Introduction
Vessel Information
Numerous critical pieces of information are needed to prepare an operating budget for a small fleet of ships that will be used to transport iron ore. The first is the vessels’ size, which will determine the amount of ore that can be transported at once and the costs associated with running the ships; the larger the container, the more fuel and resources it will require to operate (Staff, 2020; Işıklı, 2020). For example, a vessel that is 50 meters long will consume 500 liters of fuel per hour and 50 kilograms of resources per hour. A ship 200 meters long will consume 2,000 liters of fuel per hour and 200 kilograms of resources per hour.
Table 1: Vessel Size, Fuel Consumption, and Resource Needs
Generally, knowledge about the vessels helps experts determine the operating and management costs and implement strategies to maximize a company’s profitability. Additionally, it is advisable to consider the route the vessels will take, the impact on the fuel costs, and the time required to complete the journey. The other factor is the number of crew members needed to operate the vessels, which will impact the wages and other associated costs (Kurdin, Nuhun, and Welendo, 2015). The vessel’s age should also be considered; age is a critical factor when preparing an operating budget for a fleet of ships because it can impact several vital elements, such as fuel efficiency, maintenance requirements, and crew requirements (HandyBulk, 2022). Fuel efficiency generally decreases as a vessel ages, so an older vessel will require more fuel to operate than a newer vessel. The reaction will impact direct operating costs, regarding fuel costs, and indirect operating expenses, regarding the vessel’s emissions.
Furthermore, maintenance requirements increase as a vessel ages due to wear and tear on the vessel’s hull and machinery and can impact both the direct operating costs, in terms of the cost of repairs and maintenance, and the indirect operating costs, in terms of the time lost due to repairs and maintenance (Hiramoto and Koyama, 1972). Crew requirements can be affected by the age of a vessel. Older vessels may require a larger crew due to the increased maintenance requirements, while newer ships may need a smaller team due to the increased automation onboard.
The speed and range of the vessels are other critical factors in determining the operating costs because they affects how long the ship will take to complete a journey and how much fuel it will consume. Reducing fuel consumption translates to lower operation costs and offers higher savings on the total cost (Gusti and Semin, 2016). A higher speed and range vessel can complete journeys faster and consume less fuel, resulting in lower operating costs. For example, if a vessel has a speed of 10 knots and a range of 1000 nautical miles, it will take 100 hours to complete a journey of 1000 nautical miles. If the vessel has a fuel consumption rate of 10 tons per hour, the vessel will consume 1000 tons of fuel throughout the journey. However, if the ship has a speed of 20 knots and a range of 2000 nautical miles, it will take 50 hours to complete the same journey. The vessel will consume 500 tons of fuel throughout the trip, which is half the amount of energy consumed by the ship with a lower speed and range. This example shows how the speed and range of a vessel can affect its operating costs. A ship with a higher speed and range can complete journeys faster and consume less fuel, resulting in lower operating costs.
The insurance costs for the vessels must also be considered. The size of the vessels will determine the amount of fuel required and the number of crew members needed, which will directly impact the operating costs. The route taken by the vessels will also affect the fuel costs and the time required to complete the journey, which will indirectly impact the operational costs (Hsu and Hsieh, 2007). The insurance costs will need to be considered to protect the fleet’s investment. By understanding the impact of each of these factors on the operating budget, the team will be able to accurately estimate the costs associated with running the fleet and make informed decisions about whether or not to purchase the vessels.
Costs Included in the Budget
Several costs must be considered when estimating the daily operating costs for a fleet of ships. The first is the cost of fuel, which will be affected by the size of the vessels and the route they take (Melanie, 2017). The second is the cost of wages for the crew, which will be affected by the number of crew members required and the length of the journey (Redfern, 2010). The third is the cost of insurance, which will need to be considered to protect the fleet’s investment. Finally, the cost of maintenance and repairs must also be considered.
The fuel cost will be the most significant expense in the operating budget and will be affected by the size of the vessels and the route they take. The larger the ship, the more fuel it will consume, and the longer the journey, the more energy is required (Higson, 2020). The cost of wages for the crew will be the second biggest expense and will be affected by the number of crew members required and the length of the journey (Ship Management International, 2009). The longer the journey, the more crew members will be required, and the more wages will need to be paid. The type of vessel will also impact the crew’s wages. For example, a cargo ship will require a different kind of crew than a yacht. The crew members’ experience will also impact the salaries; a more experienced staff will demand higher wages.
