframax Tankers. Other significant reductions included Handysize Bulkers (4.8%) and Panamax Bulkers (4.4%).

For bulk carriers overall, stores costs fell by an average of 4.2%, compared to a fall of 7.7% in 2015, while in the tanker and container ship sectors the overall reductions in stores costs were 2.2% and 5.2% respectively, compared to the corresponding figures of 4.3% and 5.5% for 2015. The only rise in stores expenditure by any category of vessel was the 0.3% increase recorded by Coastal Tankers.

There was an overall fall in repairs and maintenance costs of 0.8% in 2016, compared to the 4.3% reduction recorded for 2015. The biggest fall in such costs was that recorded by Panamax Bulkers (3.2%), closely followed by Capesize Bulkers (3.1%). All vessels in the bulker category recorded reduced repairs and maintenance expenditure, but there were increases in the tanker sector, most notably the 2.4% additional outlay by Panamax Tankers compared to 2015. There were examples of small increases in repairs and maintenance expenditure in the container ship sector, while for Ro-Ros the increase amounted to 2.2%.

The overall drop in costs of 3.0% recorded for insurance compares to the 3.2% fall recorded for 2015. No vessel types in any of the tonnage and size categories included in OpCost paid more for their insurance in 2016 than in 2015.The biggest reduction in such costs was the 5.2% recorded by container ships of between 2,000 and 6,000 teu. Not far behind were Handysize Bulkers and Panamax Bulkers (4.7% and 4.6% respectively), while in the tanker category it was Aframax Tankers which led the way in terms of reduced insurance expenditure (4.6%). Ro-Ro owners, meanwhile, paid 4.0% less for their insurance in 2016 than in 2015, in which year they spent an additional 2.4% in premiums compared to the previous year.

Richard Greiner, Moore Stephens Partner, Shipping & Transports, says: “This is the fifth successive year-on-year reduction in overall ship operating costs, although the reduction this time is less than half the figure recorded 12 months ago for 2015.

“The biggest cost reductions were those in the Insurance category. Insurance is a major item of expenditure for all owners and operators, without which most would not be able to operate on an international basis. The fact that such costs continue to fall may be due in part to a reduction in the incidence of major casualties. Most of the larger reductions in insurance costs tracked by OpCost, however, were recorded by bulk carriers, which are no strangers to the pages of the casualty reports. So cheaper insurance must also say much about the fierce competition for business which exists throughout marine underwriting markets worldwide.

“The next biggest cost reduction was in the Stores category, where the slower than anticipated improvement in world oil prices doubtless had a continuing beneficial knock-on effect on lube oil costs in 2016.

“The reduction in Repairs and Maintenance costs in 2016 was 3.5% down on the figure for the previous year. This confirms that maintenance can only be postponed for so long by owners and operators who accept the need to invest in their ability to compete for business in a highly competitive market which is more tightly regulated than ever before. Strategic short-term lay-up is a waypoint rather than a destination.

“Over the years, the OpCost study has recorded annual average crew cost increases of more than 20%, but there was a reduction in such costs this time of less than half of one percent compared to the figure for 2015. The continuing challenging shipping markets are doubtless a significant factor.

“Although 2016 was another difficult period for shipping, the year closed on a note of rising confidence, according to the Moore Stephens Shipping Confidence Survey. Owners and charterers were more confident, than for some time previously, of making new investments, and there were improved expectations of higher freight rates in all three main tonnage categories. The expectation, too, was that oil prices and the Baltic Dry Index could only go up.

“That increased confidence, which has carried over into 2017, should logically lead to greater activity, which will mean higher operating costs. When freight rates allow owners to absorb such increased costs, the numbers start to look healthy. At present, however, owners and operators are not earning what they should be, or would like to be, from most of the markets in which they operate. Positive net sentiment is good, but it is not enough. Something has to change.

“It is also true that in shipping – as elsewhere – what goes down must come up. For example, OpCost records that, at year-end 2008, the average daily operating cost for a Capesize Bulker was US$ 7,512. In 2016, it was US$ 6,691. For a VLCC, the comparable figures are US$ 10,812 and US$ 9,950 respectively.

“Future OpCost studies are likely to reflect the start of spending – or planning for – the introduction of the likes of the Ballast Water Management Convention, the new global limit on SOx emissions from 2020 and initiatives to contain cyber-crime, which are assuming increasing importance in the industry. The results will also reflect, albeit subtly, the effect of geopolitical developments, which can seldom have been in a greater state of flux than they are today.

“Shipping can certainly find encouragement in a fifth successive annual fall in operating costs. But nothing is for ever, and nothing is more certain than that the shipping industry will continue to be characterised by uncertainty, which can be both its strength and its weakness.”

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 626 offices of independent member firms in 108 countries, employing 27,997 people and generating revenues in 2016 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 confidence hits three-year high

Shipping confidence reached its equal highest rating in the past three years in the three months to end-May 2017, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

The average confidence level expressed by respondents to the survey was up to 6.1 out of 10.0 from the 5.6 recorded in the previous survey in February 2017. Increased confidence was recorded by all main categories of respondent to the survey, which launched in May 2008 with an overall confidence rating of 6.8.

In the case of brokers, the confidence rating rose from 4.6 to 6.4, while for owners the increase was from 5.6 to 6.1. Confidence on the part of charterers and managers, meanwhile, was up from 5.9 to 6.4, and from 6.0 to 6.2 respectively. Confidence levels were unchanged in Asia at 5.6, but up in Europe, from 5.5 to 6.2, and in North America, from 6.1 to 6.4.

A number of respondents expressed cautious optimism about the industry’s fortunes over the next 12 months, based largely on perceived increased levels of ship demolition and a rationalisation of over-ambitious newbuilding plans. This helped increase expectations of major investments being made over the next 12 months. Concern persisted, however, over political uncertainty, overtonnaging in certain trades, depressed oil prices and a potential dearth of quality seafarers.

