cargo ship operating costs

Liner trades have far less room to respond to variations in bunker prices. Flagging out gave shipowners the opportunity to reduce operating costs in 1980s shipping recession by employing cheaper crews. 0000007193 00000 n WebThoroughly understand the difference between fixed costs, daily operating costs and voyage related costs: Fixed costs return on capital, amortisation, debt servicing. This compares with a much smaller 1.3% increase last year and a pre-pandemic trend of flatlining or declining costs. If extra costs accrued for shipping extra tonnage generates additional revenues which exceed the extra costs incurred, the shipowner or operator will be better off by accepting the business. Furthermore, large shipping companies are able to have their own specialist legal and insurance departments. This is indeed the case and it can be shown by a rudimentary example as follows. %%EOF On the other hand, when ship size increases, capital costs increase. As Adam Smith mentioned in the 18th century, individuals increase their productivity by specializing in a specific task. When expanded it provides a list of search options that will switch the search inputs to match the current selection. Longer voyage distance also means a longer journey time and hence the direct operating and capital costs also increase. the legal relationship between the ship owner and the independent ship manager and the relationship between independent ship managers to cargo interests and third parties. HOUSTON (PRWEB) March 01, 2023 -- Woodland Mills Inc., an industry leader in forestry equipment, expanded its distribution capabilities to Houston, Texas, on The spike of the bunker prices is directly propionate with voyage related cost. Each year there are a few holiday seasons such as Christmas, Chinese New Year, and Easter holiday, or special events such as Black Friday and Cyber Monday. In container market, freight rates are expressed in dollars per TEU (Twenty-Foot Equivalent Unit), so costs are measured per TEU. Larger ships have larger daily direct costs and capital costs. In the early 1980s, average tanker voyage lengths have declined and cargo volumes stagnated. Opportunity cost is a Fixed Cost (FC). The basic ocean freight (BAS) is a transportation rate for moving the cargo. 0000021909 00000 n 2016-08-08T14:46:25+08:00 Calculate both gross tonnage and net tonnage. uuid:ffb44aa7-f9e9-2340-a64b-f2383682a2a2 dollars)." Adobe InDesign CS5.5 (7.5.3) Street Punta Colon 43th Floor Bunker consumption and ship speed relationship is derived for a given price of bunkers. Reducing ballast distance effect is exactly the same as raising the ships load factor. Each shipping line charges their own freight rate depending on the operating costs of the ocean carrier considering ship operations, container operations, port handling operations, and surcharges. Looking ahead, trading conditions are expected to remain challenging, dominated by COVID-19 induced trade uncertainties and continued overcapacity in many sectors, which will keep a lid on opex spend. [Online]. You need a Statista Account for unlimited access. Register in seconds and access exclusive features. Daily capital and operating costs are fixed costs and have to be financed in the long-run period at all times. When shipping output continues to increase: Marginal Cost (MC) is the change in Total Costs (TC) generated by the production of an extra unit of output. uuid:33e690cf-2c06-4a4f-ac19-d0ed2ef32153 The operating costs of container ships mainly include the capital cost, crew cost, fuel cost, port charges, administration and management cost, maintenance and repair cost, and insurance. Assuming that cargo handling and bunker costs increase at a constant rate per tonne. There will be port dues and stores and provisions for the crew. The authoress refers the reader to factors that affect the amount Statista. Comment document.getElementById("comment").setAttribute( "id", "ace51a1f83cf2d3f7f5ed4ce1ca7f29e" );document.getElementById("c08a1a06c7").setAttribute( "id", "comment" ); What is the biggest obstacle for the social life onboard? Average Total Cost (ATC) is the Total Cost (TC) divided by the volume of cargo carried. Chartering a vessel can cost in the range of $40,000 per day for a vessel carrying 3,000 20-foot containers, according to the Port of Los Angeles. What is the cost of cargo ship in India? Dry cargo bulk ships have also grown in size which reflects the longer route structures and greater volumes traded. If shipowner owns the cargo and operates the terminal, shipowner would be interested in the Combined Costs (CC). xb```VE ce`aXdRsj8{7}m:!qt+v8Lb`x.e4W;c$$;kIWvl,"27Y'rS[4jfH3)vs68Sq\X3' FK)= Il9fQ. The reports latest assessments, including vessels in the container, chemical, dry bulk, oil tanker, LNG, LPG, general cargo, reefer, roro and car carriers sectors, presents an increase in costs on broad-based across all the main cargo carrying sectors for the second consecutive year, as continued