Counting the Costs: How Operating Expenses Shape Ship Value

My name is Davide Ramponi, I’m 20 years old and currently training as a shipping agent in Hamburg. On my blog, I take you with me into the fascinating world of shipping. I share what I learn, what I observe, and the skills I build on my path to becoming an expert in the field of Sale and Purchase – the trade with ships.

In the Sale and Purchase market, numbers are everything. Gross tonnage, engine power, age, fuel type—all of these are critical figures. But there's another number that’s just as important, though it doesn’t appear on the hull or in the class certificate: operating costs.

The cost of running a vessel—day in, day out—doesn’t just affect profitability. It also has a direct and growing influence on the market value of the ship. Whether you’re buying, selling, or simply trying to improve performance, understanding the true cost of operation is a must.

In this post, we’ll look at what operating costs really include, how they impact asset value, and how to manage them smartly. We'll also explore why cost transparency matters for both owners and buyers—and how clever strategies can turn numbers into a competitive edge.

What Are Operating Costs? Breaking Down the Basics

Operating costs (OPEX) refer to all the expenses required to keep a ship running safely, legally, and efficiently—regardless of whether it’s earning revenue on a voyage.

Unlike capital expenditures (CapEx), which involve one-time investments like buying a ship or installing a scrubber, OPEX covers the recurring, daily expenses of ship operation.

Let’s look at the most important categories:

⚓ 1. Crew Costs

Often the largest slice of the OPEX pie, this includes:

• Wages and social contributions

• Travel and repatriation

• Training, medicals, and certification

• Food, uniform, internet, and welfare onboard

These costs vary based on flag, vessel type, manning level, and crew nationality.

🛠️ 2. *Maintenance and Repairs

This includes both routine maintenance and unplanned repairs:

• Engine and machinery servicing

• Replacement parts and tools

• Hull cleaning and painting

• Dry-docking (spread over time in OPEX calculations)

🧠 Good maintenance = fewer surprises. Poor maintenance = bigger bills later.

⚙️ 3. Insurance

Every ship needs:

• Hull & Machinery (H&M) cover for physical damage

• Protection & Indemnity (P&I) for third-party liabilities

• War risk, loss of hire, or cyber insurance depending on trading area

Premiums vary by ship age, class, trade history, and claims record.

🔧 4. Lubricants, Stores, and Supplies

These may seem minor—but add up fast:

• Lube oil and greases

• Safety gear, tools, mooring ropes

• Cleaning products and basic provisions

🖥️ 5. Administrative Expenses

These cover:

• Communication (e.g. satellite internet)

• Compliance software and subscriptions

• Agency fees, management charges, legal services

How Operating Costs Affect a Ship’s Market Value

When buyers evaluate a vessel, they look beyond the age and DWT. They want to know: how much does it cost to run this ship? Because a ship with high OPEX:

• Eats into voyage profits

• Is harder to charter

• Becomes less attractive in low markets

Here’s how it plays out in practice.

📉 1. Higher OPEX = Lower Net Earnings = Lower Asset Value

If two similar ships are earning $14,000/day but one costs $6,000/day to operate and the other $7,500/day, the first ship nets 25% more profit.

💡 That higher margin translates to higher resale potential—even if the ship is slightly older or less fuel-efficient.

🧮 2. OPEX Affects ROI and Financing

Lenders and investors want to know when and how a vessel will pay itself off. High daily costs delay breakeven points and reduce long-term returns—resulting in lower loan amounts or higher interest rates.

⚠️ 3. Hidden Costs Kill Deals

If a ship’s operating costs are opaque, inconsistent, or poorly documented, buyers assume the worst—and lower their bids accordingly. Transparency builds trust and valuation confidence.

Tips for Optimising Operating Costs Without Compromising Safety

Cutting costs isn’t about slashing budgets—it's about improving efficiency and visibility. Here’s how experienced managers do it:

🧠 1. Invest in Preventive Maintenance

Fixing things before they fail is always cheaper. Use digital tools like Planned Maintenance Systems (PMS) to:

• Track service intervals

• Order parts in advance

• Plan maintenance during port stays or lay-ups

⚓ 2. Optimise Crewing

• Use mixed-nationality crews to balance cost and experience

• Cross-train key officers and engineers

• Review rotation patterns to reduce travel costs

📌 Note: Don’t sacrifice safety or compliance—always follow flag and STCW requirements.

📊 3. Benchmark and Monitor Costs

Track consumption patterns across:

• Lube oil

• Spare parts

• Stores

Then compare them against fleet averages or third-party data. Spot the outliers and investigate the reasons.

🛡️ 4. Review Insurance Regularly

Insurance markets change. Reassess your coverage annually:

• Can you bundle policies?

• Do you qualify for claims-free discounts?

• Are you over- or under-insured?

A smarter insurance setup can save tens of thousands per year.

🧾 5. Renegotiate Supply and Service Contracts

• Audit your vendors every year

• Standardise stores across the fleet

• Use framework agreements for bulk discounts

Even small savings per item lead to big gains over a year.

Clever Management Strategies in Action

Here are real-world examples of how operational excellence boosted ship value and reduced cost:

✅ Case 1: $200,000 Saved on Stores

A fleet manager reviewed store consumption logs and discovered high variance across sister vessels. By standardising orders and introducing monthly usage limits, they cut annual store spend by over $200,000 across 10 ships.

✅ Case 2: Better Maintenance = Higher Resale Value

A 14-year-old tanker underwent consistent preventive maintenance using digital checklists and real-time monitoring. When it came on the S&P market, the buyer was impressed by the transparency and condition—and paid 10% above the average market rate for similar tonnage.

✅ Case 3: Transparent Costing Wins Buyer Confidence

A feeder ship owner selling a 2007-built vessel included detailed OPEX reports from the last five years in the data room. The buyer was confident in the numbers and closed the deal quickly without major price negotiations.

Why Transparency Matters in the Sale & Purchase Market

When selling a ship, many owners focus on technical specs and recent earnings. But sharing operating costs builds credibility.

Here’s what buyers love to see:

• Breakdown of daily OPEX by category

• Trend lines showing cost evolution over 3–5 years

• Notes on optimisation efforts or unusual spikes

• Crew turnover rates, maintenance schedules, and oil analysis reports

🧠 Think like a buyer: Would you pay more for a ship that shows consistent cost control and operational discipline? Probably yes.

Conclusion: Operating Costs Are Part of a Ship’s DNA

In the competitive world of shipping, a vessel’s value isn’t just about its age or tonnage. It’s about how it performs—and what it costs to keep it performing.

⚓ Operating costs shape profitability, resale potential, and even charter attractiveness

📉 High OPEX drags down margins and reduces ship value—especially in soft markets

📈 Smart management, benchmarking, and transparency lead to real savings and higher valuation

🧾 Buyers reward owners who document and manage costs clearly and professionally

Do you track your vessel’s OPEX in detail? Have you used cost optimisation to improve performance or resale outcomes?

Let me know your thoughts in the comments—I’d love to hear how you manage the numbers behind the ship!

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