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Welcome news for shipowners

Welcome news for shipowners
In the midst of recession, hearing that the cost of running a ship is likely to fall must be welcome news for shipowners.

In the midst of recession, hearing that the cost of running a ship is likely to fall must be welcome news for shipowners.

In the midst of recession, hearing that the cost of running a ship is likely to fall must be welcome news for shipowners.

The brighter picture on operating costs comes from Drewry Shipping Consultants, whose annual report on the subject suggests an average fall in daily operating costs of around 3.4% for this year.

?The upward pressure of costs has been halted, if not reversed,? said Drewry managing director Nigel Gardiner.

The deflationary trend is new; no similar fall in costs occurred during the last big recession in shipping, during 2001 and 2002.

?At that time, the scope for cost-cutting was less,? Mr Gardiner said.

Costs had been cut back in the preceding decade, which meant that operators had little room for manoeuvre. This time around, however, cost reduction has become a reality across a range of shipping functions. The same is true for all ship types.

Determining how much of the global fleet is in lay up is elusive, which makes any assessment of the power of the deflationary forces stacked in the system problematic. But with enough inactive ships out there, there is sufficient evidence of weaker pricing filtering through the system.

The report finds that after years of ?high upward pressure?, manning costs ?should remain stable?.

In some segments, such as LNG, which has experienced a sharp bout of wage inflation, the change should be marked.

But any respite is likely to be short-lived. By 2012, wage inflation could return on the back of an expanding global fleet, according to the report.

Costs will fall in the short term for ship repairs and maintenance as lower steel values will put repair yards in a position to cut prices yet maintain margins.

Where the global fleet is populated by older vessels, the report says ?repair bills will inevitably rise?.

On the upside, however, owners are likely to choose carefully as to where that work is carried out.

Prices of stores and supplies should stabilise, possibly becoming deflationary, on the back of cheaper spares and lubes.

Owners accustomed to third-party providers for management duties may see advantages in bringing vessel management in-house, the report says.

Looking ahead, price stability, and possible deflation, will be the exception rather than the rule.

?Owners need to have plans in place to deal with inflation"s return, particularly when interest rates rise, as they inevitably will,? said Mr Gardiner.


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