The Future of Scrubbers
“However, there has been no mention of a dramatic decline in bunker prices and lower spreads between very low sulphur fuel oil (VLSFO) and high sulphur fuel oil (HSFO) in recent public statements. The Covid-19 driven collapse in oil demand saw the differential between the two bunker fuels fall as low as $50-$60/tonne in March and April, compared to around $275-$300/tonne spread back in January 2020. As a result, the premium in spot earnings for scrubber equipped vessels declined substantially. Using TD3C as a guide, scrubber equipped VLCCs on average earned just $4,000/day more in April than tankers without scrubbers. This is compared to a premium of $16,000/day just a few months ago”, Gibson said.
According to the shipbroker, “due to these adverse market conditions, it is not surprising that there has been considerably less appetite for new scrubber installations. Wartsila announced a decline in new marine orders, largely due to a lack of scrubber investments. A similar trend has been confirmed by the classification society DNV GL, which also reported a slowdown in scrubber orders during the 1st three months of the year. The economics of a scrubber retrofit have certainly been impacted by narrower spreads. At a $60/tonne differential between the two bunker fuels, the repayment period of an investment in an open loop VLCC scrubber retrofit is expected to be somewhere between 3 to 4 years, depending on a fuel efficiency of a tanker. The repayment period is shorter if the technology is installed on a newbuild due to lower installation costs and no offhire time. However, even here it would still take somewhere between 18 to 26 months to repay the investment”, Gibson noted.
“Yet, the picture could change again in the future. Oil prices are expected to rebound once the world recovers from Covid-19, whilst OPEC+ is likely to continue its efforts to support oil prices. Further down the line, the upward pressure on oil prices could also intensify due to the major reductions in CAPEX by oil companies seen at present. With this in mind, investment in exhaust gas cleaning technology could come back on the agenda. Expectation of higher prices in years to come is perhaps one of the reasons why delays to scrubber installations and not outright cancellations are currently the preferred strategy of tanker owners”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide