Kaiji Press recently asked for the projections of the leading overseas shipmanagement companies on ship-related expenses (ship costs). There is concern among the companies interviewed that the shortage in ship officers prevails in the market, so the seafarer costs, a major element of the ship costs, will further rise owing to the presence of an upward pressure in the seafarer salaries.
However, many were of the opinion that the increase will not be as drastic as what was witnessed prior to the onset of the economic/financial crisis. With regard to the ship repair and lubricating oil costs, it would be difficult to make any forecasts in this area owing to the presence of variable factors, but those interviewed generally predicted that the ship costs will gradually climb henceforth.
With regard to the wages, which account for a large chunk of the seafarer costs, officials from foreign shipmanagement firms claimed the following: "The level of wages of officers slightly stabilized in the past 10-12 months, but are likely to gradually increase again in the future," and "The demand for excellent, experienced and highly motivated ship officers will always be high. The compensation package of this type of seafarers will probably have a premium." These statements indicate that the operators are now fully realizing the upward pressure on the wages of officers.
However, operators claimed that, "The increase in wages will probably not be as marked as the surge experienced in the second half of 2007 and in 2008," pointing out that it is possible the wages will slowly increase, but not as sharp as was seen in the past, a phenomenon that was primarily caused by the drastic expansion in the fleet scale and the uncertainty over the shortage in the supply of seafarers.
Further, an official said that, "In particular, the seafarer markets in India, China, the Philippines and Indonesia will continue to suffer from an imbalanced supply-demand status. This is mainly attributable to the fact that a large number of shipowners who used to deploy European ship officers have diverted to Asian seamen in order to save on costs." Consequently, it is projected that that wages of seafarers will continue to rise as a result of the ballooning demand for seafarers, particularly those from the Asian region.
Aside from the above, there were also those who opined that, "There will also be ship types that will have available seafarers due to the mooring of vessels." However, if the moored containerships and other vessels were to increasingly be released, it seems that there will be resurgence in demand for ship types which had temporary seafarer demand alleviation brought about by the adjustment in ship bottoms supply during the recession. And it will likely lead to an increase in wages.
Ship repair costs significantly plunged in China and other countries starting around the end of 2008 due to the loosening supply-demand balance for ship repair yards. With regard to future projections, there were companies that expect the costs to evolve in a stable manner, but there were also those who stressed that, "If the release of moored ships were to advance, the demand for ship repairs will become high again, but the supply capability of yards will probably not grow. There are already cases of difficulty in securing space on ship repair yards as a result of the release of moored containerships. Now it is possible that this would lead to a sharp rise in costs (due to the tightening supply-demand balance)." Aside from the supply-demand balance of ship repair yards, the ship repair costs are also swayed by the prices of materials needed in ship repair. In particular, there were officials who predicted that the ship repair costs would climb due to the soaring prices of steel materials in the dry-docking works where major ship repairs are done.
The prices of lubricating oil sharply rose in 2008 in light of the skyrocketing prices of crude oil in the market. Thereafter, however, the prices reverted to a downward trend and have been hovering in a stable level ever since. It is difficult to make long-term forecasts on the prices of lubricants owing to several variables at play, such as the prices of crude oil and additives. However, officials from the companies in the study had the following to say about the prices of lubricating oil: "The prices are being modified upward every quarter," "The prices had been stable up to now, but oil companies are proposing another hike." With this, there are many who envision a surge in prices, claiming that the prices will gradually increase in the next 1-2 years.
Kaiji Press obtained the projections on ship costs of shipmanagement companies, comprising V.Ships, Anglo-Eastern Wilhelmsen, Bernhard Schulte Shipmanagement, Wallem, Fleet Management, Columbia Shipmanagement, Torm, Executive Ship Management and ISHIMA.