London - Underlying vessel operating cost inflation accelerated moderately in 2019 on higher repair & maintenance and insurance spend, while looking ahead costs are expected to continue rising at a similar pace in 2020 on a hardening insurance market before receding in subsequent years, according to the latest Ship Operating Costs Annual Review and Forecast 2019/20 report published by global shipping consultancy Drewry.
Costs rose for a third consecutive year following marked declines in the capacity ravaged years of 2015-16. Opex costs are heavily linked to developments in the wider shipping market as some, such as insurance, are connected to asset values and others impacted by the ability of shipowners to pay.
Drewry estimates that average daily operating costs across the 46 different ship types and sizes covered in this report increased 2.2% in 2019, compared to underlying increases of 1.1% and 0.7% respectively in the previous two years. This followed a period in which opex spending contracted over two consecutive years by almost 9% in 2015-16Manning costs rose for a second successive year, up 1.3% in 2019, despite the easing officer shortage, while insurance costs increased 3.4% having flatlined the previous year. Spend on stores, spares and lubricants rose for the third year in succession, though with the exception of lubes cost inflation remains very moderate.
But expenditure on repair and maintenance and dry docking accelerated to 3.1% in 2019 on tighter repair yard capacity as a result of a spike in retrofit activity, while costs relating to management and administration increased just 1%.
The rise in costs was broad-based across all the main cargo carrying sectors for the second consecutive year, as continued recovery across most cargo shipping markets and rising regulatory compliance requirements lifted cost inflation. The latest assessments include vessels in the container, chemical, dry bulk, oil tanker, LNG, LPG, general cargo, reefer, roro and car carriers sectors. But market conditions are expected to be challenging for many shipowners as the trade outlook remains uncertain and benign capacity conditions prove temporary when the current round of retrofits recedes.