News: Scrubber economics weaken as marine fuel premiums narrow
9th July 2020 11:17 GMT

Demand for scrubbers systems -- designed to clean the exhaust gases from a vessel’s main and auxiliary engines and boilers to remove sulfur dioxide gas -- has fallen, according to ship-owners and scrubber manufacturing companies.

Back in 2019, when the shipping industry was facing the imminent application of the so-called IMO 2020 sulfur regulations in bunker fuel, many shipowners opted to install scrubbers, seen at the time as among the most cost-saving solutions.

However, the global pandemic and a subsequent narrowing of the spread between high sulfur and low sulfur fuel oils has prompted a rethink, with shipowners now delaying the installation of scrubbers to minimize the financial impact.

“Despite the lower spread, the investment payback period for a scrubber is between half a year to one and a half years, depending on the cost of the scrubber and daily consumption, which allows for substantial fuel oil cost savings for scrubber-fitted ships,” Peter Sand said in a report by the Baltic and International Maritime Council.

Rotterdam port VLSFO-HSFO monthly spread

Month

Spread

Percentage Change

July, 19

98


August,19

110

12%

September, 19

178

62%

October, 19

222

25%

November, 19

240

8%

December, 19

249

4%

January, 20

223

-10%

February, 20

163

-27%

March, 20

81

-50%

April, 20

53

-35%

May, 20

49

-8%

Source: S&P Global Platts Bunkerworld


When S&P Global Platts launched its VLSFO assessment in July 2019, the spread between the product and HSFO was $98/mt, before widening by 12% month on month to $110/mt in August. Since September, the spread has been narrowing again, dropping to just $49/mt as of May (see table).


Shipping services provider Clarkson stated that just under 30% of the VLCC fleet currently has a scrubber fitted, compared with around 14% of the Aframax fleet, with the larger ship sizes seeing the greatest number of scrubber installations. Overall, 14.2% of of all vessels, when measured in deadweight tonnage, has a scrubber installed.


It also stated the coronavirus crisis and resulting low crude prices, have led to “700 scrubbers which can be cancelled or postponed."


Several shipping companies have said they are postponing installations and Wartsila has announced a decline in new marine orders, largely due to a lack of scrubber investments.

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Comments on this Article
Joel Hanley - Platts
24th July 2020
In the current price environment I can't imagine many scrubber owners will be particularly pleased on their return on investment. But these things are surely temporary and that investment will make sense again one day. The post-IMO2020 expectation was that middle distillates values would explode as a result of increased demand but the Covid-19 pandemic has dampened all predictions. As a result, 0.5% and MGO are good value for money.

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