One respondent said, “Shipping people are eternally optimistic, with one week of good news seeming to help them forget eight terrible years of hardship and financial loss.”

The likelihood of respondents making a major investment or significant development over the next 12 months was up from 4.9 out of 10.0 in the previous survey to 5.4, the highest level since August 2014. There was increased confidence on the part of all major respondents, in the case of charterers up to a level of 6.3 from 5.8 in February 2017. Owners and managers, meanwhile, each registered a confidence level of 5.9, up from 5.1 and 5.6 respectively last time. Confidence on the part of brokers was up from 3.4 to 4.4.

50% of respondents expected finance costs to increase over the coming year, compared to 54% in the previous survey. Owners’ expectations fell from 57% to 48%, while managers were also down, from 61% to 57%. More brokers and charterers, however, anticipated costlier finance – 63% of brokers (against 41% last time) and 57% of charterers (compared to 47% in February 2017). “The financial support needed to boost the markets is not yet at expected levels,” noted one respondent, “but we believe that the situation will improve in the coming months as demand increases.”

Demand trends, cited by 26% of respondents, continued to be the factor expected to influence performance most significantly over the next 12 months, followed by competition (22%) and finance costs (14%). According to one respondent, “Larger companies are targeting their smaller competitors in order to minimise competition and secure a stronger position in the market.”

The number of respondents expecting higher freight rates over the next 12 months was up on the previous survey in all three main tonnage categories. In the tanker market, 32% of respondents anticipated improved rates, as opposed to 25% last time, while the number anticipating lower tanker rates fell from 28% to 16%. Meanwhile, there was a 14 percentage-point rise, to 58%, in the numbers anticipating higher rates in the dry bulk sector, the highest figure for three years.

In the container ship sector, the numbers expecting higher rates rose from 31% to 46%, while there was a six percentage-point fall, to 12%, in those anticipating lower container ship rates. Net sentiment was up in the tanker market from -3 in February 2017 to +16 this time, while the increases in the dry bulk and container ship trades respectively were from +33 to +50 and from +13 to +34.

In a stand-alone question, respondents were asked to estimate the level they expected the Baltic Dry Index (BDI) to be at in 12 months’ time. More than half (52%) felt the BDI would reach a level of between 1000 and 1499, while a quarter (25%) put the likely figure at between 1500 and 1999. “Healthy volumes of cargo are being moved,” said one respondent, “but there are too many ships around.”

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says, “The survey was launched in 2008, on the very cusp of one of the most protracted and severe global economic downturns, with a confidence rating of 6.8. In our latest survey, the figure stands at 6.1 which, given geopolitical, economic and industry developments, must be seen as a robust rating. Moreover, confidence today of making a major new investment is the highest it has been for almost three years. The positive sentiment on freight rates is welcome, although this must be weighed against the lows to which they have fallen and from which they must continue to recover.

“Even for an industry which is familiar with the volatile nature of international commerce, shipping’s ability to survive adversity is worthy of comment. Our latest survey found many of our respondents in watchful mode, mindful of the fact that there are still too many ships, but encouraged to believe that increased demolition and more pragmatism by industry stakeholders will help to redress this imbalance. Respondents also remain cognisant of the impact which geopolitical developments can have on shipping, and it will be instructive to see what effect all this will have on industry confidence in our next quarterly survey.”

The full survey report can be downloaded from the Moore Stephens website:
http://www.moorestephens.co.uk/news-views/june-2017/confidence-hits-three-year-high

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 626 offices of independent member firms in 108 countries, employing 27,997 people and generating revenues in 2016 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 confidence holds steady despite industry and political pressures

Shipping confidence held steady in the three months to end-February 2017, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

In February 2017, the average confidence level expressed by respondents was 5.6 out of 10.0, unchanged from the previous survey in November 2016 and equal to the highest rating since August 2015. Owners were the only main category to show an improved level of confidence, up from 5.4 to 5.6. Confidence on the part of charterers was down from its all-time survey high of 6.8 to 5.9, while that of managers fell from 6.4 to 6.0. Confidence levels in the broking sector, meanwhile, dropped from 5.6 to 4.6. The survey launched in May 2008 with an overall confidence rating of 6.8.

Confidence was up in Europe and North America, from 5.4 to 5.5 and 5.9 to 6.1 respectively, but down from 5.7 to 5.6 in Asia.

Respondents generally felt that competition was running at very high levels, while other familiar concerns included overtonnaging and geopolitical uncertainty. Most respondents saw 2017 as a year of retrenchment rather than improvement. One said, “If owners can maintain their discipline and resist the blandishments of shipyards desperate for business, there is hope that 2018 will see a return of market equilibrium, in which continued scrapping remains a key element.” Another, meanwhile, noted, “The current state of most shipping markets, coupled with the weakness of banks, means that conditions should be more attractive for alternative lenders.”

The likelihood of respondents making a major investment or significant development over the next 12 months was unchanged for the fourth successive quarter, at 4.9 out of 10.0. Managers’ expectations were up from 5.2 to 5.6, the highest level since August 2015. Owners’ expectations were also up, from 5.0 to 5.1, but those of charterers and brokers were down, from 6.4 to 5.8 and 3.8 to 3.4 respectively.

The number of respondents expecting finance costs to increase over the coming year rose by one percentage point to 54%, the highest level since November 2011. Owners’ expectations of increases fell from 58% to 57%, while the figures for brokers were also down, from 53% to 41%. Managers were of a different mind, with 61% expecting increases as opposed to 52% in November 2016.

Demand trends overtook competition as the factor expected to influence performance most significantly over the next 12 months, followed by finance costs and tonnage supply. “Competition is so intense at the moment,” said one respondent: “that you either accept what is offered or a competitor will take the cargo.”

