[111216.EN.BIZ] Ship Operating Costs Likely to Rise After Two Years of Austerity: Drewry

DREWRY's latest Ship Operating Costs Annual Review and Forecast 2016/17 report indicates that the cost of operating cargo ships is likely to rise in 2017 and beyond after two successive years of drastic cost reductions.

"Weak freight rates, declining asset values, eroded profitbiility and denuded cash balances have forced shipowners to reduce costs wherever possible, and vessel operating expenses have been no exception," the London-based shipping research and consulting firm said, according to American Shipper.

Drewry's assessment of 2016 operating costs across 44 different ship types and sizes shows that shipowners have trimmed costs in 2016 for the second successive year. The average decline in total ship operating costs among the vessel categories covered was 4.4 per cent. This comes after a fall of 1.5 per cent in 2015.

"In the short term, it is evident that the direction of the wider cargo shipping market will continue to shape trends in operating costs," Drewry report editor Nikhil Jain said.

"That said, the scope for further significant cost reductions is limited. We are still of the opinion that costs will rise in 2017 and beyond, but perhaps at lower levels than previously anticipated."

Looking ahead, Drewry said it expects "modest increases in manning costs as a result of international wage rate agreements and shortages in certain officer ranks. Excess capacity in the insurance sector and competition among insurance providers will help offset the impact of rising asset values on the H&M (hull and machinery insurance) market."

Although the cargo carrying fleet is relatively young, Mr Jain said, spending on repairs and maintenance is expected to rise.

"Recent legislation regarding the retrofitting of ballast water management systems will lead to increased expenditure, so it is safe to assume that expenditure on repair and maintenance will rise at rates above typical inflation," he added.

Source : HKSG.