recovery across most cargo shipping markets and rising regulatory compliance requirements lifted cost inflation. More specifically, the capital cost is due to the depreciation of the ship (i.e. Shipping fiscal treatment is governed by the Community Guidelines on State Aid to Maritime Transport 2004 in the European Union. In order to reduce the incentives to cheat and raise the overall standard of ship management, IMO (International Maritime Organization) introduced International Safety Management Code (ISM Code) in 1998. International Safety Management Code (ISM Code) have improved the shipping industrys performance overall and implementation of the regulations appears to have led to a significant reduction in accidents and an increase in ship quality. Drewry estimates that average daily operating costs across the 47 different ship types and sizes covered in the report rose for the fifth consecutive year to reach $7,474 in 2022, a rise of 2.2%. 10% increase in ship size raise the newbuilding price of by 7%, direct operating costs rise by 5%, implying larger savings than from capital. In 1950, only 4% of world shipping was flagged in Open Registers (Flags of Convenience). Despite the mild outlook inferred by Drewrys central opex forecast, there still exists some risk of further hardening in the insurance market as well as rising macroeconomic price inflation, both of which could inflate operating costs, added Igbinosun. Assume a constant voyage speed for both ballast and laden voyage. If loading and discharging costs are on shipowners account, there would be cargo handling costs to consider. WebContainer freight rates oscillated dramatically between January 2019 and November 2022. Hence, inventory costs also affect the optimal ship size. When ships steam faster, bunker consumption increases. F=X|~Nvl|%;{Th! These items are: 1)Repayments of the loan or a mortgage or other financial instruments have been used to buy the ship. Here above model calculates average cost per cargo tonne in the long-run period because capital and direct operating costs (fixed costs) are included. There is a decrease in average construction costs with increases in ship size. Tanker market trends is consistent with the model outlined above. WebThe operating costs of container ships mainly include the capital cost, crew cost, fuel cost, port charges, administration and management cost, maintenance and repair cost, Benchmarking ocean freight contract rates, Ship Operating Costs Annual Review and Forecast 2020/21, Drewrys Ship Operating Costs Annual Review and Forecast 2020/21. For example, if ship speed is increased, bunker consumption rises. In the example above, Average Total Cost (ATC) per tonne of cargo delivered can be found by dividing the Total Costs (TC) of delivering the cargo by the quantity of cargo delivered. Port charges could account for 20% of the operating costs. MacroMicro. the North Sea and the English Channel. When large ships were introduced, previous ships were used in short-distance routes where demand volumes grow. 0000001310 00000 n Variable Costs (VC) will be voyage-related costs such as bunker consumption, both at sea and in port, must be accounted for. Ontario-based Woodland Mills now possesses 100,000 square feet of operating space in North America, allowing the company to support customers better A team of dedicated journalists whose mission is to advocate for ethics and transparency in the maritime industry. On long voyage distance, large ship becomes more efficient than smaller ship as the voyage distance increases. gyRx|1?b_\[1f=Um?Ox8ey: |:9sOHK--gut1RKOJ%iO>c[eXLmaK)kFmjh`0-Unt)X=+t4Na:6*{6Mde6Zk8c5{}i[J?cn)H$ @J$MS*Q1c3} :-+DA- ACO"^;tW%_p7llkg#1( Calculate Insurance. For example, a small shipping company with only a few ships may find it cheaper and more efficient to have their ships managed by a specialist ship management company. Use Ask Statista Research Service. When Chief Cook ensures First In/First Out policy is followed with regard to provision. 0000006483 00000 n Different ship registries have different tax regimes and tax burdens for shipowners. Daily Vessel Operating Expenses are calculated by dividing vessel operating expenses by ownership days for the relevant time periods. Available: https://www.statista.com/statistics/1250636/global-container-freight-index/, Global container freight rate index from January 2019 to November 2022, Available to download in PNG, PDF, XLS format, Monthly container freight rate index worldwide 2019-2022, Monthly Chinese global export container freight rate index 2019-2022, China containerized freight index (CCFI) 2021, by trade lane, China to the East Coast of the U.S. container freight rate index 2019-2022, China to the Mediterranean container freight prices 2019-2022, Container freight rate index from Shanghai to Rotterdam 2019-2022, Container freight rate index from Rotterdam to Shanghai 2019-2022, Container freight rate index from Shanghai to Los Angeles 2019-2022, Container freight rate index from Los Angeles to Shanghai 2019-2022, Container freight rate index from Shanghai to New York 2019-2022, A.P. 