The number of respondents expecting higher rates in the tanker market over the next 12 months fell by eight percentage points to 25%, while the number anticipating lower tanker rates rose from 24% to 28%. Meanwhile, there was a three-percentage-point rise, to 44%, in the numbers anticipating higher rates in the dry bulk sector, although one respondent remarked, “The dry bulk freight market will continue to be tough, with returns not much above break-even”. In the container ship sector, the numbers expecting higher rates rose from 27% to 31%, while there was a three-percentage-point fall, to 18%, in those anticipating lower container ship rates. The net sentiment in the tanker markets was -3 (compared to +9 in November 2016), while it was +33 (up from +31 last time) in the dry bulk markets and +13 (compared to +6 in the previous survey) in the container ship trades.

In a stand-alone question, respondents were asked to identify the price range they expected crude oil (per-barrel) to be in 12 months’ time. The most popular estimate was the $50-$59 range, identified by 38% of respondents, as opposed to 19% in the February 2016 survey. Meanwhile, 12% of respondents opted for the $40-$49 range compared to 26% last time. The $60-$69 price range was favoured by 29%, as opposed to just 5% one year ago. In February 2016, 31% predicted crude oil prices to be in the $30-$39 price range, whereas just 1% did so this time.

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says, “After three successive quarterly increases, shipping confidence has held steady. This is encouraging given the continuing political uncertainty in the US and Europe. Shipping is vulnerable to changes in the political landscape, and a slew of elections in leading industrialised nations will render it particularly so this year.

“Elsewhere, the issues facing the industry include an over-supply of ships and insufficient demolition. Freight markets are dragging along the bottom in many sectors, with net rate sentiment in the tanker market being particularly low. Add to this the expectation of higher ship finance costs, the mounting costs of regulation, the threat of cyber-crime and projected increases in operating costs and it is evident that shipping will not be a picnic for the foreseeable future.

“But shipping is not a natural fit for the pessimist, and those with meaningful experience of the industry will be looking with some justification for a re-strengthening of rates in the tanker and dry-bulk trades, supported by continued rationalisation of newbuilding plans and accelerated recycling levels. Meanwhile, oil prices will continue to go up, which is mixed news for the shipping industry. For those who can effectively manage risk and volatility, shipping is still the place to be.”

The full survey report can be downloaded from the Moore Stephens website:
http://www.moorestephens.co.uk/News-views/March-2017/shipping-confidence-industry-political-pressures


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 626 offices of independent member firms in 108 countries, employing 27,997 people and generating revenues in 2016 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

Optimistic charterers help boost shipping confidence to 15-month high

Shipping confidence improved for the third successive quarter in the three months to end-November 2016, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

In November 2016, the average confidence level expressed by respondents was 5.6 out of 10.0, equalling the highest rating since August 2015. All main categories of respondent were more confident than in August 2016, when the overall rating was 5.4. Charterers’ confidence this time increased by 2.0 points, to 6.8, the highest figure in the life of the survey for such respondents. The confidence of owners was up from 5.3 to 5.4, of brokers from 4.5 to 5.6, and of managers from 6.0 to 6.4. The survey was launched in May 2008 with an overall confidence rating of 6.8.

Confidence was up in Asia, from 5.5 to 5.7, in Europe from 5.2 to 5.4, and in North America from 5.8 to 5.9.

A number of respondents felt that the bottom of the cycle had been reached and that the only way was up. Particular concern was expressed about overtonnaging, insufficient recycling, and the cost of regulatory compliance. One respondent noted, “The oversupply of tonnage will cease when the banks write down bad loans and force owners to sell for scrap,” while another said, “The weak or unlucky will fold or be gobbled up, while the strong or the lucky will grow and succeed.”

The likelihood of respondents making a major investment or significant development over the next 12 months was unchanged, at 4.9 out of 10.0. Charterers’ confidence in this regard was up from 5.0 to 6.4, equalling its highest figure since August 2013. Owners’ expectations were also up, from 4.8 to 5.0, but those of managers and brokers were down, from 5.3 to 5.2 and from 4.1 to 3.8 respectively. According to one respondent, “It is hard to see how major investment to meet environmental regulations can be justified in the current climate.”

The number of respondents expecting finance costs to increase over the coming year rose from 35% to 53%, the highest level for five years. Owners’ expectations in this regard rose from 31% to 58%, their highest level since May 2011. The figures for brokers and managers were also up, from 47% to 53% and from 30% to 52%, respectively. Charterers were alone in not anticipating any increase in finance costs. “Major investment will be required over the next few years to meet increasingly stringent environmental regulations,” said one respondent, “at a time when earnings are on the floor and bank finance is hard to come by.”

Competition is expected to influence performance most significantly over the next 12 months, just ahead of demand trends, followed by finance costs and tonnage supply. One respondent said, “If demand remains weak, we don’t anticipate any improvement in the shipping markets over the next five years, particularly for dry bulk cargoes.”

The number of respondents expecting higher rates in the tanker market over the next 12 months rose by ten percentage points to 33%, the highest figure since August 2015, while the number anticipating lower tanker rates fell from 37% to 24%. Meanwhile, there was a three percentage-point rise, to 41%, in the numbers anticipating higher rates in the dry bulk sector. In the container ship sector, the numbers expecting higher rates rose from 22% to 27%, but there was a five percentage-point increase, to 21%, in those anticipating lower rates. The net sentiment in the tanker markets was +9, while it was +31 in the dry bulk markets and +6 in the container ship trades.

In a stand-alone question, respondents were asked what they considered would be the most important source of funding for the installation of Ballast Water Management (BWM) systems by shipowners. Overall, on a weighted average basis, 21% of respondents felt that shipowner equity (shareholder funds) would provide the source of funding. Next came bank finance, at 19%, BWM system manufacturers (15%), shipyards (12%) and other non-bank finance (10%). One respondent said, “Financing BWM is almost impossible. Owners have no money for it.”

