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- Second wave of scrubber installations to support HSFO sales despite cleaner fuels shift
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A second wave of scrubber installations will likely sweep the marine industry as the price differential between high sulfur fuel oil and very low sulfur fuel oil, or the Hi-5 spread, stabilizes to normal levels at major bunkering hubs, supporting HSFO demand at a time when there is a growing impetus towards greener fuels to meet shipping's environmental goals, market sources said.
“After the quick adjustment to the global sulfur cap, the decline in HSFO’s share of total bunker sales has stopped," BIMCO’s chief shipping analyst Peter Sand said in a report April 29.
"Although its share is much lower than any time prior to Q4 2019, the steadily rise in scrubber-fitted ships has supported demand for HSFO and will remain until new solutions and future fuels are widely introduced on the industry’s path to decarbonization,” he added.
The number of scrubber-fitted ships doubled in the 13 months after the International Maritime Organization's global low sulfur mandate came into force on Jan. 1, 2020, according to BIMCO, which estimates there are currently 4,006 scrubber-fitted ships, up from 2,010 in January 2020.
The crude oil tanker fleet has the highest share at 30.5% of total capacity, and the oil product tanker fleet the lowest at 13.8%, BIMCO said.
BIMCO's data compares with S&P Global Platts Analytics' estimate on April 8 of 4,223 ships having had scrubbers installed and returned to the operating fleet at the end of 2020.
Second wave of scrubbers
“Over the past 12 months there has been increasing demand for high sulfur fuel oil, indicating higher scrubber usage," Steve Bee, group commercial director at fuel testing firm VPS, said April 28 during the Petrospot Global Bunkering Summit. “March 2021 showed the highest demand for HSFO since… January 2020,” he added.
Market participants now have a better idea of scrubbers technology, its use, crew training requirements and costs, an industry source said May 5, adding that all of those factors have accelerated its uptake.
Although the cost of installing scrubbers is high, it is not excessive and the payback period still renders its economics justifiable, he said.
Sources said the current Hi-5 spread, which has largely stabilized in many ports, had widened substantially as oil prices recovered from late 2020, making a favorable case for scrubbers.
In Singapore, the world's largest bunkering hub, the Hi-5 spread averaged $298.90/mt in January 2020 as the market transitioned to the IMO 2020 mandate, then narrowed to $60.32/mt in September before firming to $103.33/mt in January 2021, S&P Global Platts data showed.
The spread averaged $108.24/mt in March and $112.92/mt in April, remaining mostly above the $100/mt mark to date in 2021.
Meanwhile, HSFO sales have also been strong in Singapore as it has ready availability of the grade, and the port's efficiency, bunkering standards and strong infrastructure has meant that owners and charterers have continued to bunker here.
Singapore's HSFO sales rose 47.2% year on year to 3.1 million m in Q1, data from the Maritime and Port Authority of Singapore showed. This includes MFO 180 CST, MFO 380 CST and MFO 500 CST.
Sources said that cleaner fuels -- LNG in the medium term and ammonia, hydrogen in the medium-long term -- were likely to gather momentum as the IMO cuts GHG emissions targets and other environmental rules in shipping loomed.
However, HSFO demand and scrubber use were expected to remain supported until these initiatives were implemented extensively, they said.
Bunkerworld .,