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Friday, April 17, 2020 

Classification Society DNV GL says many ships, passenger vessels in particular, are facing an unprecedented challenge caused by Covid-19, with vessels prevented from docking, and forcing idle assets into temporary lay-up.

Owners face tough decisions as to what type of lay-up, and where, is appropriate for a given vessel. There are three main lay-up types to consider: hot, warm and cold lay-up – although it should be noted these are industry terms and not regulatory descriptions. "The most likely options right now are either hot or warm lay-up as a stopgap measure", said Richard Tao, Discipline Leader - Technical Operation, DNV GL Maritime. "Cold lay-up of a year or longer may be relevant in exceptional cases."

Owners must balance key factors such as the estimated time the vessel will spend in lay-up, what the operational cost savings will be, the cost of recommissioning and how long it will take, the intended destination after recommissioning, as well as age and potential recycling value.

Hot lay-up is suitable for ships that will be out of service for up to three months, remaining as if fully operational in terms of class and flag, with routine maintenance continuing. Machinery and equipment are kept in optimal working order to enable speedy reactivation, but measures can be taken to tighten operational costs. Crew can be reduced to the minimum safe manning level.

Warm lay-up should be considered for ships that will be pulled for up to twelve months. The crew is reduced to below its trading limit in dialogue with flag, port authority and insurance providers, while routine maintenance is reduced. Some essential machinery is kept in operation, but deeper measures can be taken to optimize operational costs. Recommissioning will take longer, potentially up to several weeks.

"The main purpose of laying up a ship is to achieve significant savings. To give a rough indication of the cost reduction in percentage, in our experience hot lay-up will cost around two thirds or 74% of the normal running cost for the ship, including port and fuel costs," said Tao.

Warm lay-up can reduce costs to around 62% of the normal running budget, and to around 54% for two vessels double-banked. DNV GL’s case studies show that from a total cost perspective, hot lay-up is best for up to four to five months, warm lay-up for 16 to 17 months. For anything after that, cold lay-up is the preferred option.

Technical challenges are likely minimal in short-term hot lay-up, but increase the longer the ship is out of action. Water may build up in engine chambers, while corrosion and rusting are ever-present risks. Others include unintentional mistakes, such as the application of preservation oil in systems where it can do damage. Deck equipment can be subject to internal corrosion, leading to frozen machinery at reactivation. Lack of availability of spare parts could cause significant delays at reactivation.

Owners must inform class in writing of the vessel’s operational status change. Other class services to be considered include a clean lay-up declaration if the lay-up location is in an environmentally sensitive area, a recommissioning declaration and a statement of compliance for lay-up service providers. A declaration of lay-up must be made to the insurer and a lay-up plan describing intended preservation and maintenance, as well as anticipated reactivation procedures, is generally required to be submitted to the hull and machinery insurer.

"The quality of maintenance and preservation during the lay-up period is a determining factor when bringing a vessel back into operation effectively when the market turns," said Tao.

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