Total annual operating costs in the shipping industry fell by an average of 2.4 per cent in 2015, compared with the 0.8 per cent average fall in costs recorded for 2014, representing the fourth successive year that the operating costs were in decline, according to shipping consultant Moore Stephens.
All categories of expenditure were down for the previous 12-month period. This suggests continued pragmatic management of costs by ship owners and operators, as well as a reduction in active trading for some owners as a result of the prolonged worldwide economic downturn.
This is as another world top shipping consultancy, Drewry has found that the recent rally in Asia to Europe spot market rates has improved carriers’ chances of securing higher 2017 contract rates.
Drewry said it has been another typically volatile year as far as the spot freight rate market is concerned with the weekly ups and downs once again being most obvious in the high-volume westbound Asia to Europe trade, adding that 2016 has thus far played out very much like 2015 with very little difference in regards to the average weekly rate, standard deviation or highs and lows.
According to Moore Stephens, the total operating costs for the tanker, bulker and container ship sectors were all down in 2015. On a year-on-year basis, the tanker index was down by 4 points, or 2.2 per cent, while the bulker index fell by 6 points, or 3.6 per cent. The container ship index, meanwhile, was also down by 6 points, or 3.7 per cent, according to the report.
There was a 1.2 per cent overall average fall in 2015 crew costs, compared to the 2014 figure. Tankers overall experienced a fall in crew costs of 1.3 per cent on average. All categories of tankers reported a reduction in crew costs for 2015 with the exception of Panamaxes and VLCCs, which recorded increases of 1.4 per cent and 1.2 per cent, respectively. The most significant reduction in tanker crew costs for 2015 was the 3.6 per cent recorded by product tankers.
For bulkers, meanwhile, the overall average fall in crew costs in 2015 was 1.1 per cent. The operators of Handysize bulkers paid 2.3 per cent more on crew costs than in 2014, but the operators of other categories of bulker paid less, in the case of Panamax bulkers to the tune of 3.2 per cent.
Expenditure on crew costs was down 3.3 per cent in the container ship sector. The biggest fall in crew costs in this category was the 3.6 per cent reduction recorded for vessels of between 2,000 and 6,000 TEUs.
“This is the fourth successive year-on-year reduction in overall ship operating costs. The reduction is three times that recorded 12 months ago, and a reduction at this level had not been widely anticipated,” Richard Greiner, Moore Stephens Partner, Shipping & Transport, said.
He added that shipping can draw “some comfort” from a fourth successive annual fall in operating costs, but that it should remember “that costs can move both ways.”
“The indications from the freight markets are that shipping is still selling itself too cheaply. Inflationary pressures on operating costs will remain, so maintaining the status quo will not be a viable option. For many, the freight markets will remain challenging and so to remain competitive, shipowners need to continue to improve efficiency, innovate with new technology and harness the considerable benefits of ‘big’ data without delay,” Greiner noted
Meanwhile, Drewry said this year the key aspect of timing was different as the average Asia-Europe spot rate was approximately 35 per cent higher in the third quarter 2016 than in the same period a year ago.