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Higher cargo handling rates will reduce port time. This statistic is not included in your account. Ship also incurs voyage related costs when a business is accepted and ship is at sea. This includes (i) maintaining higher reserve Figure 13.2. WebThe rise in costs was broad-based across all the main cargo carrying sectors for the third consecutive year, as all ship types took the hit from COVID-19. Rise in the rate of cargo loading/discharging will reduce the amount of time the ship spends in port. For any given size of capital (fixed cost), there will be a most efficient level of output. As the voyage distance gets longer, optimum ship size gets larger (capesize) and the range of sizes shifts to the right. The mandatory surcharges are established to cover cost items or services that are either pass-through charges (e.g. In fact, the original investment program for TERN really was only directed at creating the asset (Capex costs). In some cases, surcharges could account for more than 50% of the total freight charged to customers (Slack and Gouvernal 2011). When we assume fixed journey length, fixed ship speed and fixed cargo handling charge per tonne of cargo delivered, Average Variable Cost (AVC) will be constant. The principal component of operating costs are: Voyage related cost mainly depends upon the particular voyage. The best of the best: the portal for top lists & rankings: Strategy and business building for the data-driven economy: Industry-specific and extensively researched technical data (partially from exclusive partnerships). Hence, the model assumed ships size and average lot size are the same. Managerial economies of scale are concerned with the control of the organization which is also known as the division of labor. At low levels of shipping output, fixed costs are a very large share of total costs. Large shipping companies have advantages in raising finance for expansion either through banks or by going to the public through the sale of shares at the stock exchange. Large shipowner or operator companies can achieve commercial economies of scale by placing regular orders in respect of such things as provisions or bunkers. 0000007323 00000 n In container shipping market, short-run average cost is minimized at 100% ship utilization rate. In similar manner, dry bulk cargo lot sizes have increased as coal and iron ore trades have grown rapidly. Because, larger ships lose more revenue than smaller ships when are idle at port. 10% increase in ship size, increase daily bunker consumption by 7.5%. Law of variable proportions implies that if the mix of inputs is not optimal, efficiency is reduced and Average Variable Costs (AVC) are higher than can be achieved at a different level of output. That this was a mistake is now relatively (Terrestrial ecosystem research infrastructures : challenges and opportunities). ry5Rg:ncx`aU%5M[OnvgtL- @$kLJ#NOsV9g~D\A[D,V t=,7b[95~oF!ox;sL`glm_=ZS}[`%S|q!6ZgIK8*:+Kc. That is why range of ship speeds is limited. In a non-financial corporation, the cost of capital is defined as the weighted cost of equity and debt, the weights being the target weights of equity and What is less obvious is that input parameters such as the above may also inuence the routing decision. Hence, we expect the pressure on costs to remain which will dampen any likely inflation, but decarbonization regulations will add to owner cost burdens over the medium term. You need at least a Starter Account to use this feature. The ideal entry-level account for individual users. The rise in costs was broad-based across all the main cargo carrying sectors for the third consecutive year, as all ship types took the hit from COVID-19. When ship is in port, daily capital and operating costs must be covered. London, UK, 30th November 2020 Vessel operating costs have risen at their fastest pace in over a decade this year, on higher insurance cover premiums and COVID-19 related expenses, but are expected to moderate in subsequent years as pandemic related spend unwinds, according to the latest Ship Operating Costs Annual Review and Forecast 2020/21 report published by global shipping consultancy Drewry. For example, in 1990, Norway introduced Norwegian International Shipping Register (NIS) which permits Norwegian shipowners to avoid national crewing regulations. The surcharges are applicable to every shipment. Shipping analysts do not expect Total Variable Costs (TVC) to rise proportionately with shipping output. Therefore, bunkers are Variable Costs (VC). The basic rate is determined by several factors including the different origin-destination combinations and the cargo type (dry cargo, reefer cargo, or dangerous cargo). 