View above about Issue: Odds that Ship Owners Opt Not to Install Marine Scrubbers vs. Using VLSFO fuel.
At times in January it looked as though shipowners who’d invested in scrubbers for their fleets could see payback periods of less than two years in some cases. By March, however, the spread between 3.5% HSFO and 0.5% VLSFO dropped to as low as $40 a tonne from over $300, and payback periods are now commonly assumed to be at least four or five years. We’re unlikely to see sustained interest for retrofitting scrubbers as long as the spread remains low. On newbuilds, I’m slightly more optimistic about positive economics.
One of the linchpins of scrubber adoption is the cost savings vs. burning very low sulphur fuel (VLSFO). Coronavirus and the Saudi / Russia oil price war has flipped the script and is decimating IMO 2020 ship-scrubber savings. Marine-fuel pricing has actually fallen year-on-year and the predicted savings from exhaust-gas scrubbers have increasingly evaporated. On Jan. 6, the VLSFO-HFO spread peaked at around $350 per ton. A large container ship with a capacity of 10,000 twenty-foot-equivalent units or more, sailing at 16 knots, would burn about 100 tons of fuel per day — meaning that such a ship, if it had a scrubber, was saving $35,000 per day. Scrubber savings are down to just $1,400 per day for Capesizes and $1,200 per day for VLCCs. These represent declines from January highs of 86% and 95%, respectively. Not only are savings from scrubbers being squeezed, one of the rationales for installing scrubbers in the first place — to protect against a higher fuel bill — has been undercut. Ship owners are now paying less for IMO 2020-compliant VLSFO than they did for more polluting HFO one year ago. The average price for VLSFO in the world’s top four bunkering hubs was $352 per ton on Monday, according to Ship & Bunker. One year prior, the average price of HFO in those hubs was $428 per ton, equating to a year-on-year savings of 18% for non-scrubber ships. It no longer makes sense to install a scrubber and filter providers such as LiqTech will likely see a reduced outlook for demand.