Vessels operating costs to rise in 2017
The economic recession that has hit Nigeria in recent times is already manifesting on the flow of cargoes into the country, as it recorded sharp drop in container traffic in the third quarter 2016.
Specifically, Drewry, a maritime research, consulting and financial advisor, in its latest report said that container shipping dropped severely as Asia to Nigeria and other West African container traffic fell by 19 per cent during the period.
This is coming as shipping companies are on the verge of reviewing their balance sheets, with indications that vessel operating costs would rise from 2016 to 2017, with repairs, maintenance and spares recording the most significant increase.
Drewry noted that the container flows into the region are reflecting the fact that economic slowdown is hitting the largest economies the hardest.
“After nine months of 2016, southbound shipments from Asia to West Africa were down by 11 per cent. Traditionally one of the strongest periods of the year, the third quarter saw volumes slide by 19 per cent year-on-year, the worst decline on records dating back to 2012 and the seventh consecutive quarter with a negative comparison,” it stated.
“The end-year 2016 deficit will almost certainly beat the 10 per cent drop in annual volumes experienced last year,” the shipping consultancy said, adding that the average monthly Asia to West Africa volume over the past 12 months up to September 2016 fell to 101,700 TEU, 11.6 per cent down on the same month last year.
“The speed of the decline is accelerating and indicates a trade decrease of around 12-14 per cent come end-December,” it stated.Shipping consultant Moore Stephens, in a separate report said vessel operating costs are expected to rise by 1.9 per cent in 2016, and by 2.5 per cent in 2017, while the cost of repairs and maintenance is expected to grow by 1.7 per cent in 2016 and by 1.9 per cent in 2017.
Besides, on spares could go up by 1.7 per cent in 2016 and by 1.8 per cent in 2017.This has already begun to impact on the rates of freight to Nigeria, with many shipping firms increasing rates to West Africa.
Moore Stephens said that the predicted overall cost increases for 2016 were highest in the container ship sector, where they averaged 3.3 per cent against the overall survey increase of 1.9 per cent.
Container ships also headed the expected cost increases for 2017, at 3.4 per cent compared to the overall survey average of 2.5 per cent. Tankers featured in second place for both years at 2.5 per cent for 2016 and 2.9 per cent for 2017.
Analysts believed that greater discrepancy will emerge between operating costs and freight rates, while owners will manage to make ends meet, but barely.
“Operating costs will rise for technical expenses such as maintenance and repair held over from previous years, while the cost of ballast water treatment plant will have to be taken into consideration in 2017 dry docking budgets,” a source said.
Others opined that with the Ballast Water Management (BWM) Convention, which aims to prevent the spread of harmful aquatic organism across regions, coming into force in 2017, dry docking costs will increase significantly, depending on the type and size of ship involved.