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ISM's shipowners' costs calculations. General info

Shipowners’ costs are calculated according to the market participants’ estimates, as well as permanent monitoring of port charges, prices for fuel, lubs, analysis of crewing, survey and other services. The model used in calculations is based on the principle of a strong regional and age differentiation that takes into account the value and specifics of maintenance and operation of vessels of a certain age in a particular basin, region or subregion.

Defining the DWT and the type of a vessel

Weight of a cargo lot allows to define the volume of transported cargo according to its stowage-factor. Based on this data, the value and the minimum required DWCC and DWT of the vessel, its class and type (sea-going, sea-river ship) are determined.

Time management en route and in ports

Three possible states of the vessel are taken into account for voyage time calculation:

- laden passage;

- loading and discharging in ports and delays while passing the canals;

- ballast passage.

Calculation model assumes that vessel is operating on a certain route during the year. Each trip is characterized by the duration of ballast and laden passages, the time spent on loading and discharging in ports as well as the idle time in canals. So, these parameters satisfy the following relation:

where - time spent in ports and canals, - laden shipping time, - time spent in ballast, - number of days when the vessel is unavailable (this value is taken as 5 days on default, assuming that the ship will stay at docks for about 25 days during 5 years).

The duration of laden passage is defined as the ratio of the distance between the ports (by sea) to the speed of the laden vessel of a certain type. Moreover, the received value is added to a certain percentage of days of adverse weather (as weather conditions are normal, this value is 5-10% of the estimated voyage time). Thus:

where - distance between the ports, - speed of this type of vessel, - percentage of days of adverse weather conditions.

Ballast time is determined according to the ballast passage factor - a dimensionless quantity that is equal to 0 in the absence of ballast passage and to 1 with complete ballast passage. Thus, time spent in ballast is calculated as follows:

where - speed of this type of vessel while being in ballast, - ballast passage factor, - time spent in port is calculated according to the loading/unloading rates and conditions typical of a certain cargo. Besides, in some cases includes idle time of a vessel waiting for icebreaker assistance and port delays.

Appliance of a certain condition is equivalent to multiplication of loading/unloading speed by the factor . Considering that there are 52 weeks in one year, it may be calculated as follows:

where - average number of holidays per year in a certain country or region, and factors are determined in accordance with the terms:

- for SHINC: d = 0, h = 0;

- for SHEX: d = 1,375 (means 1 day + 9 hours), h = 1

- for SSHEX: d = 2,125 (means 2 days + 3 hours), h = 1.

As a result, time spent in port is adjusted by the factor 1 under SHINC conditions, by 1.2966 under SHEX, by 1.5051 under SSHEX.

The total time spent in port is calculated as follows:

Where - cargo lot, and - loading/unloading speed in the departure and destination ports respectively, - idle time of a vessel waiting for icebreaker assistance or another idle time that is not included in the laytime.

The time required for crossing the canal is determined as the sum of time delays on each canal passed:

Capital costs

Calculation of annual depreciation is based on the straight accounting method; the period of useful age of the vessel is taken for 25 years (for coasters - 30 years), the primary cost corresponds to the rental prices of a vessel per year according to its year of construction. The residual value is calculated considering scrapping prices at the beginning of the current year. Residual value is not adjusted on default. It should be noted that calculated capital costs do not assume any credit obligations of shipowners (on default, vessel purchase was made at their own expense).

Voyage costs

Bunker prices and expenses. The prices for marine fuel (IFO 380 (HS / LS), IFO 180 (HS / LS), MGO (reg., 0.1%, 10 ppm) in all major ports are being collected every week.

Considering that fuel costs depend on the port of bunkering, calculation model assumes that the price for each type of fuel is defined as the weighted average price in certain bunkering places of the world. The weighting factors are calculated as per the relation:

where - distance (by sea) from the port of loading to - bunkering place, - route extension. Thus, the cost of marine fuel that is on sale in the port of loading or next to it has a greater impact on the estimated fuel price. At the same time, the ports being located far from the port of loading have almost no influence on this value. For example, when cargo is delivered from Rotterdam to Diliskelesi, the biggest weighting factor is applied to the cost of the fuel in Rotterdam, to a lesser extent - around Antwerp, even smaller factor – to the fuel prices in Spain and France. In this case, weighting factors of the cost of fuel in Piraeus or Augusta are minimal, while those of prices in Odessa or in countries of the Persian Gulf are vanished.

Weighted average price for each type of fuel is determined from the relation:

Where - cost of fuel in a certain bunkering place. Prices in all the places are being summed up.

Daily bunker costs at sea are defined as the sum of expenses on IFO and MGO:

,

where k - daily fuel consumption. It should be noted that the level of fuel oil and diesel fuel consumption for the ship at a certain speed during cargo or ballast passages will be given in the notes to each table due to a wide range of the values for same dwt vessels.

Similarly to the above, the daily fuel expense is calculated for the period when the ship is in port or waiting for canal passing:

Thus, fuel costs for the whole trip are calculated as follows:

Disbursements and canal charges are provided by the agent companies according to the current tariffs. The expenses for towing services and agency fees are included in disbursements.

Brokerage commission is 2.5% on default.

Running/operating costs

Calculation of shipowners’ running costs is based on dual accounting method. ISM experts analyze crewing, survey, maintenance, insurance and other services simultaneously with surveying the shipowners that operate in a certain region. This method allows to evaluate the average operating costs for different types of vessels in each region.

Maintenance costs are calculated taking into account the five-year cycle of vessel operation. It is assumed that during the 5 years of operations the shipowner will incur expenses for 3 annual surveys, 1 intermediate one and another one - for class renewal/special survey. Only the costs of extra additional class endorsements are considered in terms of 1 year of vessel operation. The expenses for maintenance in dry dock during the special survey are taken into account as once in 5 years. Drydocking expenses during the intermediate survey are assumed for ships being older than 15 years, while in-water survey expenses are assumed for newer fleet. It should be noted that the cost of repairing vessels of the same age and of the same size can vary significantly in the same docks due to a number of factors (condition of the vessel, type of operation, shipowner’s willingness to invest in a full repair or pay the minimum price with the prospect of a soon scrapping, etc.).

Time-charter equivalent and profitability

Time-charter equivalent is calculated as follows:

Profitability level is defined as the ratio of the overall income to the total voyage costs:

Where - sum of voyage expenses that consists of capital, running/operating and voyage costs. These values are determined by the sum of the following items:

- - Depreciation (it is assumed by default that vessel was purchased for own assets only. Thus, possible loan repayment + interest rate are not taken into account);

- - Port charges, canal dues, bunker cost, brokerage;

- - Insurance P&I + war risk, H&M, crewing costs , victualling, oil, water, other types of supply, routine maintenance, communication on board, the cost of docking and class renewal/update, flag registration, etc.

Addendum

All fleet specifications as well as the values of capital, operating and voyage costs are fixed for the tonnage of 3000 DWCC, 5000 DWCC, 7000 DWCC, 10000 DWCC, 15000 DWCC, 25000 DWCC, 50000 DWCC, 70000 DWCC, 120000 DWCC, 160000 DWCC by approximating the collected values with the help of characteristic figures. During further calculations, values of the required figures are defined by using linear interpolation of the data for the above mentioned tonnage values.

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