Vessel operating costs rose in 2020 at their fastest pace in
over a decade, according to a new analysis from the global shipping consultancy
Drewry. They attribute the sharp increases to the expenses of higher insurance
premiums and COVID-19 related expenses, while forecasting that ship operating
costs will moderate beginning in 2021.
“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.”
Detailed in the latest Ship Operating Costs Annual Review
and Forecast 2020/21 report published Drewry, they estimated a 4.5 percent jump
in 2020 average daily operating costs across the 47 different ship types and
sizes. This compares with underlying increases of 2 and 2.5 percent in 2018 and
2019. Prior to that Drewry reports that
opex spending stagnated or contracted by 8 percent in the three years between
2015 and 2017.
Manning costs were particularly impacted they report,
climbing 6.2 percent in 2020 compared to underlying rises of 1.3 percent, while
hull and machinery (H&M) and protection and indemnity (P&I) cover costs
jumped 4.5 percent on a hardening insurance market. Meanwhile, disruption to
supplies and labor availability caused by the pandemic pushed stores &
spares and repair & maintenance cost inflation to around 3 percent, while
dry-docking spend leaped 5 percent.
The rise in costs was broad-based Drewry reports across all
the main cargo carrying sectors for the third consecutive year, as all ship
types took the hit from COVID-19. The latest assessments include vessels in the
container, chemical, dry bulk, oil tanker, LNG, LPG, general cargo, reefer,
roro and car carriers’ sectors.
Looking ahead, “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.”
While they conclude that trading conditions are expected to
remain challenging, dominated by COVID-19 induced trade uncertainties and
continued overcapacity in many sectors, Drewry forecast that costs are expected
to moderate beginning in 2021 as pandemic related spend unwinds.