Operations

Covid-19 sees vessel operating costs rise at their fastest pace in over a decade

Vessel operating costs have risen at their fastest pace in over a decade this year, on higher insurance cover premiums and Covid-19 related expenses, according to new research carried in shipping consultancy Drewry’s Ship Operating Costs Annual Review and Forecast 2020/21 report.

Drewry estimates that average daily operating costs across the 47 different ship types and sizes covered in the report jumped 4.5% in 2020, compared to underlying increases of 2% and 2.5% respectively in the previous two years. This followed a period in which opex spending stagnated or contracted over three consecutive years by 8% in 2015-17.

Manning costs escalated due to disruption to crew repatriation arrangements

“Like many aspects of merchant shipping, vessel operating costs have been severely impacted by the Covid-19 pandemic,” said Drewry’s director of research products Martin Dixon. “Its effects cut opex spend through the first half of the year as economic lockdowns and social distancing restrictions closed dry-docking and repair yards, while owners reacted to the resultant trade downturn by postponing anything except essential spend. However, costs have jumped through the second half of the year as repair facilities reopened, unleashing pent-up demand, while manning costs escalated due to disruption to crew repatriation arrangements.”

Manning costs were particularly impacted, climbing 6.2% in 2020 compared to underlying rises of 1.3%, while hull and machinery (H&M) and protection and indemnity (P&I) cover costs jumped 4.5% on a hardening insurance market. Meanwhile, disruption to supplies and labour availability caused by the pandemic pushed stores and spares and repair and maintenance cost inflation to around 3%, while dry-docking spend leapt 5%.

“Ship operating costs are expected to moderate in 2021, as some one-off Covid-19 related costs unwind in response to containment responses, offsetting inflationary pressures elsewhere,” added Dixon. “Thereafter, we expect opex inflation to return to past trend, rising below the general rate of price inflation and so representing cost stagnation in real terms, although there will be variations by cost head.”

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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