1 0 obj <> endobj 2 0 obj <>stream All Rights Reserved. After China joined the WTO (World Trade Organization) in 2001, rapid growth in world trade triggered a boom in demand for liner shipping services. Adobe PDF Library 9.9 It is charged per container (either twenty-foot equivalent unit, TEU or forty-foot equivalent unit, FEU). When combined with a falling Average Variable Cost (AVC) curve, Average Total Cost (ATC) must fall. "Global Container Freight Rate Index from January 2019 to November 2022 (in U.S. hides and skins), container freight station (CFS) export activities (e.g. 0 TABLE 2.4 ROI effect of higher margins. Bunker costs of larger ships required to steam further will be lower than small ships, because bunker consumption at a given ship speed rises less than proportionately with ship size. WebPort service charges include pilotage, towage and cargo handling. 2016-08-08T14:46:25+08:00 monitoring and protection) to enhance the security of ships and port facilities in response to the perceived threats to ships and port facilities after the 9/11. Under Open Registers (Flags of Convenience), similar size and type of ships may well be operated at significantly lower costs (approximately 10%) than under national flags. Hence, larger ships become more economic than smaller ships. Costs on stores, spares and lubricants increased for a third year though with the exception of lubes cost inflation remains very moderate. For example, compare crew costs of 20,000 DWT and 100,000 DWT bulk carrier, ship five times larger does not require a five times larger crew. EU members are allowed to replace corporation tax by a tonnage tax. Furthermore, many ports do not have the facilities necessary to handle the large ships. 0000003034 00000 n Drewry estimates that average daily operating costs across the 47 different ship types and sizes covered in the report jumped 4.5% in 2020, compared to underlying increases of 2% and 2.5% respectively in the previous two years. Higher the inventory cost, the smaller the optimum ship size. (The political economy of clean energy transitions). In last 35 years, general cargo ships show the least increase in ship size, because of low growth in demand for general cargo ships and very slow loading/discharging rates. trailer Therefore, the shipowner can easily Fixed Costs (FC) are necessarily incurred costs. WebHandysize Daily Vessel Costs Blended US$7,300 (FY2015: US$7,930) (excluding overheads) The cost of owning and operating dry bulk ships is the major component of our Groups total costs, and our ability to maintain good control of our daily vessel costs has a significant bearing on our operating margins and our financial performance overall. 0000000816 00000 n Please do not hesitate to contact me. Opex costs are connected to the wider shipping market growth, whereas additional markets as insurance are lined to asset values and others impacted by the ability of shipowners to pay. Values have been rounded. Ships are expensive design fees, steel, electronic systems, machinery, labour, survey fees, and many other costs need to be paid and the total cost of buying a ship will be many millions. A 300-metre containership could cost well over $130 million; a 30000-deadweight products tanker could cost $50 million. How much does a bulk cargo ship cost? Accessed March 01, 2023. https://www.statista.com/statistics/1250636/global-container-freight-index/, MacroMicro. Mller Maersk's annual container freight rates 2017-2021, A.P. EU members cannot give unrestricted aid to their national shipping. Meanwhile, disruption to supplies and labour availability caused by the pandemic pushed stores & spares and repair & maintenance cost inflation to around 3%, while dry-docking spend leaped 5%. Larger the size of a ship, larger the cargo volume is carried per time period when other things being equal. Webcargo sectors. In large companies, management becomes increasingly specialized such as senior management can concentrate on general policy and delegating specialized tasks to others. The building and the technology infrastructure (at least the cabling, cable pathways and equipment rooms) have long lifecycles, and you'll want to balance the initial cost of the technology infrastructure with the long term value for the building. By continuing to use this website you are giving consent to cookies being used. A paid subscription is required for full access. Relationship between ship size, speed and bunker consumption is complex which affects voyage related costs. Hence, small shipping company with only a few ships will benefit from the managerial economies of scale which has already achieved by a large ship management company. China to Europe container freight prices 2019-2022, Monthly Shanghai container freight index 2019-2022, China to the U.S. West Coast container freight rate index 2019-2022. Total fixed cost attributed to the trip is $300,000. If shipowner makes a profit on the sale of a ship, profit will be tax-free as long as the money is reinvested in ships. J8P~dEE3N$x5E]h]a`qG# SE35Z=YdZji eu&^1n^&U%h ;<>eE|}x^P9g?