Vessel operating costs rose at the fastest pace in over a decade in 2020, due to the impacts of COVID-19, according to Drewry’s Ship Operating Costs Annual Report.
The overall rise in opex across the whole year was 4.5%, and was the third year in succession that costs had risen in all sectors.
Martin Dixon, Drewry’s Head of Research Products, said it was the fastest paced growth seen in over a decade and described it as a “significant increase”.
Manning costs increased sharply in 2020 – 6.2% higher than in 2019 and the highest for 12 years – driven by high repatriation costs due to the pandemic, with higher costs expected to continue this year due to the ongoing situation with the pandemic.
Marine insurance is another area which has seen a big increase – 4% higher than in 2019 – due to the hardening of the insurance market for P&I as it responds to losses, and with higher premiums expected for future years, an annual increase of 2.6% is expected up to the forecast end of 2025.
Stores and spares costs also rose sharply, by 3% on the previous year, driven by disruption in supplies logistics, due to the pandemic. However, there was some positivity with underlying lube costs falling by 2% in 2020 driven by lower crude oil prices and competition between suppliers.
The pandemic also impacted the repair and maintenance sector, with R & M costs accelerating by an above average 3% in 2020, driven by a repair backlog at yards, which were forced to shut during the pandemic. These rising costs are expected to reduce as COVID-0-19 starts to unwind.
Management and administration costs saw a 2.3% – well above the normal increase – driven by increasing safety and environmental compliance spend, with cost reduction expected to be a key focus for vessel owners this year.
Mr Dixon said although opex costs had accelerated across all the main cargo carrying sectors in 2020, they were expected to soften this year if COVID-19 started to recede. The biggest risk to vessel opex, he said, was the fast-rising insurance costs, which are expected to accelerate.
However, operating cost increases will remain below inflation for the next five years.