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Will be squeezed out by 2014

Will be squeezed out by 2014
Vessel operating costs are expected to rise by more than three per cent in both 2013 and 2014 according to a new survey by international accountant and shipping consultant Moore Stephens.

The survey is based on responses from key players in the international shipping industry, predominantly shipowners and managers in Europe and Asia. Those responses revealed that vessel operating costs are expected to rise by 3.0 per cent in 2013, and by 3.2 per cent in 2014, with crew wages and PandI insurance the cost categories likely to increase most significantly.


Crew wages are expected to increase by 2.4 per cent in 2013 and by 2.5 per cent in 2014, with other crew costs thought likely to go up by 2.1 per cent and 2.2 per cent respectively for the years under review. The cost of P&I insurance is also expected to escalate by 2.4 per cent in 2013 and by 2.5 per cent in 2014, this compared to the increases of 2.0 and 2.3 per cent respectively predicted in respect of the cost of hull and machinery insurance.

Expenditure on spares is expected to increase by 2.1 per cent and 2.3 per cent in 2013 and 2014 respectively, while respondents anticipate a 2.2 per cent increase in the cost of lubricants in both years under review. The cost of stores is expected to increase by 1.9 per cent and 2.0 per cent respectively for 2013 and 2014, while repairs and maintenance expenditure is predicted to increase in those two years by 2.3 per cent and 2.4 per cent respectively.

Drydocking costs over the same period are expected to rise by 2.1 per cent and 2.4 per cent 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 per cent and 1.7 per cent 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 sulphur emissions levels, another 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-sulphur fuel is causing problems for some ships, and instances of black-outs and loss of power are on the increase.”

Elsewhere, a number of respondents referred to the effect on operating costs of a significant number of older vessels still operating in the market, with one predicting, “A number of these will be squeezed out by 2014, particularly those over 25 years of age.”

Moore Stephens also asked respondents to identify the three factors that were most likely to influence the level of vessel operating costs over the next 12 months. Overall, 21 per cent of respondents (compared to 27 per cent in last year’s survey) identified finance costs as the most significant factor, followed closely by crew supply (20 per cent). Competition was in third place, with 18 per cent, followed by demand trends (16 per cent) and labour costs (13 per cent). The cost of raw materials was also cited by ten per cent of respondents as a factor that would account for an increase in operating costs.


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