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OVERCAPACITY TO DOMINATE SHIPPING MARKETS FOR YEARS TO COME 

 

At the recent Moore Stephens Ship Operating Costs: Current and Future Trends seminar in London Martin Stopford, managing director of Clarkson Research Services and well known shipping economist, painted a gloomy picture of the market in the coming decade. Dr Stopford outlined three themes for the 2010s: shipyard overcapacity; energy costs; and the environment. All were correlated, he said, and would lead to a renewed focus on costs. He said that shipbuilding overcapacity will mean cheaper ships and greater willingness to do innovative work while lower ship earnings will push the strategic focus towards cost control. Over the coming years cost management will have a much greater urgency than in the past decade, according to Dr Stopford.

 

That keeping costs down will be however be difficult has been underlined by Moore Stephens' latest ship operating costs survey. Vessel operating costs are expected to rise by 3.8% in 2011 and by 3.7% in 2012, with lube expenditure and crew costs identified as the categories most likely to produce the highest levels of increase The survey is based on responses from key players in the international shipping industry, predominantly ship owners and managers in Europe and Asia. Those responses identified lubricants as the cost category likely to increase most significantly over the two-year period – by 3.6% in 2011, and by 3.1% in 2012.

 

Crew wages, meanwhile, are expected to increase by 3.1% in both 2011 and 2012, while the cost of spares is expected to escalate by 2.7 % and 2.6 %, respectively, in the two years covered by the survey. Expenditure on stores is expected to increase by 2.5 % in each of the two years.

The cost of repairs and maintenance is expected to increase by 2.8% and 2.6 % in 2011 and 2012 respectively, while the increase in P&I costs for those two years was estimated by respondents at 2.4 % and 2.3 % respectively. As was the case in the previous survey, in 2010, management fees was identified as the category likely to produce the lowest level of increase in both 2011 and 2012, at 1.8 % and 2.0 % respectively.

 

“Bunkers and lubes are our biggest cost,” said one respondent, while another observed, “The cost of bunkers is unrealistically high. There is no reason for that. If the price of bunkers remained at a reasonable level, shipowners would not be struggling in the way they are at the moment.”

One respondent expected dry cargo crewing costs to increase more than tanker crewing costs, while another noted, “The Manila amendments to STCW will result in significant increases for ‘other’ crew costs, especially in respect of training.”