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says, “This is the third successive increase in shipping confidence recorded by our survey. So despite overtonnaging, weak freight rates, declining demand, insufficient recycling, Brexit, Syria, Trump, despite everything, shipping is still looking up, rather than down. This is not to deny the reality of today’s difficult market, or the sluggish economic climate. But it does say much for the strength of shipping’s backbone and the quality of its mettle.

“Those who can point to a long history in shipping will be better placed to gauge the severity and longevity of the current downturn than those with a shorter pedigree in the industry. But both will need access to finance and to other resources in order to meet the challenges which lie ahead. Not the least of these is the ongoing regulatory environmental compliance programme, even if implementation of the BWM convention may be caveated with potential delay and amendment for a little while longer.

“Many of our respondents felt that things can only get better. They are probably right. But for that to happen, freight rates will have to go up. Perhaps it is safer to say for the moment that, if we want things to stay as they are, things will have to change.”

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, London
Tel: +44 (0)20 7334 9191
richard.greiner@moorestephens.com

Moore Stephens reports second successive quarterly rise in shipping confidence

Shipping confidence, notably on the part of charterers and managers, improved for the second successive quarter in the three months to end-August 2016, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

In August 2016, the average confidence level expressed by respondents was 5.4 on a scale of 1 (low) to 10 (high). This is an improvement on the 5.1 recorded in May 2016, and the highest rating for the past nine months of the survey, which was launched in May 2008 with a confidence rating of 6.8.

Although confidence on the part of owners was down this time from 5.7 to 5.3, charterers (up from 4.0 to 4.8), managers (up from 5.1 to 6.0) and brokers (up from 4.3 to 4.5) were all more optimistic than in May 2016. Geographically, confidence was up in Asia, from 5.2 to 5.5, and in North America from 5.0 to 5.8, with sentiment in Europe unchanged at 5.2.

Overcapacity was the dominant theme of comments from respondents to the survey. “Scrapping is still not sufficient to cope with newbuilding deliveries and the general supply-side overhang. Every new order will prolong the crisis,” said one, while another noted, “If we all stay away from ordering relatively cheap tonnage today, supply and demand will soon recover.”

Conditions in the dry bulk market also occupied the thoughts of large numbers of respondents. “Implementation of the Ballast Water Management Convention will most likely solve overcapacity,” said one, “but it will also cause a bloodbath among owners.” Another remarked, “Growth is non-existent, so there is no hope there,” while another still simply said, “We have lost confidence in the dry bulk market.” Other respondents were slightly more optimistic, with one noting, “We expect the dry bulk markets to improve significantly during the course of 2017.”

Concerns about the global economy were uppermost in the minds of a number of respondents, one of whom neatly encapsulated a number of the main issues currently impacting the shipping industry by noting, “Brexit, Trump, supply overhang, consolidation, demolition, bankruptcies, and the low risk appetite of banks for shipping and shipping stocks seem to be the main topics to follow for the next 12 months or so. We would be pleasantly surprised if this were to change.”

The likelihood of respondents making a major investment or significant development over the next 12 months was unchanged on the previous survey, with a rating of 4.9 on a scale of 1 to 10. The confidence of charterers in this respect was up significantly, from 4.1 to 5.0, while brokers also recorded a small increase, from 3.5 to 4.1. Owners and managers, however, were less confident in this regard than they were three months ago, dropping from 5.7 to 4.8 and from 5.4 to 5.3 respectively. One respondent said, “Massive investment, mainly from inexperienced funds and private entrepreneurs, has resulted in an oversupply of funding in some trades.”

The number of respondents who expected finance costs to increase over the next 12 months was down by six percentage points, to 35%. There was a noticeable fall in the numbers of owners (down by six percentage points to 31%), managers (down by 19 percentage points to 30%) and charterers (down by two percentage points to 27%) anticipating higher finance costs. One respondent said, “Shipping banks need to be more realistic about pricing if they want to sell debt as a means of reducing their exposure to the sector.”

Demand trends, competition and tonnage supply featured again as the top three factors cited by respondents as those likely to influence performance most significantly over the coming 12. Demand trends, which were up by two percentage points to 26%, remained in first place, with competition (down by three percentage points to 20%) in second. Tonnage supply, unchanged at 16%, occupied joint-third spot with finance costs, which were up by one percentage point. Operating costs, up by one percentage point to 10%, featured in fifth place, ahead of fuel costs (5%) and regulation (4%). One respondent said, “We have read many, many times that we have reached the bottom of the cycle, only for a lower offer to appear in the market a few hours later.”

The number of respondents expecting higher charter rates in the tanker market over the next 12 months was unchanged at 23%, while the numbers anticipating lower tanker rates rose by three percentage points to 37%. Meanwhile, there was a five percentage-point drop, from 43% down to 38% in the numbers of like mind in the dry bulk trades, and a one percentage point increase, to 12%, in the numbers anticipating lower dry bulk rates. In the container ship sector, the number of respondents expecting higher rates was up by one percentage point to 22%, while there was a fall, from 20% to 16%, in the numbers anticipating lower rates.

The net sentiment in the tanker markets was -14, as opposed to +26 in the dry bulk markets and +6 in the container ship trades.

One respondent said, “Too many dry cargo ships have been built, and we are not confident that the freight market will improve sufficiently to justify investment, especially from people who have no previous experience of shipping.” Another remarked, “A whole class of container ships is essentially obsolete following the opening of the widened Panama Canal.”

