Page 10: of Maritime Reporter Magazine (December 2013)

10 Maritime Reporter & Engineering News ? DECEMBER 2013 NEWSBy the NumbersChart 1Cost type (mean) 2013 2014Crew wages 2.4% 2.5%Other crew 2.1% 2.2%Lubricants 2.2% 2.2% Stores 1.9% 2.0%Spares 2.1% 2.3%Repairs & Maintenance 2.3% 2.4%H&M Insurance 2.0% 2.3%P&I Insurance 2.4% 2.5%Management fees 1.4% 1.7%Dry docking 2.1% 2.4%Total operating costs 3.0% 3.2%Source: Moore Stephens Chart 2By Vessel Type Expected % Cost Increases for Year Ending December 31, 2014 Mean Bulkers Tankers Container Offshore Total Ships Crew wages 2.2% 2.4% 2.8% 3.4% 2.5% Other crew 1.9% 2.3% 2.5% 2.9% 2.2% Lubricants 2.1% 2.2% 2.6% 2.5% 2.2% Stores 2.0% 2.0% 2.1% 2.2% 2.0% Spares 2.3% 2.4% 2.4% 2.2% 2.3% Repairs & Maintenance 2.4% 2.6% 2.4% 2.4% 2.4% H&M Insurance 2.2% 2.3% 2.8% 2.2% 2.3% P&I Insurance 2.6% 2.4% 3.0% 2.0% 2.5% Management Fees 1.5% 1.7% 2.1% 2.1% 1.7% Dry docking 2.2% 2.3% 3.1% 2.5% 2.4% Total costs 3.0% 3.2% 3.6% 3.5% 3.2% Source: Moore Stephens A new survey from Moore Stephens Þ nds that vessel operating costs are expected to rise by more than 3% in both 2013 and 2014. While this news should not be unexpected it is nevertheless bad news for ship owners that continue to struggle with low freight rates and over capacity across sev-eral oceangoing sectors. In total the survey examined 10 main cost areas, summarized in charts one and two. Crew expenses, broken in two categories as ?wages? and ?other? by far dominated the cause of cost es- calation, accounted for a 4.5% rise in 2013 and a projected 4.7% rise in 2014. ?Crew costs, as always, emerged as a major concern for respondents, which is no surprise given the potential budgetary implications of the entry into force of MLC 2006 and the increasing involvement of both interna-tional and regional bodies in the oversight of crew com-petence and its effect on safety,? said Richard Greiner, Moore Stephens shipping partner. Running neck-and-neck though were cost increases due to rising insurance costs, with P&I insurance ex-pected to escalate 2.4% in 2013 and by 2.5% in 2014, and hull & machinery insurance projected to increases 2.0% and 2.3%, respectively. Expenditure on spares is expected to increase by 2.1% and 2.3% in 2013 and 2014 respectively, while respondents anticipate a 2.2% increase in the cost of lu-bricants in both years under review. The cost of stores is expected to increase by 1.9% and 2.0% respectively for 2013 and 2014, while repairs & maintenance ex-penditure is predicted to increase in those two years by 2.3% and 2.4% respectively. Drydocking costs over the same period are expected to rise by 2.1% and 2.4% respectively. Meanwhile, as was the case in the 2012 survey, management fees are deemed likely to produce the lowest level of increase in both 2013 and 2014, at 1.4% and 1.7% respectively. The cost of fuel occupied the thoughts of a number of respondents, one of whom noted, ?Fuel costs remain the biggest chunk of our operating expenses due to surging price increases.? Referring to political volatility in the Middle East and increasing regulation on sulfur emissions levels, anoth-er respondent predicted that many owners would ?have to switch to Marine Gas Oil, which will involve a very big cost increase. We have already seen how the switch between high and low-sulfur fuel is causing problems for some ships, and instances of black-outs and loss of power are on the increase.?Moore Stephens also asked respondents to identify the three factors that were most likely to inß uence the level of vessel operating costs over the next 12 months. Overall, 21% of respondents (compared to 27% in last year?s survey) identi Þ ed Þ nance costs as the most sig- niÞ cant factor, followed by crew supply (20%), com- petition (18%), demand trends (16%) and labor costs (13%). The cost of raw materials was also cited by 10% of respondents as a factor that would account for an increase in operating costs. ?Ship operating costs fell by an average of 1.8% across all the main ship types in 2012, so at Þ rst blush the predicted increase in costs for this year and next might come as something of a disappointment,? said Greiner. ?In truth, however, the levels of increase an- ticipated for 2013 and 2014 are still way below many of those we have seen in recent years.?In regards to increased costs for underwriting, Greiner said ?the projected rise in P&I premiums for 2013 and 2014 can be attributed, among other things, to a number of major casualties to which the clubs and their reinsur- ance underwriters have had to respond, as well as to the escalating cost of wreck removal. For these reasons, the anticipated cost increases are not unexpected. The fact that the projected increases for hull & machinery cover are lower than those for P&I is perhaps an illustration of the difference between physical loss & damage cov- er and third-party liability cover, and of the distinction between commercial and mutual insurance.?(Photo: Alex Sergienko) Coming your way, a 3% rise in Coming your way, a 3% rise in Operating Costs Operating Costs4.7% 4.7% Projected cumulative rise in crew expenses in 2014 MR #12 (10-17).indd 10MR #12 (10-17).indd 1011/27/2013 2:27:48 PM11/27/2013 2:27:48 PM