Charterers (shippers of cargo) and Owners (carriers of cargo) think in US dollars per day. Ships are essentially 'day labourers' and for comparative purposes this is how the market self-evaluates who has the upper hand and where rates are trending.
So what does it cost to operate a Capesize bulk carrier for a day? The three major cost groups are the mortgage, operating costs and insurance. Ships are typically financed on 80% of their purchase price for periods of up to 15 years. For the purposes of this posting, a modern Cape will be paying the bank about US$13,000 a day in cost of capital.
Operating costs are all the all the cost to keep the ship crewed, maintained and available to trade. Crew wages, food and stores, maintenance, spares and management fee are about US$5,500 per day.
The ship has to be insured for total loss, damage and liability - another US$1,000 a day. The Owner also has to accrue for 5-yearly drydocking - another US$500 a day to be squirrelled away for the two weeks in dock. Generators consume about 2.5 tonnes per day of bunkers of essential services, US$1,750.
So far, $21,750 a day required just to cover the idle cost and with less than $5,000 a day on offer for a coal or iron ore cargo. Before readers get too misty-eyed for the plight of the Shipowner, these same vessel saw peaks of $300,000 a day before the 2008 global recession. More an illustration of the high stakes and deep pockets needed to stake a seat at the table.
The Antipodean Mariner