The list of shipowner costs expected to rise in 2020 include insurance, repair and maintenance and increased manning and procurement spending
A slump in profitability for marine insurance providers in the last three years has driven suppliers to ramp up their rates between 5-7% for 2020 premiums, leading to considerable higher prices at a time when shipping market conditions remain tight, said Drewry head of research products Martin Dixon.
“In 2020 we forecast a sharp rise in insurance costs,” he said at Riviera Maritime Media’s Optimised Ship Forum, in London on 10 December 2019.
“Many insurance firms say they will increase P&I and hull and machinery insurance in 2020,” he told delegates including managers from BP Shipping, D’Amico Group, Glencore, K Line, Navig8, MSC Cruise, Marella Cruise and Seadrill.
“Hull and machinery insurance could rise by 10% and P&I by 6% in 2020. They could rise by 2% year-on-year after that.”
Other operating costs expected to rise in 2020 include repair and maintenance. Drewry forecasts a 3.1% rise in 2019 and similar rises in 2020. “This is because retrofit activity [for ballast water treatment systems and sulphur emissions abatement technology] in repair yards means less available capacity and increasing costs,” said Mr Dixon.
He forecasts a 2% rise in lubricants costs, 1% increase in stores procurement and 1.5% hike in manning expenditure.
Digitalisation leads to optimisation
Some of these cost increases could be managed through performance optimisation, according to Columbia Shipmanagement president Mark O’Neil.
He said owners, operators and managers can manage fuel costs through fleet and vessel analytics. “It is about preventing waste, using voyage routeing, managing speed and preventing delays at ports,” he said.
Columbia Shipmanagement developed its Performance Optimisation Control Room to deliver cost savings for owners. This includes fleet analytics to compare ship performance and benchmark against other fleets.
Optimisation should include “preventative maintenance of key engine components” Mr O’Neil said. It could also include crew training and rotation to reduce inefficiencies. He thinks real-time data and its analytics are vital for optimisation.
So does d’Amico Group fleet performance manager Ivana Melillo. She thinks reliable data is vital for technical and commercial reporting.
“It is important to have clear and transparent data as we need to justify the technical and commercial performance,” Ms Melillo said.
D’Amico invested US$1.2Bn in a new fleet of eco-ships during 2013-2018 and management needs to justify this capital through monitoring fuel efficiency. “We need to monitor our ships and validate data, otherwise we will just have garbage and Excel files with numbers,” she said.
Ms Melillo’s department receives almost 5.5M data streams from hundreds of daily reports from its fleet. It also processes high-frequency data streams from 35 ships with sensor networks on board.
Data, especially weather and sea condition information, can also be sourced from third-party providers. StormGeo and DNV GL principal consultant for fleet performance management Tobias Gröger said data quality checking can be challenging as it can include the position and calibration of sensors.
“Sensors could report doubtful information, so sensors on board need regular recalibration,” he said. “It is possible to compute data to fill in some of the gaps, but determining data quality is challenging.”
Also challenging is improving operational efficiency of ships and fleets if vessels remain idle outside ports. Owners can manage voyages and fuel effectively, but this could be undone if port congestion prevents them entering terminals as predicted, said BIMCO head of maritime technology and regulation Aron Frank Sørensen.
He thinks third-party contracts could also include terminals, with owners and charterers considering potential fuel costs or savings from voyage planning and productive terminals.
“If terminals are involved, then if the terminal delays entry, it will pay the owner some money [to compensate additional time and fuel costs] and if ships are late, the operator could pay some money to the terminal,” said Mr Sørensen.
BIMCO is working on a just-in-time clause to contracts for review in 2020 that would involve the charterer and owner agreeing an arrival time and sharing the cost on fuel.