Tanker owners and operators are expected to be hit once more with cost inflation as the service and insurance sectors emerge from their own recent recessions.
This is the prediction of Drewry Shipping Consultants Ltd., London, which said operators will have to refocus their budgets, having experienced relatively favorable costs during the last 2-3 years.
The analyst said total operating costs for a very large crude carrier-more than 280,000 dwt-are now around $9,500/day but will reach to more than $11,000/day in 2000.
Similarly, a Suezmax tanker of around 140,000 dwt will cost more than $8,000/day to operate in 2000 compared with $7,000/day now.
Operating costs for an Aframax tanker of 80,000-110,000 dwt will rise to more than $7,000/day in 2000 from about $6,300/day now, while costs for a 35,000-45,000 dwt products tanker will rise to more than $6,000/day from $5,500/day.
Shipyards have been busy, but newbuilding prices have not soared, said Drewry. Manning costs have increased, but insurance premiums have fallen with surplus capacity, and fuel costs have been stable.
The insurance market in particular is still characterized by "...competition for business still forcing premium levels down. The likelihood, however, is that this sector has hit or is close to its nadir, and an inevitable market self-correction is imminent," the consultant said.
"The consensus looks to be moving to the idea of higher hull premiums within 6-18 months," Drewry predicted.
Recent renewals of protection and indemnity coverage by tanker owners show increases of up to 7.5%, said Drewry, which is in line with rises since 1994 rather than the steep rises in the early 1990s. "Looking further forward," said Drewry, "there must be an expectation that cost levels will increase. The reason can be summed up in one word: liabilities.
"The insured risks are primarily in respect of claims involving third parties. These claims tend to become increasingly litigious-and there appear to be few market forces able to keep legal costs stable, let alone force them down-while awards are likely to become higher."
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
