Sanjay Shesh, managing director at Crowley Accord Maritime, outlines the savings that can be made from taking off hire ships into cold lay-up.
With the economic downturn affecting the shipping industry, we see bulk carriers being worst affected. With charter rates for panamax bulkers going below $3,000 to $4,000 a day and operating costs soaring high, the present day shipowner is suffering heavy financial losses. Selling vessels for scrap and to other potential buyers is not making sense as scrap rates have also fallen. Our forecasts show that the bulk trade may only recover by late 2018. With this scenario cold lay-up of vessels appears to be the best option.
In today’s market, the average daily costs for operating a supramax bulker is around $6,000 and the charter rate is around $2,500, this equates to a loss of some $3,500 a day when the vessel is hired and a loss of $6,000 a day during off-hire time. Here is where cold lay-up helps. Cutting crew costs to a skeleton staff, no fuel oil and lube oil expenses, no sludge generation, reduced insurance premiums and no consumption of spares and stores. Thereby reducing operating expenses to less than $1,000 a day, which is a straight saving of $5,000 a day, or more than $1.8m a year.
Crowley Accord’s lay-up services are finding that owners are using the lay-up time for repairs, and many vessels have advanced electronics which require certain operating conditions in terms of temperature and humidity control. For these vessels during lay-up, humidifiers are installed. Similar preparation needs to be made for blanking the sea chests to prevent internal marine growth. Engines are also run for a short time and small modifications made to the seawater pipelines.
The case for cold lay-ups has rarely been so strong. Just witness the comments by Angeliki Frangou, chairman and ceo of Navios Maritime Holdings, earlier this week. She noted how dry bulk was “as difficult a market as ever existed in shipping”. Lay-ups can mitigate this difficulty.