[311014.EN.SEA] Vessel Operating Costs Expected to Rise 6pc by The End of 2015

THE projected six per cent increase in vessel operating costs for the next two years will be difficult for owners, operators and managers to absorb, according shipping accountancy firm Moore Stephens.

Operating costs are expected to rise three per cent both this year and next, while seafarers' wages are to rise 2.4 per cent in 2014 and by 2.6 per cent in 2015. Other crew costs are to go up 1.9 per cent and 2.1 per cent.

The study is based on responses from key players in international shipping, predominantly shipowners and managers in Europe and Asia, reports Lloyd's List.

"Crew costs remain a critical factor," said one respondent. "There will continue to be a high level of demand for trained crew, especially for top-end ships."

It was also noted that "the full implementation of the Maritime Labour Convention 2006 is likely to be a significant factor in higher labour and crewing costs."

The cost of repairs and maintenance is expected to escalate by 2.3 per cent by the end of this year and by 2.4 per cent in 2015.

P&I insurance costs are estimated to rise two per cent in 2014 and by 2.2 per cent in 2015, with increases of 1.6 per cent and 1.8 per cent predicted for the cost of hull and machinery insurance.

Drydocking costs are expected to rise 2.1 per cent in 2014 and by 2.2 per cent in 2015, and expenditure on spares is forecast to rise by 2.1 per cent and by 2.2 per cent, respectively.

One respondent noted that owners are hard-pressed to cut costs and lower operating expenses because of poor freight markets. "There is a particularly severe impact on running costs for ships bought prior to 2009."

Several respondents felt that surplus tonnage on the market would inevitably increase operating costs. "The recent increase in tonnage supply will add pressure to operating costs," said one.

"Sensible owners with adequate funding are planning for the future by investing in eco-friendly ships and by weighing up the advantages of [liquefied natural gas] propulsion," said Moore Stephens partner Richard Greiner.

"Such initiatives will bring long-term benefits but are likely to increase costs in the short term because new technology and associated research and development costs do not come cheap," said Mr Greiner.

"On the plus side, oil and gas prices are falling, which should translate into savings for owners and operators, and shipping continues to attract new money from both internal and external investors," he said.

Source :  HKSG.