The cost of insurance will need to be considered to protect the fleet’s investment. The insurance costs will depend on the value of the fleet and the risks associated with the vessels’ route. The insurance can cover the ship in case of an accident or damage (Dalao, 2021). The maintenance cost of a vessel can vary depending on the size and age of the vessel (Seaplace, 2020). A newer vessel will have lower maintenance costs than an older vessel. The type of vessel will also impact the maintenance cost. A cargo ship will have different maintenance needs than a yacht. The level of maintenance required will also affect the price. A well-maintained vessel will have lower costs than a not-well-maintained one. The maintenance cost of a ship can be calculated using the formula:
Maintenance Cost = (1/2) x (Size of Vessel) x (Age of Vessel) x (Maintenance Level)
For example, if the vessel is 100 meters long and 10 years old, the maintenance cost would be:
- Maintenance Cost = (1/2) x 100 x 10 x 0.5
- Maintenance Cost = 2500
Monitoring Process
Fleet managers invest time and resources in investigating the costs associated with their operations. In most cases, companies apply fleet management software for proper tracking of costs and improved performance. There are several ways to monitor the costs associated with running a fleet of ships, including tracking the fuel consumption of the vessels by keeping a record of the amount of fuel purchased and the number of miles traveled (Flowers, 2019). Additionally, the costs can be monitored by tracking the crew wages by considering the number of hours worked and the hourly wage rate. Tracking the insurance costs is a critical procedure accomplished by keeping a record of the premiums paid and the claims made. Finally, the fourth is to monitor the maintenance and repair costs by keeping records of the invoices for work completed.
By tracking these costs, the team will be able to identify trends and adjust the Budget as needed. For example, if fuel consumption increases, the team may need to change the budget to account for the higher costs. If the crew wages are growing, the team may need to adjust the budget to account for the higher prices. If the insurance costs increase, the team may need to change the budget to account for the higher costs. If the maintenance and repair costs rise, the team may need to adjust the Budget to account for the higher prices.
STCW Convention
The fast growth in the number of merchant ships and yachts peculiar to the second half of the 20th century introduced the need for effective and strict regulations to avoid emergencies and critical issues. Moreover, the exceptional pace of globalization and international trade, traveling, and exchange promoted the increase in the number of vessels traveling to various destination points. Under these conditions, the need for the framework introducing the relevant requirements for seafarers on an international level became evident. As a result, the International Convention on Standards of Training, Certification, and Watchkeeping for Seafarers (STCW) was established. It became one of the major documents regulating the training and preparation of personnel.
Importance
The importance of the STCW convention comes from several aspects. First, previously the standards for training seafarers, their education, certification, and watchkeeping were established by national governments (MSA, 2021). Although merchant fleets often operated in the same waters and ports, states had their own standards that differentiated from other ones (IMO, 2019). Moreover, numerous issues with ships delayed in ports and different views on enforcing specific standards emerged (MSA, 2021). The growing shipping tonnage, along with the increased number of interactions, created the basis for the emergence of numerous incidents and safety issues (IMO, 2019). For this reason, establishing the STCW became an essential step towards the standardization of interactions and creating the basis for effective interaction.
The document’s importance is also linked to the conditions necessary for its ratification. Firstly, to start acting, the STCW had to be accepted by 25 nations with a minimum of 25% of the gross world tonnage of ships 100 gross tons (MSA, 2021). As a result, the offered standards became relevant in 1984, when nations agreed (MSA, 2021). Furthermore, the importance of these regulations and their positive impact on global interaction are proven by the fact that in 2018, 164 nations, or 99.2% of global shipping tonnage, ratified the STCW (MSA, 2021). It means that the framework created by the Convention is the basis for modern cooperation between seafarers at the international level. The STCW has several changes, such as the 1995 revision and Manila Amendments that were introduced to align training standards with the new technologies and practices. Today, it remains an important and relevant framework for international cooperation.
Overview
In general, the STCW Convention consists of three major sections introducing the main ideas of the framework. The articles provide clear definitions of all legal responsibilities a party has to meet to work in terms of the proposed framework (What is STCW and why do you need it?, 2022). The annex outlines the central technical details explaining how the legal responsibilities mentioned previously should be met by the parties (What is STCW, 2022). Finally, the STCW Code supports the regulations included in the Convention. It contains Part A, which is mandatory, with tables listing the minimum standards of competence for seafarers (International Maritime Organization, 2019). Part B introduces the guidance on implementing the Convention and observing it. This part is not mandatory and is established to illustrate how specific issues might be resolved (IMO, 2019). In general, the STCW Convention outlines the regulations accepted by its members and helps to develop safe interaction.
Key Requirements
Standards introduced by the STCW Convention are vital for the personnel operating different types of vessels, such as masters, chief mates, engineers, radio operators, and officers in charge. The requirements include training and certification of the personnel and endorsement by the ship’s flag state, safety training and survival at sea, personal and social responsibilities, medical standards, security awareness, rescue operations, fire prevention, and first aid (International Maritime Organization, 2019). These competencies and areas are fundamental for seafarers as compliance will guarantee the desired level of preparedness and readiness to operate vessels following international standards and accepted practices. The requirements are relevant for all ships bigger than 24 meters in length and are applicable to all crew members regardless of their position (IMO, 2019). In such a way, the document is an important element of modern seafarers’ security.
