Over the course of the past couple of months, there has been news of mass installations of scrubbers on board entire company fleets, ranging from tankers, to dry bulk carriers and container ships. And there’s a pretty good reason for this, as analysts are suggesting that those vessels will have a competitive advantage over the rest of the fleet when the IMO 2020 rules come into effect.
In its latest weekly report, shipbroker Intermodal said that “since the IMO’s 2020 global cap on sulphur in marine fuels is coming into force, ship-owners have to decide whether they will operate using emissions compliant fuels, or ensure that emissions are cleaned using an exhaust gas scrubber. We saw that even though scrubber retrofits started slowly, momentum has been building up as owners that are time-chartering their vessels stand to benefit. There are currently reported more than 1,600 ships with confirmed scrubber projects when back in 2015 the number was in the low 200. Most of the recently signed projects are for bulk and oil/chemical ships, with bulk carrier retrofits in the first place, oil/chemical tankers in second and containers in third place”.
Intermodal noted that “as per Skandinaviska Enskilda Banken AB’s (SEB) IMO 2020 Report, it is estimated that less than 2,000 vessels will have been fitted with scrubbers by the implementation date, while a significant price delta between HFO and LSGO is also projected, providing the scrubber installed vessels with a significant short-term advantage post 2020. With most reports out there highlighting this advantage one would normally wonder why aren’t more owners rushing to install scrubbers at the moment”.
According to Intermodal’s Oil Products expert, Mr. Apostolos Rompopoulos, “we understand that this “wait and see” approach is compounded by the fact that owners pay for scrubbers (CAPEX) and charterers pay for fuel (OPEX), and that if most vessels are operating without scrubbers, charter market prices will largely be set by those vessels factoring in higher fuel costs without a competitive disadvantage. According to the same analysis by SEB, those moving to install scrubbers now will be at a competitive advantage compared to their non-scrubber counterparts in the first few years after the implementation. These first movers will likely be able to charge substantial “freight rate premiums” to account for the fuel related savings while operating the vessel. These premiums are projected to allow for a quick payback on the initial investment as others are focusing on scrubbers”.
Rompopoulos added that “we have seen Koch fixing the M/T New Champion (310kdwt, blt ’18 China) from China Merchants Energy Shipping for two years at $29,750/day with an option to upgrade the ship with scrubber installation and increase the daily rate up to $35,000/day. MSI has also calculated that in 2020, the value of the time charter premium for a Capesize vessel fitted with a scrubber will be $12,100/day, for a Panamax vessel it would be $6,800/day, $6,300/day for an Ultramax and $5,100/day for a Handysize. MSI also predicted increased asset values for tankers with scrubbers given that the time-charter premium exists”.
He concluded by noting that “as the 2020 deadline approaches it becomes clearer that vessels with scrubbers will definitely benefit with substantial premiums, while the extend of the period during which these premiums will apply remains key to the competitive advantage the scrubber investment can offer. As far as bigger ships in either sector are concerned, the installation of a scrubber is considered a no brainer for most, while when it comes to smaller sizes things are not as straightforward, with slow steaming slowly but steadily starting to become a topic of interest as a result”.
Source: Hellenic shipping news