Respondents were asked a stand-alone question about the perceived barriers to women playing a greater role in the shipping industry. Overall, 31% of respondents placed ‘workplace attitude or corporate culture’ in the top five factors in this regard. ‘Travel implications in day-to-day roles’, meanwhile, was a top five factor for 21% of respondents, while ‘lack of career progression’ was placed third, at 19%. One respondent said, “There are no barriers. It is up to the individual to pursue her career with determination and strength of character.” Another, however, complained that, “The culture in the industry is male chauvinist.”

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says, “Given the challenges currently facing the industry, the continuing uncertainty surrounding the worldwide economy, and the ongoing level of global geopolitical instability, it is encouraging to see an increase in shipping confidence for the second successive quarter. Confidence is now at its highest level for nine months, which says much for the resilience of the shipping industry.

“Concern persists about too much tonnage and not enough recycling. Restoring the correct balance to tonnage supply and demand is a long-term undertaking, the complexities and diverse nature of which are arguably well captured by the respondent who noted, ‘We have divided interests. For our customers, we hope that nobody orders any vessels for the next 12 months. For us, we hope that people do, because we need newbuildings’.”

“Given the pace of technological development, the continuing imperative to improve the industry’s environmental footprint, and the exigencies of escalating regulation, the industry will always need newbuildings. The trick is to make sure that there is room – and work – for them in a market which encourages responsible competition and allows a sensible margin for profit. That requires, among other things, an increase in ship demolition levels which, given the recent decline in dry bulk recycling and the perceived impossibility of recycling enough container ships, seems unlikely.

“The maintenance of sensible levels of competition is also a prerequisite for a healthy and profitable shipping industry. Since the survey was launched in 2008, respondents have consistently identified competition as one of the main factors likely to influence their performance most significantly. All trade sectors thrive on responsible competition, which works as an incentive to progress and profitability. But irresponsible competition can have the opposite effect, witness the respondent who referred to ‘those who focus on how to trick, treat and corrupt under the broad term ‘competition’.”

“Perversely, the collapse of Hanjin Shipping Co., which occurred after our survey was concluded, may have a positive effect on overtonnaging, although nobody would have been looking for such an extreme solution. Hanjin’s collapse has sent shockwaves through the industry which will continue to reverberate for many months to come. It may also give pause for thought to those who see the future of container shipping as ever bigger and more diverse alliances.

“Equally perverse is the very real possibility that final ratification of the Ballast Water Management Convention may have a positive effect on overcapacity. It might not be correct to say that this development has sent shockwaves through the shipping sector, because the industry has known for some time that it has been coming, and has been pondering how best to meet its requirements and how to fund the considerable cost of so doing. It matters not whether it was the ratification by Finland which finished the uncertainty about implementation, or whether it was Panama’s huge fleet which activated the green light. A shock is no less shocking for being expected, and the fact is that the convention will enter into force in September 2017. It will be instructive to see how shipping deals with the issue, and from what level of preparedness, the extent of which will become clearer over the coming months.

“A stand-alone question in our survey asked respondents to name the biggest barriers to women playing a greater role in today’s shipping industry. More than 65% identified ‘workplace or corporate culture’ as the number one barrier. James Brown famously sang, ‘This is a Man’s World’, although not everybody remembers that the self-styled Godfather of Soul went on to say, “but it wouldn’t be nothing without a woman or a girl’. It is beyond any reasonable measure of doubt that shipping will need the efforts of every man and woman working within the industry today to tackle both current challenges and those which lie in wait.”

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 new low in shipping confidence

Overall confidence levels in the shipping industry fell to a record low in the three months to February 2016, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

The average confidence level expressed by respondents in the markets in which they operate was 5.0 on a scale of 1 (low) to 10 (high). This compares to the 5.6 recorded in November 2015, and is the lowest rating in the life of the survey, which was launched in May 2008 with a confidence rating of 6.8.

All main categories of respondent with the exception of brokers (up from 4.6 to 5.1) recorded a fall in confidence this time, most notably charterers (down from 5.5 to 3.9), which is the lowest confidence rating by any category of respondent in the history of the survey. Confidence on the part of owners and managers was also down, from 5.7 to 4.8 and from 5.8 to 5.5 respectively.

Geographically, confidence was down in all major areas covered by the survey – in Asia from 6.0 to 4.4, in Europe from 5.4 to 5.1, and in North America from 5.7 to 4.7.

A number of respondents continued to express concern about the level of overtonnaging, with one pointing out, “Newbuilding deliveries for 2016 will increase the total fleet by 10.5%, 7% of the current fleet is older than 20 years, and cargo volumes in 2015 were just 4.5% higher than in 2014, so the expected available fleet per metric ton of dry cargo available will be higher at the end of 2016 than it is now. As a result, there is no chance of freight levels improving.” Another respondent said, “As long as shipowners operate based on hope rather than on solid economics, there will always be booms and busts.”

Particular concern was expressed about the state of the dry bulk market, with one respondent commenting, “No dry bulk business makes any remote sense. There are too many players, too many operators, and too many vessels chasing too few cargoes. Most fixtures are concluded merely to keep the banks happy in the belief that some tiny amount of cashflow is coming in.” Elsewhere it was noted, “Dry bulk is simply at the bottom of the bottom, and actually a little lower than that.”

The need for accelerated demolition was also identified by a number of respondents, one of whom noted, “Scrapping activity is far from sufficient to compensate for incoming new tonnage.” Another observed, “Low scrapping prices provide little motivation for owners to demolish ships,” although another still said, “Increased scrapping may help achieve equilibrium in the dry bulk sector sooner rather than later.”

Falling oil prices were also a recurring topic in responses to the survey. One respondent said, “Global bulk oil movements will be the key to conditions in the tanker market over the next 12 months. With storage facilities almost full to capacity, there will be nowhere to stock additional supplies unless global economies pick up and oil production is regulated.” Other respondents, meanwhile, saw some solace in soft oil prices, typified by the comment that, “The wet markets stand a better chance of remaining profitable on the back of weak crude oil prices.” Elsewhere, however, there was concern about the effect of falling oil prices on the offshore maritime sector, with one respondent noting, “There are companies in the offshore shipping market which are under pressure and in potential danger of being shut down.”

