Anecdotally, as borne out by owners and bankers on the conference circuit, bigger companies, with greater market capitalizations and larger fleets. have access to capital markets that their smaller brethren do not. But the impacts of company size on the cost side of the business have seen less mention, and has escaped rigorous analytical scrutiny.
A recent webinar produced by Capital Link highlighted a new effort by the accounting firm Moore Greece, a leading accountant and consultancy serving shipping clients, to create fresh benchmarks using anonymized company financial data.
While, elsewhere, there is considerable attention placed on algorithmic approaches to forecasting shipping markets, this effort is not about predicting the markets’ ups and downs- rather it is about looking at actual operating revenue and cost accounting metrics across a broad swathe of companies, allowing for observation of trends. Importantly, “benchmarking” implicitly asks the question of “How does my fleet’s performance compare against the larger universe of comparable vessels?”
As explained in the late Spring, 2020 Moore Maritime Index report, ‘Shipping trends based on the fleet size’, the firm’s initial focus was to search for “correlations between operating expenses, net income, vessel age, capacity and fleet size” in the tanker and bulk carrier segments. The report’s authors explain that “Collected data comes from more than 150 management companies which manage more than 1,500 vessels globally and data is grouped under four categories based on fleet size under management: 1-5 vessels, 6-10 vessels, 11-20 vessels, more than 20 vessels.”
The Moore Maritime Index (MMI) project (seeking additional data contributors, who would in return gain access to an advance suite of analytical capabilities) has already uncovered information that does not comport with the “conventional wisdom” expressed in gossip and hearsay) of “bigger is better.”
On the webinar, Moore Greece’s managing partner and global shipping leader, Costas Constantinou, explained that: “As accountants, we love numbers…numbers have a story to tell…by trying to [put these numbers in order] you meet be able to hear the stories that the numbers are telling…and see if there are any patterns in the numbers.”
A few patterns emerged in the dataset, using 2018 data from 150 management companies controlling more than 1500 vessels; for both the tanker and drybulk sectors, “the larger fleets are comprised of younger ships Also, across the board, “there is strong evidence that management companies with big fleets tend to manage younger and larger vessels.” Also, from the dataset, Constantinou suggested that “…bigger fleets seem to be able to earn a higher time charter equivalent.”
That data presented to webinar viewers indicated that, in both wet and dry sectors that crewing costs, and “administration” costs, expressed in $ per day, per vessel, increase as size of the fleet increases, though other costs, such as insurance, did benefit from economies of scale.
MMI is looking to source additional data beyond what is admittedly a snapshot. “The more data that we have, the more we will be able to analyze it …MMI will get better as our database expands.” In asking for industry support, Constantinou said, “It’s a big puzzle that I hope we can solve together.”
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