Micawber’s Dilemma: part two

In my last article, I suggested that ways of looking at ship operating costs have not changed very much since the 1970s. If we cast our minds back thus far, we find that shipowners in the seventies were very much exercised by operating costs, and were going to considerable lengths to understand them.

I know a man who, as a junior officer brought ashore, was paid to calculate the cost of painting the elegant white stripe round the hull of each ship in his employer’s fleet. He announced that it cost them a hundred and odd thousand dollars a year – whereupon this practice was abruptly discontinued.

Staying with paint, it is from the same era – an era of alkyd paints, be it noted – that we derive the common wisdom of today that the cheapest colours to paint a ship are red antifouling and boot top, red decks, and black topsides. Aristotle Onassis, in the days of his pre-eminence, painted his big tankers white, with green decks, to show just how rich he was, because, in those days, the rust-concealing white paints used on the cruiseships of today had not been developed. It was, I think, BP, who sat down and calculated which colours were cheapest. The reason for the red antifouling is that the biocides are copper compounds, so you waste less pigment.

Why were the owners of the 1970s so interested in analysing the small details of operating cost? Because this was the time when the European owners first faced real competition, not just from the emerging Asian owners but from European and American owners using the open registers and employing lower cost crews. This was an era when operating costs in dollar terms could be, and often were, starkly different between owners, and those owners who failed to adapt efficiently found themselves driven out of business, with similar ships having operating costs that differed by as much as a thousand dollars a day and more.

The end of that struggle saw the definitive victory of cheap. The clever, hard working owners who employed expensive, hard working, clever crews lost out to the owners who employed cheap crews. Now, this had a consequence. The consequence was that people decided that there was no longer any point in carefully analysing operating costs. We’d all done that. We knew about it. We automated our stores inventory and ordering processes, with AMOS or one of its clones, and thought – “Job done!”

It is worth noting that ship operating costs have not changed very much in dollar terms since the end of the 1980s. Before we pat ourselves on the back for this achievement, we should note that global inflation has been low for quite a bit of that time, so pressure on crew pay has been moderate, and the cost of stores and spares has been efficiently held down by the widespread adoption of the sort of software and the sort of buying policies favoured by the professional shipmanagers.

The cost of oil, and thus not only the cost of fuel but of luboil and paint, is not a number that we can do much about, but we can give a tip of the hat in passing to B&W and their Alpha Lubricator, which has put an end to gratuitous cylinder oil consumption (you used to be able to tell whether a ship was owned or managed by the positions of the cylinder oil taps!) and a tip of the hat to the paint companies for weldable primers and ‘shipyard friendly’ epoxy paints, which have made it possible to have ships that really don’t need to rust.

The point which I am coming to is this – for the past 30 years, the ‘playing field’ in ship operating costs has been more or less level. There has not been pressure to reduce operating costs, for at least the following reasons:

There is precious little transparency in operating costs. Moore Stephens have made a good effort with their annual operating cost reviews, but many people suspect that people put in slightly high figures, in order to make their own numbers look good. In general “My operating costs are ‘x’ a day”, is up there with “I didn’t vote for that bastard, either” (the second great lie – “My cheque is in the post!” – has been overtaken by technology, and the third one is too obscene to mention here).

Thirty years ago I joked, rather unkindly, to a gathering of Hong Kong shipmanagers that their conversations could be summed up as, “Have you tried Burmese yet?”. There are no new sources of magically cheaper manning waiting to be tapped. No nation remains “uncrimped”!

The drive to reduce crew numbers has come to a halt. All attempts to get below “sixteen warm bodies plus a riding crew” on big ships seem to have been more or less abandoned. It is some years since the late John Newton, a man whose rise to fame began on the day when the chief engineer of the Queen of Bermuda was suddenly taken to hospital shortly before sailing, and the young John was just as suddenly the youngest chief engineer of a large passenger ship in history (and the Queen of Bermuda, 1933-67, was turbo-electric, quadruple screw, with two pressurised boiler rooms and a chief engineer’s writer whose sole task was to write up the four engine room log books) announced to me, with some glee, that his agents’ scrutiny of his competitors’ portage bills had revealed the interesting fact that competitor A’s claim to run their ships with a crew of 16 omitted the permanent presence of a riding squad of six.

Now, the point that I am coming to is that this is about to change, and rather few people are thinking about this as much as they should.

Part Three contains some actual numbers, but the maths won’t be that hard.