Professional services firm BDO’s Opcost report shows operating costs continued an overall downward trend in 2018, but owners and operators predicted increasing costs for 2019 and 2020 in a survey
BDO partner Richard Greiner presented the results for this year along with owners’ anticipated costs for 2019 and 2020 at an event in London on 24 October.
Overall, an opex reduction of 1.8% was seen over 2018, and across all vessel types covered (bulkers, tankers and containers), costs overwhelmingly either declined or flatlined.
“I think it’s a fantastic story for the industry overall, how the industry collectively has managed to bring its opex under control,” Mr Greiner said.
“If you look in the 2000s, we saw an era of high inflation in opex, and the story in the last decade has been a reduction, such that in each of these main sectors the level has declined to around the level it was at 10 years ago.”
Bulk carriers showed the biggest drop at an average 2.6%, the average decline around 2.3% compared with an 18-year average rise of 2.4%. Tankers showed a 1.3% decline in 2018, better than the average 2% decline seen over the last three years, but still a way off the average rise of 3% for the last 18 years. Container ships also saw a 1.3% decline, compared to an average decline of 1% over the last three years and an 18-year average rise of 2.8%.
Mr Greiner noted that one area where costs have increased is in repairs and maintenance (excluding drydocking) for container vessels, which showed a 3.2% increase.
“This is changing the [downward] trend that has been visible for the last five to six years,” he said, adding “It’ll be interesting to see whether that connects with a reduced element of spend on repairs and maintenance while the markets have been tough.”
“I think now there is more cash in the marketplace, there is the capacity to do more work on repairs and maintenance, rather than just the minimum.”
Insurance costs, both P&I and hull and maintenance, have continued a downward trend. Mr Greiner noted that despite speculation that the trend may reverse, the evidence seen by BDO suggests this has not happened yet.
Looking ahead to the Opcost 2020 review, Mr Greiner said more data is sought and invited interested owners to get in touch to learn more. He added that BDO is considering how to capture the impact of systems such as ballast water treatment systems and scrubbers in the next edition of the review.
Mr Greiner also shared some of the results of BDO’s Future Operating Costs Survey.
Respondents were largely from the worlds of shipowning and management in Europe. Vessel types included bulkers, tankers, container ships and offshore vessels.
A total increase in operating costs of 2.5% for 2019 and 2.7% for 2020 was expected by respondents. New regulations were expected to be responsible for 25% of the cost increase, followed by finance costs (15%), crew supply (14%), competition (13%), demand trends (12%), labour costs (11%), raw material costs (8%) and ‘other’ (2%).
“What stood out in 2019 was a much higher expectation in the container ship space than average,” said Mr Greiner, adding “And in 2020, container ships [are seen as] fairly high, and in the offshore market there is an expectation of increased opex [too].”
Respondents were also polled on cost-type expectations, calculated separately from the overall overages. No costs were anticipated to exceed a 2% rise, but crew wages are seen to have potential for a 1.9% increase in 2019 and a 1.8% increase in 2020, with repairs and maintenance, dry docking and spares also expected to rise. Hull and machinery insurance costs are expected to grow by 1.9% in both 2019 and 2020, while P&I insurance costs are expected to grow by 2% both years.