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Ship Management : Tuesday 3rd October

15.15 - 15.45 Dirk Fry - Columbia Shipmanagement Ltd


Shipmanagement Fees - Why aren't we being paid more?

 

20 Years Ago - Today

Shipmanagement Requirements - Shipmanagement Fees

I. What is a Shipmanagement Fee?

• Comprehensive Technical service

• Comprehensive Crewing service

• Complete Office support as well as

- Claims handling

- Office communication traffic management etc

• Full accounting service ISM Code

- Implementation

- Certification

• Amount to cover administration costs (overheads) of shipmanagement company

• Profit element

II. Types of Shipmanagement Fees

• Type A - Shipmanagement Fee by Agreement

• Type B - Fee and lumpsum agreement

• Type C - Percentage of vessel's charter income agreement

• Type D - Management fee/budget performance agreement

• Type E - Basic fee & payments for additional services agreement

Chartering Fees - Vessel Costs, accepted by everybody

III. Requirements 20 years ago/today

Part 1 - International Regulations

  20 Years Ago Today
ISM Code   Standard
Port State Control Occasionally Standard
Flag State Inspections Occasionally Standard
Equasis   Standard

 

III. Requirements 20 years ago/today

Part 2 - Charterers' Requirements

  20 Years Ago Today
Vetting Requirements No Standard
CDI Inspections No Standard

 

III. Requirements 20 years ago/today

Part 3 - Additional Services required by the Client

  20 Years Ago Today
Monthly Accounts No Standard
Future Forecasts Few Standard
Adhering to different Quality Systems No Standard
Claims/Insurance Services (Including statistics, root cause investigations, prevention) No Standard
Vessel Registration / Flag Administration Few Standard
Newbuilding Guarantee Claims handling Few Standard

 

IV. Everybody talks about quality - but nobody wants to pay for it

• Better Quality Services

• Better Human Resources

- training of existing human resources

- new highly qualifies individuals

- increased demand for University graduates

• Higher personnel Costs

• Investment in state of the art IT systems

• Vessel Inspections prior to taking over the Management

 

V. Development of Shipmanagement Fees

300,000cbft Reefer Vessel
Cost items in % of total running costs
1992 2000
Crewing 36% 36%
Victualling incl in crewing 3%
Equipment 6% 12%
Luboil 7% 8%
Repairs 25% 21%
General 4% 4%
Insurance 15% 9%
Management fees 7% 7%
Total Running Costs 100% 100%
Overall increase in Total Running Costs = 20%

 

V. Development of Shipmanagement Fees

Handysize Bulkcarrier blt 1985
Cost items in % of total running costs
1990 2000
Crewing 47% 46%
Victualling 4% 3%
Equipment 6% 8%
Luboil 5% 5%
General 3% 3%
Insurance 14% 10%
Management fees 11% 11%
Total Running Costs 100% 100%
Overall increase in Total Running Costs 10%

 

VI. Development of Shipmanagement Fees

• Today Shipmanagement Fees in real terms are lower than ten years ago taking into account costs increases and inflation rates

• Pressure on vessel earnings and high capital costs force Shipowners to look at costs, especially the Shipmanagement Fees

VII. Conclusion

• Negotiations for shipmanagement fees will remain an uphill struggle caused by strong competition in the shipmanagement market

• Owners to realize the quality of services provided by high quality 3rd party shipmanagement companies

• Charterers to appreciate high quality tonnage, being reflected in higher charter rates