Scorpio Bulkers postpones 13 scrubber installations amid investment cuts
Dry bulk company Scorpio Bulkers said Monday it has delayed the installation of 13 scrubbers as part of a wider effort to cut costs.
“In April 2020, the company reached an agreement with its counterparties to postpone the delivery of exhaust gas cleaning systems, or scrubbers, on 13 of its vessels until at least 2021 at no additional cost to the company, ” Scorpio Bulkers said in its Q1 earnings.
“This is expected to delay the payment of between $20 million and $25 million of expenditures until 2021 at the earliest,” the company added.
Ships have not been allowed to burn marine fuel with a sulfur content of more than 0.5% on the high seas since January 1, 2020 unless they are fitted with a scrubber, according to International Maritime Organization regulations.
A deteriorating global economic situation, which has impacted the dry bulk segment heavily, has come at the same time as a diminishing spread between 3.5% sulfur fuel oil, which would require a scrubber to be used on board, and more expensive 0.5% sulfur fuel oil.
S&P Global Platts assessed the premium of delivered 0.5% S FO over 3.5% S FO at Rotterdam at $53/mt Monday, down from $296/mt on January 2. According to calculations from Norwegian risk management company DNV GL, this increases the payback time from one year to about four years for open-loop scrubbers and six years for closed-loop scrubbers.
The S&P Global Platts Scrubber Premium Index, which measures the difference in earnings potential for vessels between scrubber-fitted and non-scrubber ships, has tumbled since January as the high-sulfur spread has narrowed. The Panamax Scrubber Premium Index has fallen from $5,994/d on January 6 to $1,051/d on May 11, meaning the initial scrubber investment may take up to six times as long to recoup.
Scorpio Bulkers had completed installation of 22 scrubbers as of May 8, the company said. It listed seven vessels that are still due for to receive scrubbers between Q2, 2020 and Q4, 2021 at a total estimated cost of $46.743 million with individual units estimated to cost between $2.126 million and $14.115 million.
“We have strengthened our balance sheet by vessel sales and sale leasebacks, we have reduced capital expenditures by adjusting our scrubber installation schedule, we have reduced our quarterly cash dividend and we have sold a portion of our shareholding in Scorpio Tankers for net proceed amounting to $42.7 million,” Scorpio Bulkers said.
Sister company Scorpio Tankers said May 6 it was postponing the installation of 19 scrubbers, which are now not due to be fitted until at least 2021.