Training
The STCW Convention devotes much attention to the training and preparation of personnel to ensure they can meet the current requirements for safety and global interaction. Thus, general requirements for officers state that there is a critical need to revalidate their certificates to show compliance with the current demands (IMO, 2019). Specialists must possess knowledge and expertise in personal surviving techniques, fire prevention, medical fitness, and advanced firefighting (Merchant shipping (STCW convention 2010) regulations, 2013). At the same time, officers in charge and other officers should be ready to perform the functions outlined in the code (International Transport Workers’ Federation, no date). There are different types of certificates with demands for other specialists, meaning the framework helps to ensure that all seafarers are ready to perform their functions at high levels.
Effectiveness
The effectiveness of the STCW Convention can be discussed regarding the central purpose of the regulations. Thus, the central goal of the STCW is to make seas and ships safe for all nations and individuals, including the crew and individuals who might be impacted by seafarers (MSA, 2021). The new, revised version of the STCW Convention focuses on providing the international standards vial for training institutes and trainers to cultivate skills and competencies crucial for today’s seafarers (International Transport Workers’ Federation, no date). In such a way, the STCW Convention’s pivotal aim is to create the framework for interaction between nations at the global level and ensure the number of accidents is reduced.
Today, it is possible to admit the enhanced effectiveness of the STCW Convention and its positive impact on global intercourse. The certificates provided to seafarers guarantee they possess the skills and knowledge necessary for acting in all ports and seas across the globe (IMO, 2019). Moreover, the establishment of the Convention and its ratification by most maritime nations resulted in a significant reduction in the number of accidents because of the difference in codes and training that existed previously. The agreement between nations created the basis for enhanced collaboration and provided seafarers with guidelines on how to act in various situations to avoid emergencies or accidents.
Conclusion
Altogether, the STCW Convention is a crucial framework establishing the basic requirements regarding training, certification, and watchkeeping for all officers and other seafarers. The framework was established because of the increased number of vessels and differences in regulations introduced by national governments. The STCW code was introduced to avoid misunderstandings and create a basis for better interaction. Its importance comes from the positive impact on global intercourse and the competence of seafarers. It remains an effective tool to prepare officers and other personnel and guarantee they can act in various seas and ports. For this reason, the introduction of the Convention was a critical step towards safer work of seafarers and enhanced security. Its revisions helped to ensure the STCW remained relevant and the technological progress and new approaches were considered by the document.
Reference List
Dalao, K. (2021) What is shipping insurance? Cost, benefits, and when to buy. Web.
Flowers, L. (2019) 7 tips to manage fleet costs. Web.
Gusti, A. P., and Semin. (2016) ‘The effect of vessel speed on fuel consumption and exhaust gas emissions’, American Journal of Engineering and Applied Sciences, 9(4), pp. 1046-1053.
HandyBulk. (2022) Ship management costs. Web.
Higson, D. (2020) How oil prices affect the shipping industry. Web.
Hiramoto, F. and Koyama, T. (1972) Ship maintenance and repair cost versus age. University of Michigan. Web.
Hsu, C.I. and Hsieh, Y.P. (2007) ‘Routing, ship size, and sailing frequency decision-making for a maritime hub-and-spoke container network’, Mathematical and Computer Modelling, 45(7-8), pp.899-916. Web.
International Maritime Organization (IMO) (2019) International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW). Web.
International Transport Workers’ Federation (no date). STCW. A guide for seafarers. Web.
Işıklı, E. et al. (2020) ‘Estimating fuel consumption in maritime transport’, Journal of Cleaner Production, 275, p.124142.
Kurdin, M.A., Nuhun, R.S. and Welendo, L. (2015) ‘Operational management marine transportation on shipping lanes Wangiwangi–Kaledupa, Wakatobi-Indonesia’, Procedia-Social and Behavioral Sciences, 211, pp.184-191.
Melanie. (2017). 8 key factors that influence freight costs. Web.
Merchant shipping (STCW convention 2010) regulations (2013) Web.
MSA (2021) STCW convention explained – history and overview. Web.
Redfern, J. (2010). Crew expenses the big factor as ship operating costs rise. Web.
Seaplace. (2020). Ship maintenance cost: How can owners reduce it? Web.
Ship Management International. (2009). Crew wages continue to drive surge in ship operating costs. Web.
Staff, F. (2020). How many gallons of fuel does a container ship carry? Web.
What is STCW and why do you need it? (2022) Web.