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International accountant and shipping consultant Moore Stephens says total annual operating costs in the shipping industry increased by an average 2.2% in 2010. This compares with the 2.0% average fall in costs recorded for the previous year, which was the first time since 2002 that operating costs had fallen. All cost categories showed an overall increase this time, with the exception of stores and insurance – with the latter falling by 4.7% overall.

The findings are set out in OpCost 2011, Moore Stephens’ unique ship operating costs benchmarking tool, which reveals that all individual categories of vessel covered by the research, with the exception of handy-size product tankers, experienced an increase in total operating costs in 2010, the financial year covered by the survey. Costs for the three main sectors covered – bulkers, tankers and container ships – were all up. The bulker index increased by 5 points (or 2.9%) on a year-on-year basis, while the tanker index witnessed a two index point (1.1%) rise. Meanwhile, the container ship index (with a 2002 base year, as opposed to 2000 for the other two vessel classes) was up three index points, or 1.9%. The corresponding figures in last year’s OpCost report showed falls in the bulker, tanker and container ship indexes of 1, 5 and 13 points respectively.

There was a 3.2% overall increase in 2010 crew costs compared to the 2009 figure, which itself represented the most moderate increase for a number of years. In 2008, the report revealed a 21% increase in this category. Tankers overall experienced increases in crew costs of 2.7% on average, compared to 2.5% in 2009. For bulkers, meanwhile, the overall increase in crew costs was 4.0%, while for container ships it was 2.9%.

For repairs and maintenance, there was an overall increase in costs of 4.5%, compared to the 11.3% decrease recorded for 2009. The biggest increase here was the 8.0% recorded in the container ship category. For bulkers the increase was 7.6%, and for tankers just 0.8%. There were variations in the cost movements experienced within vessel categories. Whereas operators of handysize bulkers spent an average of 12.0% more on repairs and maintenance in 2010, those running capsizes recorded an average increase of just 3.7%. And whereas the average increase in repair and maintenance costs for panamax tankers was 8.4%, operators of aframaxes actually spent 1.3% less than in 2009. In the container vessel sector, meanwhile, increased repair and maintenance spend was fairly consistent across all box ship tonnage sizes covered by the report.

For the second successive year, OpCost reveals a fall in the level of spending on stores – down by 1.0%. Overall, expenditure in this regard was actually up in the bulker sector, by 1.1%, but down in the tanker trades (by 3.4%) and in the container ship market (also by 3.4%).

The insurance category showed the biggest movement in terms of costs – down overall by an average of 4.7% across all vessel types in 2010. For tankers, the insurance spend was down by 7.9%, for container ships by 3.8%, and for bulkers by 2.9%. Panamax bulkers were the only individual class of ship to spend more on insurance in 2010, while the likes of small chemical tankers (10.4%), VLCCs (9.8%) and aframax tankers (9.0%) spent considerably less.

Moore Stephens partner Richard Greiner says: “The movement in operating costs during 2010 is fairly consistent with what we might have expected, bearing in mind the big fall in costs in 2009 and the continuing economic downturn. The average overall increase in crew costs of 3.2%, up one% on the figure for 2009, is clearly a matter of continuing concern for owners and operators. But it is modest in comparison to some of the very significant increases recorded in this category in earlier years. The industry must continue to invest in personnel, and it is encouraging to see that it is not only doing so, but also doing so without suffering the huge surge in outgoings that was giving such a lopsided look to operating costs a couple of years ago.

“The 4.5% average increase in expenditure on repairs and maintenance compares with a decrease of more than 11% in 2009, but is significantly down on the 13%-plus increases recorded in both 2007 and 2008. It is also an indicator not only of increases in the costs of labour and raw materials, but of a continuing willingness on the part of the industry to pay for the upkeep of its ships which, with increasingly stringent national and international regulations coming into force covering the likes of corporate and environmental responsibility, is a prerequisite for the continuing ability to trade.

“Spending on stores was down in 2010. This is perhaps something of a surprise, since the category includes lube oils, the price of which continued to rise throughout 2010, along with the cost of the additives which go into its manufacture. But the more widespread fitting of Alpha-type lubricating systems, the fall-off in some areas of trade, and the resort by some to slow steaming, appear to have made their effect felt in this regard.

“Insurance costs were the big mover in this year’s report, with spending down by almost 5%. Conditions in the insurance market were more benign in 2010 than for a number of years. The general increases announced by the P&I clubs for 2011 are in most cases at their lowest levels for more than ten years, reflecting improved figures for 2010 and more optimistic forecasts for 2011 and 2012. The results of OpCost also point to a level of informed discernment in the commercial underwriting sector, with the likes of chemical tankers – notoriously ‘safe’ ships – paying over ten% less for their insurance in 2010 than in the previous year. Tighter regulation and stricter port state control should result in fewer accidents and, in an ideal world, will feed through to more favourable insurance rates.

“The global economic outlook remains both bleak and uncertain. Like other industries, shipping will both play a part in its recovery and suffer from its consequences. But the indications from OpCost 2011 are that operating costs are under a measure of control, which could prove crucial over the next couple of years.”