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Ship operating costs up, but sector's lost value keeps insurance down

NEW international rules on safety, manning, pollution and depressed hull values as well as flat or weaker commodity prices have combined to drive up ship operating costs in 2013, says London's Drewry Maritime Research.

But indifferent commodity prices and lower asset values also produced lower insurance premiums and the less costly lubricating oils and repairs because of lower oil and steel prices.

Drewry's latest Ship Operating Costs Annual Review and Forecast concluded that 2013 was another difficult year for most ship operators with weak freight rates.

Judging by the findings of the latest Drewry report, ship operators were able to keep down cost increases last year between one and 2.5 per cent.

"Looking ahead and given the expected outlook for the world economy and international shipping markets, we expect to see operating costs rise two to three per cent per annum in the next couple of years," said Drewry managing director Nigel Gardiner.

On manning, the Drewry report said: "With the exception of LNG, manning costs increased by one to two per cent in 2013, as overall fleet growth moderated and pressure was eased on officer supply. Looking ahead as the world comes out of recession and shipping markets improve, upward pressure on manning costs is expected to return with increases over those in 2013."

On insurance, the report said: Shipowners and operators have made an effort to resist increases in insurance premiums helped by weak assets values. "But with a general recovery in asset values underway we expect insurance costs to rise in 2014."

On the cost of stores, spares and lubricating oils, the report said: "Expenditure on items such as lubricating oils has been held in check by weak or static commodity prices, but if the world economy picks up in 2014 and commodity prices rise, we expect costs in this sector to rise as well."

On repairs and maintenance, the report said: "In 2013, weak steel prices helped to keep increases low, but with new regulations and an element of catch-up in repairs due, we expect repair and maintenance expenditure to rise by at least 2.5 to three per cent per annum over the next couple of years."

Of management and admin costs, the report said: Increases appear to have been low in 2013 - typically less than one per cent and "we are of the opinion that operators will do they best to keep increases to a similar figure in the short term".