CAPITAL, VOYAGE AND OPERATING COST OF A SHIP

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CAPITAL COST-
It depends on mainly two things. First is
 How the ship is financed. If financed by loan, then it will depend on

  • Size of loan
  • Source of loan
  • Interest rate
  • Terms of loan
Final price of the ship will be; Final Price= Cash price + Interests= Cash price+ n*Installments

Second capital cost is 
Depreciation- Deprecation refers to two very different but related concepts. First is decline in value of assets and Second is allocation of the cost of tangible assets to periods in which the assets are used.
Depreciation cost depends on
  • Cost of asset
  • Expected salvage value of asset
  • Estimated useful life of asset
  • A method of apportioning the cost over such life
OPERATING COST-
It consists of the following
  1. Crew Cost:- Crew cost includes direct and indirect costs. Direct cost includes
  • Wage cost
  • Travel cost
  • On Board victualing
  • Training
  • Union fee
Indirect cost includes
  • Recruitment/ Selection of process
  • Medical test
  • Social dues
  • Communication/ Bank charges
  • Crew accident insurance payment
  • Sick pay
  • Port expenses
  • Agency fee
Total crew cost depends on 
  • Size of crew
  • Employment policy of owner/ Operator
  • Ships flag
2. Repair And Maintenance:- It consists of 
  • Routine maintenance- Maintenance of engine and equipment, Painting ob etc
  • Break downs-- Mechanical failures resolved in repair yards  ( Loss of trading time)
  • Spares, replacement parts cost
  • Periodic Maintenance- In repair yards/ Dry dock to maintain seaworthiness(Class) and obtain certification( for insurance)
Regular maintenance leads to less breakdowns. This cost increases with ships age and in average accumulates for 14% of operating cost.

3. Insurance:- It varies from ship to ship. This we know in details
  • 2/3 H&M ( obtained from Marine insurance company)
  • 1/3 Third party liability ( Obtained from P&I club)
4. Administration- 
  • Shore based administration and management charges
  • Communication cost
  • Agents in ports
  • Flag state fee
VOYAGE COST- 
It basically comprises of following
1. Fuel Cost- It depends on
  • Fuel Price
  • Engine Power and efficiency-- Only 23% of energy consumed is applied to propelling the vessel. Rest is lost for cooling the engine, lost as exhaust emission, lost at the propeller & Hull friction.
  • Design and state of Hull
  • Ships speed
2. Port charges:- Fees for the use of facilities and services provided by the port.
a) Port dues - General use of port facilities. It depends on
  • Volume of cargo
  • weight of cargo
  • Gross Tonnage
  • Net Tonnage
b) Service charges include
  • Pilotage
  • Towage
  • Cargo handling
3. Canal Charges
a) Suez canal: - Charges are calculated in terms of the Suez canal net ton.
b) Panama canal- Flat rate per Panama canal net ton is used.

Chief engineer role of optimizing the costs incurred in a ship operation basically plays a important role in reducing the Operating cost by maintaining the engine efficiency and maintenance of all equipment so that there is no trading time loss. He can also optimize the voyage cost by running the engines on economical speed. 


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