The Choice of the Ship and Running Costs Essay

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The choice of ship is connected with the running costs of transportation. Stopford (2009) claims that the best way to reduce costs is to select newer ships, which require fewer crewmembers, less maintenance, and are more reliable. While all of these points are true, they do not automatically make newer ships the preferable choice for shipping costs. As it stands, 65% of all cargo ships in the world are over 14 years old, meaning that competition for newer ships is intense (Cheng, 2021). High demand means increased costs, which was demonstrated by the increase in cargo rates in 2021, and previously in 2016 (Cheng, 2021). Both of these surges saw a rise in demand for older ship services.

As a rule, the offered costs of shipping by older vessels are cheaper. The reasons for that are the lower costs of purchasing a ship, which means lower pressure to repay the interest in time (Ros Chaos et al., 2021). In addition, companies running older vessels are aware of their disadvantages, thus needing to compensate for them by offering a more advantageous price. Finally, certain running costs for older ships can be mitigated by utilizing low-grade fuel, which these ships can still run on (Ros Chaos et al., 2021). In addition, while repairs and maintenance for aging vessels are more frequent when compared to newer ships, the costs of these repairs are often lower. New ships have expensive and sensitive equipment, which requires more time and money to repair and replace (Ros Chaos et al., 2021). Older vessels are less high-tech, meaning more straightforward and cheaper maintenance.

Overall, with two-thirds of the world’s cargo being ferried by older ships, Stopford’s conclusions about newer ships being better are rendered moot. While, on paper, such a conclusion seems obvious, in reality, a company has to contend with changing transportation rates (which are higher for newer ships), availability, and a myriad of other factors. If shipments are frequent and cannot afford delays, the shipper will have to go not with the best possible solution but with what is available at hand. Chances are, it will be an older ship.

References

Cheng, E. (2021). Surging shipping costs will drive up prices for some consumer products by 10%, new UN report finds. CNBC. Web.

Ros Chaos, S., Pallis, A. A., Saurí Marchán, S., Pino Roca, D., & Sánchez-Arcilla Conejo, A. (2021). Economies of scale in cruise shipping. Maritime Economics & Logistics, 23(4), 674-696.

Stopford, M. (2009). Maritime economics (3rd ed.). Routledge.

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