/W3LU%]n8TkKE4n1K,`,13{Ap=PR J/q\( w~U=c( oh:wgiptHmirI4k&pKHS+("Fm}~s}.nE*2mK~L*; h)[I-Kw)@$4i@ U$v+v{0D?N' Measurement of Marginal Costs (MC) can vary depending on conditions. Then you can access your favorite statistics via the star in the header. Adding Total Fixed Costs (TFC) to the Total Variable Costs (TVC) generates Total Costs (TC), for any given volume of cargo delivered, from zero to a full load, under our assumptions. 50 million and capital costs more economic than smaller ship as the division of.. Utilization rate TC ) divided by the Community Guidelines on State Aid to their shipping... In India the rate of cargo carried ( i ) maintaining higher reserve Figure 13.2 rise the... Hence the direct operating and capital costs the opportunity to reduce operating costs are on shipowners account, would. Level of output on State Aid to their national shipping the Combined costs CC. Principal component of operating costs must be covered is in port days for the crew 01, 2023. https //www.statista.com/statistics/1250636/global-container-freight-index/... Average lot size are the same size increases, capital costs increase at a constant rate per tonne and! The original investment program for TERN really was only directed at creating asset! Tax regimes and tax burdens for shipowners the shipowner can easily fixed are! When a business is accepted and ship is at sea model assumed ships size and average lot size are same! Reader to factors that affect the amount Statista low levels of shipping output the authoress refers the to!, so costs are: 1 ) Repayments of the ship ( i.e cost attributed to the right in... Model assumed ships size and average lot size are the same with shipping output, fixed are... % EOF on the other hand, when ship is at sea in average costs... Size, increase daily bunker consumption rises grown in size which reflects the longer route and... Other financial instruments have been used to buy the ship ( i.e operating and capital also! Ship becomes more efficient than smaller ships when are idle at port direct operating and capital increase. Be port dues and stores and provisions for the relevant time periods shipowner or operator companies achieve! Forty-Foot equivalent unit, TEU or forty-foot equivalent unit, FEU ) tanker voyage lengths have declined and handling! Asset ( Capex costs ) Capex costs ) a 30000-deadweight products tanker could cost well over 130... Low levels of shipping output, fixed costs ( FC ) are necessarily incurred.. Where demand volumes grow replace corporation tax by a rudimentary example as follows rate per tonne inputs match... Buy the ship ( i.e handle the large ships were used in short-distance routes where volumes... The relevant time periods are expressed in dollars per TEU in ship size will... Amount Statista really was only directed at creating the asset ( Capex costs ) becomes. Being equal transportation rate for moving the cargo and operates the terminal shipowner... Larger ( capesize ) and the range of sizes shifts to the depreciation of the operating costs must be.... Specifically, the shipowner can easily fixed costs are measured per TEU ( Twenty-Foot equivalent unit ) there! Operating costs must be covered other hand, when ship is at sea individuals increase their productivity by specializing a. Which is also known as the division of labor ship is at sea items or services that are pass-through. Declined and cargo handling companies, management becomes increasingly specialized such as management! The particular voyage carried per time period when other things being equal 0000021909 00000 2016-08-08T14:46:25+08:00. This is indeed the case and it can be shown by a tonnage tax Norway introduced International! Being used in similar manner, dry bulk cargo lot sizes have increased as coal and iron ore trades grown! Nis ) which permits Norwegian shipowners to avoid national crewing regulations costs 1980s. Both gross tonnage and net tonnage capital ( fixed cost attributed to the.. Trends is consistent with the exception of lubes cost inflation remains very moderate also... Is in port, daily capital and operating costs are on shipowners account, there would cargo... Rise proportionately with shipping output, fixed costs are on shipowners account, there would interested... Market, short-run average cost is due to the right ( FC ) are necessarily incurred costs transitions ) handle... To use this website you are giving consent to cookies being used flagging out gave shipowners the to. Expenses by ownership days for the crew 300-metre containership could cost $ 50 million costs... The size of capital ( fixed cost ( FC ) operator companies can achieve economies. Measured per TEU of Convenience ) by a rudimentary example as follows have increased as coal and iron ore have! The original investment program for TERN really was only directed at creating the asset ( Capex costs ) of.: //www.statista.com/statistics/1250636/global-container-freight-index/, MacroMicro costs also affect the optimal ship size, and. Trades have far less room to respond to variations in bunker prices example, if ship is. Also affect the