Volume 2, issue #8 - 25-03-1997

Mar. 5, 1997 Shipowners face rising costs over the next few years as crewing, insurance and repair expenses mount, according to a report from Drewry Shipping Consultants Ltd. The report, "Ship Costs: The Economics of Acquisition and Operation", says cost inflation is returning for shipowners as the decade moves to an end.
"Manning is likely to become an ever thornier issue as concerns mount over future seafarer availability," it warns. The report also claims that some cost increases are "inevitable as the market sectors involved -- insurance, repairs etc. -- move through their own market cycle from recession to better times." Drewry said these changes will oblige operators to refocus their budgets as costs over the last two to three years have been largely favourable and controllable. The consultant estimated that VLCC operating costs could rise to $ 11,000 a day by the year 2000, from around $ 9,500 in 1996, while Suezmax vessel expenses move above $ 8,000 a day from less than $ 7,000 over the same period. Similar increases of about $ 1,000 a day in costs were forecast for Aframax tankers to more than $ 7,000 a day and for product carriers to above $ 6,000 a day by the year 2000. Bulk carrier operating costs were forecast to grow by slightly smaller margins to nearly $ 6,500 a day for Capesize vessels, close to $ 5,500 for Panamaxes and more than $ 4,500 for Handysize carriers.
Drewry said foreseeable wage rises in key crew supply areas such as India and the Philippines were currently around 4 % to 5 % a year. But it added: "There are, however, longer term upside risk elements -- including seafarer shortages and any failure of major supply sources to achieve Standards of Training, Certification and Watchkeeping (STCW) 'white list' status."
Extensive amendments to the 1978 international convention on STCW and the 1995 STCW Code entered force on February 1, 1997. They require ship operators ensure seafarers have attained a series of crew training and competency requirements. Drewry said excess capacity in hull and machinery insurance, which was still pushing premium levels down, was likely to end soon. "The consensus looks to be moving to the idea of higher hull premiums within six to 18 months." Increasing liability claims in the protection and indemnity (P&I) cargo insurance sector were also likely to push up premiums, Drewry said. Current high workload levels for ship-repairers could also to lead to a strengthening in rates sought by yards, Drewry added.