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COVID-19 Crisis Forces Shippers to Choose Low-Sulfur Oil over Scrubbers

The lockdown of Chinese shipyards that manufacture scrubbers, a desulfurization device for ships, due to the spread of the novel coronavirus, is bringing a big change to the shipping industry’s strategy to cope with environmental regulations.

Clarkson Research, a shipbuilding and shipping market analysis agency in the United Kingdom, predicted on July 19 that the planned installation of scrubbers on over 700 ships is highly likely to be canceled or postponed. In April and May, plans to install scrubbers on some 270 ships at shipyards were canceled.

Currently, scrubbers are being installed on only about 100 ships, or 0.6 percent of the total tonnage of ships around the world. The figure is about one third of the more than 300 ships (1.8 percent) in early 2020.

The International Maritime Organization (IMO) lowered in January 2020 the sulfur content limit of ship fuel from 3.5 percent to 0.5 percent in all seas around the world. Under these regulations, shipping companies can respond by either installing scrubbers, or replacing fuel with low-sulfur oil, or ordering LNG-powered ships. Until the beginning of the year, many shipping companies had judged that it would be cheaper to install scrubbers than to use low-sulfur oil, which is about 50 percent more expensive than conventional fuel, bunker C oil.

Shipping companies suddenly began shunning scrubbers because Chinese yards which accounted for 76 percent of the world’s scrubber installations as of 2019 were shut down in the wake of the COVID-19 spread. In addition, as low oil prices continued in the aftermath of the COVID-19 crisis, the price gap between low-sulfur oil and bunker C oil narrowed significantly, falling from US$300 per ton in early 2020 to US$60 in June.

HMM began to install scrubbers on its vessels early when other shipping companies remained lukewarm. In the first half of 2020, 70 percent of the HMM fleet in operation were loaded with scrubbers.
Source: Business Korea

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