The likelihood of respondents making a major investment or significant development over the next 12 months was down on the previous survey, on a scale of 1 to 10, from 5.2 to 4.8, which equals the figure recorded in February 2009 as the lowest in the life of the survey to date. Owners, managers and brokers were less confident in this regard than they were three months ago, but the confidence of charterers was up, from 4.8 to 5.1. One respondent said, “We are paying for excessive investments over the past five years by speculative funds that would win an Oscar for the quickest/largest destruction of capital in the shipping world.” Another said, “Weak demand is undermining confidence and investment.”

The number of respondents who expected finance costs to increase over the next 12 months was down by five percentage points on last time, to 42%. The number of charterers anticipating dearer finance fell by 11 percentage points to 56%, but the number of owners of like mind rose by one percentage point to 36%. The number of brokers expecting a rise in finance costs, meanwhile, fell from 75% to 36%. One respondent said, “Millions of dollars are lost each day by owners, and soon will be by bankers. We are navigating very risky waters.” Another noted, “There is no future in this industry unless all sectors, including financiers, take a more in-depth approach.”

Demand trends, competition and tonnage supply featured as the top three factors cited by respondents as those likely to influence performance most significantly over the coming 12 months. Demand trends, which were up by two percentage points to 26%, remained in first place, with competition (unchanged at 21%) in second place. Tonnage supply, at 15%, occupied third place, one percentage point ahead of finance costs. Operating costs, up by six percentage points to 12%, featured in fifth place, ahead of fuel costs and regulation at 4%, the latter representing a five percentage-point drop on the figures for November 2015.

One respondent said, “Demand has let us down at the most inopportune moment possible,” while another predicted, “Competition will remain fierce and only by aggressive marketing will we achieve growth.”

There was a 16 percentage-point increase in the number of respondents anticipating lower freight rates in the tanker markets. But there was a small increase in the number of respondents anticipating higher rates in the dry bulk and container ship sectors, compared to the figures for November 2015. The net sentiment in the tanker market was -23, but +22 and +8 in the dry bulk and container ship sectors respectively.

“Tankers should be able to benefit in 2016 from the lack of market consensus over oil price movements, with longer-term decisions delayed as operators search for direction,” noted one respondent, while another commented, “Dry bulk provides opportunities for investment only for cash-rich owners who can afford to lose in the near term.” In the container ship sector, meanwhile, the point was made that, “Sometimes it seems that container ship operators are guided more by market share considerations than by sound economics.”

Respondents were asked a stand-alone question concerning the level which they expected crude oil prices to be at in 12 months’ time. 31% predicted that the price would be between $30 and $39, while 26% put the figure at between $40 and $49. 10% of respondents thought the price would fall between $20 and $29.
One respondent said, “It would be no surprise if crude tops $50 in the next 12 months, but anything significantly above that is unlikely.”

Richard Greiner, Moore Stephens Partner, Shipping Industry Group, says: “Shipping continued along its volatile course in the three months to end-February 2016, with the confidence of industry participants reaching the lowest level since our survey was launched in May 2008. This is disappointing and unsurprising in equal measure.

“When the Baltic Dry Index drops to an all-time low it is a real indication of the problems facing the shipping industry. The BDI doesn’t lie, and any doubts about the extent of those problems would have been dispelled over the past three months when reports of the fall in the BDI started to appear in the mass media, which generally carries only bad news insofar as it impacts the shipping industry.

“Most recently, however, there is better news, with the BDI starting to move upwards once more, gaining over 100 points within six weeks of plumbing the depths. Moreover, there is a reasonable expectation that the approaching peak harvest season will bolster demand for ships to carry grain and other commodities on international trade routes. This should boost the BDI further and, while shrinking demand for raw materials from China will continue to have an effect, the world will always need shipping to move its trade staples.

“Overcapacity in any industry will inevitably lead to price-cutting and eventually to financial difficulties for the weakest, the least well-prepared, or sometimes simply the unluckiest. Shipping has had its share of bankruptcies, foreclosures and restructurings during the past few years, and it is likely that we will see more over the coming months, with negotiations doubtless enlivened by the fact that shipping’s purse-strings today are often controlled by an intriguing mix of private equity and traditional shipping finance.

“The simple answer to overcapacity is to reduce the numbers, but ships are too big to hide and disposing of excess units is more difficult in shipping than in most other industries, particularly when there are record numbers of new cabs just waiting to come off the rank. Increased ship recycling is one obvious answer, although current low scrap prices mean that fewer numbers of most tonnage types are being recycled.

“In a climate of continuing overcapacity, increased regulation, ongoing political unrest and economic instability, the shipping industry must find a way to supplement the bread-and-butter of its livelihood – the freight markets. Current indications are not good. The tanker industry may still be reaping a somewhat perverse benefit from low crude oil prices, but that window of opportunity may be starting to show the first signs of closing. Roughly a quarter of respondents to our survey predicted that crude prices would be between $40 and $49 in 12 months’ time which, whilst it would have bought you only just under half a barrel less than two years ago, is more in line with the current price level.

“The dry bulk sector, meanwhile, looks especially troubled, with one respondent to our survey claiming that new historic lows in dry bulk freight rates are being set every day. Reports suggest, however, that more and younger dry bulk vessels are being recycled in spite of weak demolition rates, and contrary to the trend with other categories of tonnage.

“In any industry, the price of a service or product must exceed the cost of providing that service or product in order to achieve a return on investment. In shipping, that is simply not happening at present. Operating costs are going up while freight rates generally are not even keeping pace. Nobody doubts the ability of shipping to bounce back. It has a long history of doing just that. This time, the only question is when.”

