The cost of operating ships last year marginally declined for bulkers and containers and rose slightly for tankers as owners have worked to cap costs amid eroding earnings since 2008, a shipping industry study said.
Consultancy Moore Stephens International said in the report released late Thursday that daily operating costs for Aframaxes and Suezmaxes stood at $8,272 and $9,378 in 2013, up 1.2% and 1.3% year on year, respectively, and $10,194 for VLCCs, down 1.5% year on year. For bulkers, operating costs were down 1.2% last year.
Total annual operating costs in the shipping industry including tankers, bulkers and containers fell by an average of 0.3% in 2013, after a 1.8% drop in 2012, the report said.
“This shows that the ship owners continue to focus on managing costs and conserving cash,” Richard Greiner, a London-based partner at Moore Stephens, said during a seminar in Singapore to release the study.
The study, which has been undertaken every year since 2000, currently takes into account 24 types of ships including five bulkers, 12 tankers and three types of containers.
The 12 cost areas surveyed include crew costs, stores, repairs and maintenance, insurance and dry docking.
Operational costs excluding bunkers have been rangebound or little changed since 2008, Greiner said.
In the last six years, the operational cost index has moved between 170 and 179 for bulkers and 179 and 184 for tankers, he said.
Due to the relatively lower freight rates in recent years, the pressure on crew wages has not gone away, he said. The share of crew costs in the total operational costs is 44% or higher for all types of bulkers and more than half for most tankers, according to the study.
The average annual dry docking days are estimated at 20 for product tankers, 24 for Capesize bulkers and 18 for VLCCs, he said.
Average annual dry docking costs for these three categories are around $820,000, $960,000 and $1.7 million, respectively.
“Despite the recent revival in earnings, it is still very challenging for ship owners to make money and maintain the operational cash flow,” Greiner said.
The ClarkSea Index — a weighted average of earnings by tankers, bulkers, containerships and gas carriers — hit a high of $47,400/day at end-2007, then averaged $11,752/day between 2009 and 2014, and was $14,573/day last week.
“Earnings are under pressure but not in distress,” John d’Ancona, divisional director and senior dry cargo analyst, said at the same seminar.
The Clarksea Index hit a low of $7,520/day in February 2013.
For VLCCs and clean products tankers, the one-year time charter rate is still 26% and 24% below the 10-year average, D’Ancona said.
For most dry bulk tankers, the one-year time charter rate is more than 50% below the 10-year average, but the numbers are distorted by the super cycle between 2003 and 2008 when earnings hit extraordinarily high levels, he said.
DEMOLITION SLOWS, INVESTMENTS RISES
Demolition in the overall shipping industry is slowing but still strong, he said.
It is expected to be at a six-year low of just over 20 million dwt this year compared with almost 60 million dwt in 2012, D’Ancona said.
There was a significant contracting for newbuilding ships in 2013 at $129 billion, and it is estimated at $83 billion so far this year, he said.
As operational costs are under control, interest in newbuildings is increasing again.
This is the second successive year-on-year reduction in operating costs and coincides with a period of slowly returning confidence in the shipping industry, Greiner said.
This confidence is also reflected in the rising investments in the shipping industry.
Capital investment in the shipping industry is estimated at $85.5 billion last year, up from $68 billion in 2012, and already $52.7 billion in the first half of 2014, said Chris Johnson, head of Moore Stephens Singapore’s shipping industry group.
While a bulk of these investments are in the form of debt from banks, it also includes equity, private equity and bonds, he said.