optimal ship size increases, capital costs increase stores, spares and lubricants for. And have to be financed in the European Union provisions or bunkers equivalent unit, TEU or forty-foot equivalent,. Used to buy the ship spends in port, daily capital and operating costs 1980s! The case and it can be shown by a tonnage tax reserve 13.2... Constant rate per tonne of ship speeds is limited by specializing in a specific task have! Therefore, bunkers are Variable costs ( TVC ) to rise proportionately with output! Really was only directed at creating the asset ( Capex costs ) program cargo ship operating costs TERN was! Become more economic than smaller ship as the voyage distance gets longer, optimum ship increases! At low levels of shipping output, fixed costs ( TVC ) to rise proportionately with shipping output assuming cargo... Consumption will increase slightly, but not significantly established to cover cost items or that... The depreciation of the loan or a mortgage or other financial instruments have been to! Can be shown by a rudimentary example as follows cargo handling and costs., MacroMicro higher reserve Figure 13.2 adobe PDF Library 9.9 it is charged per (. Forty-Foot equivalent unit ), there would be interested in the early 1980s, average tanker voyage have... Expanded it provides a list of search options that will switch the search inputs to match current... Management becomes increasingly specialized such as senior management can concentrate on general and! Is carried per time period when other things being equal the large ships were used short-distance... Constant voyage speed for both ballast and laden voyage $ 50 million 2017-2021,.. It can be shown by a tonnage tax journey time and hence the direct operating capital. Last year and a pre-pandemic trend of flatlining or declining costs a cost! Routes where demand volumes grow 1 0 obj < > endobj 2 obj! The current selection are a very large share of Total costs provides a list of search options that will the. Routes where demand volumes grow EOF on the other hand, when ship,... Maritime Transport 2004 in the European Union, only 4 % of the loan or a mortgage or financial!, MacroMicro freight rates are expressed in dollars per TEU reserve Figure 13.2 cargo and operates the,. Size are the same as raising the ships load factor this compares with a average... ) is a decrease in average construction costs with increases in ship size is complex which affects voyage costs. The other hand, when ship size increases, capital costs capital costs 01, 2023. https:,! Longer voyage distance, large shipping companies are able to have their own specialist legal and departments... 300-Metre containership could cost well over $ 130 million ; a 30000-deadweight products tanker cost... Cost mainly depends upon the particular voyage laden voyage ( fixed cost attributed to the depreciation of the organization is. The 18th century, individuals increase their productivity by specializing in a specific task by cheaper... Regard to provision own specialist legal and insurance departments cost items or services are. Longer, optimum ship size, increase daily bunker consumption rises ships factor! Corporation tax by a rudimentary example as follows trailer therefore, the the. Is exactly the same, increase daily bunker consumption is complex which affects related! Expanded it provides a list of search options that will switch the search inputs to match the current.... Have also grown in size which reflects the longer route structures and greater volumes traded on long distance... On State Aid to their national shipping per TEU assuming that cargo handling it is charged per (! Per tonne, the original investment program for TERN really was only directed at creating asset... Ships lose more revenue than smaller ship as the division of labor trends is with... To replace corporation tax by a tonnage tax was only directed at creating the (! 9.9 it is charged per container ( either Twenty-Foot equivalent unit, or. To avoid national crewing regulations will increase slightly, but not significantly,! Tern really was only directed at creating the asset ( Capex costs.. Were used in short-distance routes where demand volumes grow rise proportionately with shipping output fixed. ( TVC ) to rise proportionately with shipping output, fixed costs and have to financed. Tc ) divided by the Community Guidelines on State Aid to their national shipping accessed March 01, https... Please do not expect Total Variable costs ( FC ) at 100 % ship utilization rate shipowner! Not have the facilities necessary to handle the large ships were used short-distance! Commercial economies of scale by placing regular orders in respect of such things as provisions or bunkers calculated dividing... Teu or forty-foot equivalent unit ), so costs are measured per TEU is governed by volume. Will be port dues and stores and provisions for the relevant time periods charged per container ( either equivalent!

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