Making tanker OPEX count

So far this year, the managers of the world’s fleet of clean and dirty tankers have spent approximately $4.5bn on operating costs (OPEX). That’s everything from crew, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs and management fees, but doesn’t include voyage costs such as fuel, port and agency fees, commissions or canal dues. We’ve come up with this figure by taking the 4,033 strong fleet of active tankers (>50,000-dwt) from the MarineTraffic vessel database and using the quarterly OPEX assessments published by the Baltic Exchange and its panel of ship managers. The daily OPEX for a tanker for Q2 is estimated at $6,235.

tanker opex

Source Baltic Exchange

It’s a huge bill, and one that every ship manager constantly assesses and seeks to reduce without compromising safety or environmental performance. 

At a time of poor earnings – this August average daily hire rates for Very Large Crude Carriers (VLCCs) have languished at around $9,800 – the pressure is on hard-pressed operations departments to come up with greater savings.

VLCC Timecharter Equivalent earnings 1 Jan 2020 – 24 August 2020 (Source: Baltic Exchange)

A typical Aframax tanker will have 20 crew onboard and the largest component of tanker OPEX costs will be the cost of the crew. That’s not only their wages, but the cost of feeding them, providing them with personal safety kits, medical costs, training and getting them on and off the ships and back home again. Analysis of this year’s OPEX shows that crew costs on tankers are up 8% this year already and are now at $3,890 per day. 

This rise has been driven by the impact of the COVID-19. In normal times, a crew member would serve his or her time at sea, usually around 6-9 months but certainly no more than 12 months, and then return home for several months before returning for their next contract. 

But since March, far fewer crew changes have been able to take place. Port authorities and governments banned or restricted them as part of their efforts to combat COVID-19. Despite some successful crew changes, there are still hundreds of thousands of seafarers still working at sea who have not been home for over a year. It’s an issue we highlighted in March when MarineTraffic threw its weight behind a campaign to designate seafarers as key workers. 

For those ship managers who have managed to conduct crew changes, it has been a complex and costly business. Airlines have been downsizing or even ceasing operations. Weeks of self-isolation in hotels, travel from the airport to the seafarer’s home, ship deviation costs, chartering special flights, medical tests and endless paperwork have all added to the costs. 

Shipping companies have long been extremely lean businesses. Headcounts are kept low, purchasing strategies are sophisticated and there is usually little fat on the bone. Whilst vessel earnings are volatile, hitting extreme highs and lows, shipping companies need to cope with poor markets. To do this, they constantly look at ways in which to pare back costs. Digital innovation is part of this drive and it is where companies have focused much of their efforts. Artificial intelligence, sophisticated algorithms, multiple data sources and advanced diagnostics all play their part. Underpinning much of this drive is access to comprehensive and reliable vessel position data. This is where MarineTraffic has been partnering with countless organisations to help them extract greater value from their data and improve their operations. From port-call optimisation through to routing, MarineTraffic data provides a solid platform to help shipping companies get smarter and leaner.

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Bill Lines
Bill is a director of London based maritime public relations firm Navigate PR and has been working with MarineTraffic since 2013.