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 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 says shipping will remain volatile and indispensable in 2016

International accountant and shipping adviser Moore Stephens says it expects the shipping industry to remain volatile and indispensable in 2016.

Moore Stephens shipping partner Richard Greiner says, “The ultimate definition of an optimist has been characterised as an accordion player with an answerphone. Such extreme optimism might be difficult to find in shipping today, but the portents for 2016 are not all bad.

“The Baltic Dry Index, a measure of shipping rates for everything from pins to elephants, dropped to an all-time low in December last year, and has fallen still further this month.. Most people blamed this on China for not consuming as much of anything as it did previously. Nevertheless, the dry bulk sector will probably have to reduce the newbuilding orderbook and increase ship recycling in 2016 in order to restore the balance.

“The same is true of the container ship sector, where reducing capacity is seen as the best way to drive up rates. CMA CGM's move to buy NOL, meanwhile, although subject to regulatory approval, is an indication of further consolidation. It would be no surprise to see more still in 2016.

“By comparison, the tanker markets enjoyed a stronger year in 2015, not least because of falling oil prices. In contrast, this has presented major challenges in the offshore maritime space. Some experts are predicting a slide to $20 a barrel in 2016, which may be just as well since a recent decision of the English High Court left a shipowner claiming that it had been asked to pay twice for the same fuel from bankrupt OW Bunkers. In 2016, owners will be monitoring a possible appeal against this decision to the Supreme Court, while keeping an eye on disputes elsewhere.

“Shipping will remain volatile and uncertain throughout 2016. Operating costs will go up, as will the cost of regulation - for example, implementation of the Ballast Water Management Convention. The threat from cyber security will rise. Interest in refinancing, as a means of getting cash out of the business, is likely to increase, as are calls for accelerated ship recycling and a cap on newbuildings. The effect of geopolitical developments should not be under-estimated, while speculation about the UK’s planned Brexit referendum in 2017 will add spice to the pot.

“Now is nevertheless a good time to invest if you have access to finance and a credible business plan, preferably one with the badge of green approval. It is no coincidence that IMO recently endorsed a proposal to adopt ‘Shipping: Indispensable to the World’ as the theme for World Maritime Day 2016. You don’t need to be an accordion player to take heart from that.”

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. www.moorestephens.co.uk

Moore Stephens says shipping confidence equals seven-year low

Overall confidence levels in the shipping industry fell during the three months to May 2015 to a level equal to the lowest rating recorded in the past seven years, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens. Respondents complained predominantly about low freight rates and overtonnaging, while some expressed continuing doubts about private equity funding.

In May 2015, the average confidence level expressed by respondents in the markets in which they operate was 5.3 on a scale of 1 (low) to 10 (high), down from 5.5 in February 2015. This equals the lowest figure recorded in the life of the survey, which was launched in May 2008 with a confidence rating of 6.8.

Charterers were the only category of main respondent to record an increase in confidence, albeit from the all-time survey low last time of 3.9. But their rating of 4.2 was still the lowest in the latest survey. The confidence of owners was down from 5.4 to 5.1, that for managers from 6.2 to 6.1, and that for brokers from 5.0 to 4.8. Geographically, confidence was down in all main areas covered the survey, with the exception of North America, where it showed a marginal increase from 5.9 to 6.0.

A number of respondents expressed the view that an upturn in market conditions was some way off. One said: “After eight years of misery, rates must go up if shipping companies are to survive. Another remarked, “Boom / bust cycles in the shipping industry usually last about seven years, which is sufficient time for any money lost to return to the market, with interest rates at, say, 6 percent. But now, because of excess liquidity in the markets and low interest rates, there is a feeling that any recovery will be a very long time coming.” Yet another respondent noted: “For as long as there is no correction in the availability of shipbuilding capacity, and for as long as outside money keeps coming in, there is no hope of an improvement in the shipping industry.” Others, however, were less downbeat, such as the respondent who said: “The aftershocks are almost over, and a recovery should get under way soon.”

The depressed state of the dry bulk sector and the effect of the entry into the market of private equity were the subjects which dominated responses to the survey, neatly encapsulated by the respondent who noted: “The remarkable acceleration of scrapping of larger bulk carriers and the conversion of many newbuildings into tankers will have a positive effect on the dry bulk market sooner than had previously been anticipated - provided, of course, that suicidal private equity has learnt its lesson and accepts that this is not an opportunity to make a quick fortune.” Another respondent said: “The problem facing shipping is the entry into the market of silly money by investors who have no idea about how the industry works and for whom any money lost is a drop in the ocean.”

The likelihood of respondents making a major investment or significant development over the next 12 months was down on the previous survey, on a scale of 1 to 10, from 5.1 to 5.0, the lowest figure since the 4.9 recorded in February 2012. Charterers, however, were more confident in this regard than they were three months ago. One respondent said: “The thin-to-non-existent margins at which Asian yards operate, together with undue concern about the need for new ‘green’ vessels, encourages investment in newbuildings rather than in existing tonnage. This would never happen in real estate, for example, where recession precludes additional supply for years. We are very pessimistic about shipping investment returns for many years to come.”

The number of respondents who expected finance costs to increase over the next 12 months was up by eight percentage points, from the lowest figure in the seven-year life of the survey, to 40 percent. One respondent said: “No real investor can dare to make investments in ships in the coming months.”

Demand trends, competition and tonnage supply featured as the top three factors cited by respondents as those likely to influence performance most significantly over the coming 12 months. The numbers for demand trends and competition were each down on last time by one percentage point, to 23 percent in the case of the former and to 20 percent for the latter. Tonnage supply, meanwhile, was up by one percentage point to 15 percent, one percentage point ahead of finance costs. Operating costs, down by one percentage point to 11 percent, featured in fifth place, followed by fuel costs, down by one percentage point to 6 percent, equalling the lowest figure recorded in this category since February 2010. One respondent said: “Only the big owners can make investments in order to be ready with good tonnage, and not be displaced by competitors, when the market recovers.”

