Costs of stores such as lube oil fell the most, but crew costs were also lower in 2014 compared to previous years, according to a new report from the accounting and consulting firm.
International accountant and shipping consultant Moore Stephens said in a recent report total annual operating costs in the shipping industry fell by an average of 0.8 percent in 2014. This follows a 0.3 percent average fall in costs recorded for 2013.
All categories of expenditure were down last year, according to the report.
“This is the third
successive year-on-year reduction in overall operating costs,” Moore Stephens partner Richard Greiner said of the findings. “This comes
as something of a surprise, and is contrary to earlier forecasts.
Shipping is clearly watching the pennies, and it may also be the case
that more competitive pricing for goods and services has had a part to
play in holding down expenditure. Beyond that, as always, the impact of
exchange rate changes cannot be determined readily.
“By far the
biggest reduction in operating costs, for example, was seen this time
in the stores category. This can be largely explained by the knock-on
effect which the fall in oil prices has had on lube oil costs. Such benefits do not come often to any industry, and are usually not
without a downside, as has been the case in shipping,” he said.
Expenditure on stores was down by 2.4 percent overall, compared to the fall of 1.9 percent in 2013.
The findings are set out in OpCost 2015, which Moore Stephens has published for 15 years. It found total operating costs for the tanker, bulker and container ship sectors were all down in 2014.
On a year-over-year basis, the tanker index was down 1.1 percent, while the bulker index down 0.6 percent and the container ship index was down 1.2 percent.
There was an 0.1 percent overall average fall in 2014 crew costs, compared to the 2013 figure, which itself was down 0.2 percent from 2012. (By way of comparison, the 2008 report revealed a 21 percent increase in this category.)
“Crew costs were down, albeit marginally, for the first time in recent memory,” said Greiner. “This could be an indication of a higher level of idle tonnage during the period under review, but is nevertheless welcome news for an industry which has seen crew cost increases of more than 20 percent at their peak.
“Expenditure on repairs and maintenance was also marginally down on 2013, possibly attributable in part to weak steel prices and in part to the fact that poor freight rates arguably do not encourage owners and operators to engage in anything but the most essential repairs and maintenance. It is to be hoped that there is not a future price to be paid in this respect in terms of either safety or performance,” he added.
“The bill for insurance coverage was also down, which will come as little or no surprise in view of the high level of competition in the insurance market, which is arguably even fiercer than that in the shipping industry.
“The challenge for shipping is how to build the cost of operation into freight rates in a way which allows for a reasonable profit margin in an industry which is driven by competition and characterized by overtonnaging,” said Greiner. “Given that, over the next few years, annual seaborne trade is projected to grow at a reasonable rate, and that the cost of regulatory compliance is likely to increase significantly, one would expect operating costs to rise over the same period.
“Two things are certain,” he added. “Firstly, the business of operating ships will remain a costly undertaking. Secondly, the impetus for higher freight rates will not come from the shipping industry’s customers.”
Moore Stephens reports small decline in 2014 ship operating costs