Turning to the freight markets, there was a fall in the number of respondents anticipating higher rates in the dry bulk sector, but expectations of improved rates in the tanker and container ship trades were up on the figures for February 2015. Overall net sentiment, based on the difference between the number of respondents who expected rates to improve and the number who thought they would deteriorate, was positive in all three main tonnage categories covered by the survey.

One respondent said: “We are experiencing the worst dry bulk market since the 1980s.” Another urged, “Tankers are not bad for the moment, but please stop ordering more ships! Will we never learn?” In the container ship sector it was noted: “There is general overcapacity, with rates collapsing and insufficient tonnage management.”

Richard Greiner, Moore Stephens Partner, Shipping Industry Group, says: “The fact that shipping confidence has revisited the low point recorded twice before in the seven-year life of the survey underlines both the current volatility of the markets and the fragile nature of confidence itself in an industry where, little more than 12 months ago, it was at an all-time high.

“The nature of the concerns expressed by respondents to the survey comes as no surprise. Familiarity in this case breeds continuing uncertainty rather than contempt. There are no quick fixes for the likes of overtonnaging and low freight rates. The solutions, like the problems themselves, are long-term in nature, and will undoubtedly involve some pain along the way. Moreover, there is a not a one-size-fits-all solution for the industry as a whole. What is good news for some sectors is quite the opposite for others.

“Lower oil prices might be helping smaller operators to compete by virtue of reduced bunker costs, but in many respects they are bad news for the bigger players with whom they are competing. Access to finance for newbuildings in either the traditional or private equity markets is good news for owners with an eye on expansion, but bad news for those seeking investment to upgrade existing tonnage.

“Shipping has enough problems to occupy itself for the foreseeable future. But it must not take its eye off the ball when it comes to the incipient costs associated with achieving regulatory compliance, or indeed of properly managing the increasing risks which it faces on a daily basis, encompassing everything from the financial stability of counter-parties to cyber security threats.

“It is not all bad news. The Baltic Dry Index (BDI) has started to nudge upwards after an extended period in freefall. The tonnage supply / demand imbalance, although still unsatisfactory, is improving rather than deteriorating. There will always be a demand for shipping. Moreover, given the high operating and regulatory costs involved, and the fact that the economic and industry downturn has already claimed significant numbers of weaker companies, the shipping industry is likely to be stronger than it has been for many years once the recovery does get under way. In the meantime, it is just a question of holding one’s nerve.”

The Moore Stephens Shipping Confidence Survey includes responses from key players worldwide in the international shipping industry to a targeted, web-based survey by the Moore Stephens Shipping Industry Group. Responses were received from owners, charterers, brokers, advisers, managers and others. Editors can apply for a copy of the survey 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. 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 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

BV to class largest container ships built in China

Leading international classification society Bureau Veritas is to class three Ultra-Large Container Ships (ULCSs) to be built for China State Shipbuilding Corporation (CSSC) and chartered to French operator CMA CGM. The ships are due for delivery in 2015. 

The 16,000 teu vessels will be the largest container ships built in China to date. One will be built at the Shanghai Waigaoqiao Shipbuilding (SWS) yard, and the other two at Shanghai Jiangnan Changxing Heavy Industry, part of which came under the management of SWS this year.

In recent years, Chinese shipyards have secured orders for increasingly large box ships, and the three new 16,000 teu ships are only a fraction smaller than the largest container vessels being built today in Korea. The design was developed by the Marine Design and Research Institute of China (MARIC) in co-operation with BV, which performed the drawing approval and conducted a thorough structural examination.

The vessels will have an overall length of 399 m, a beam of 54 m, and a draft of 16 m. Special consideration has been given to hydroelastic design (whipping and springing) issues, which are so important for this size of ship. A hydroelastic examination was performed using BV’s HOMER software in order to take into account extreme whipping loads due to slamming and additional fatigue damage due to springing, factoring in the elastic structural response of the ship. This review provides a higher level of safety compared to the rigid approach traditionally adopted to such issues, and is mandatory under BV Rules for ULCSs of 300 m and above. On the strength of this examination, BV’s WhiSp2 notation has been assigned to the ships.

The vessels will be also granted BV’s VeriSTAR HULL DFL 25-year notation, which certifies various structural details, including hatch corners and coamings, for 25 years of fatigue life, following a spectral fatigue analysis with a 3D finite element analysis model. The importance of fatigue for large container ships, which generally lack torsional rigidity and become more elastic with size, has been confirmed by real measurements on board ULCSs classed by BV.

The 16,000 teu ships will be able to operate at a maximum speed of over 23 knots with a single-screw propeller directly coupled to a 69 Megawatt, 2-stroke electronic engine. The vessels’ environmentally friendly profile is attested to by BV’s class notations CLEANSHIP and FORS. The latter incorporates special arrangements to ensure that the ship’s fuel oil tanks are safely emptied in case of emergency, minimizing the risk of pollution. This is an important safety aspect considering the size of the fuel oil tanks of ULCSs

Steel cutting for the new vessels is due to begin next year and the ships are expected to be delivered in 2015. 

 l Bureau Veritas is a world leader in conformity assessment and certification services. Created in 1828, the Group has 59,000 employees in around 1,330 offices and laboratories located in 140 countries. 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.

 www.bureauveritas.com for corporate information                              www.veristar.com for marine information

 For more information:

    

Konstantinos Chatzitolios

Manager Containerships

Bureau Veritas

+33 1 55 24 72 34

konstantinos.chatzitolios@bureauveritas.com