March 29 ------ There are approximately 4,000 ships fitted or about to be fitted with a scrubber as of March 2020, according to the data from the DNV GL classification society. Interest in scrubbers peaked in 2018 and 2019 ahead of the implementation of the IMO 2020 sulphur cap that entered into force in January 2020. Until the spring of 2018, only about 400 vessels had installed scrubbers, mainly operating in Emissions Control Areas. From the summer of 2018 until September 2019, orders accelerated quickly, with more than 3,000 vessels, corresponding to approximately 15% of global marine fuel consumption, according to DNV GL. The figure at the moment stands at 4,014 ships, with majority of scrubbers being open-loop (3,249), followed by 678 hybrid systems and 634 closed-loop scrubbers.
Data from DNV GL, indicates that out of the total, newbuild installations account for 1,054 ships, while 2,960 ships were retrofit projects. Bulk carriers have claimed the biggest portion of the total number of installations, with 1,365 ships fitted with scrubbers, followed by containerships with 814 vessels, crude oil tankers with 572 ships, oil/chemical tankers with 520 ships and cruise ships with 215 units. The key driver behind the surge in orders was the expected charter premium for ships installed with scrubbers stemming also from significant fuel price differentials between HFO and LSFO. Nevertheless, the recent turn of events characterized by the outbreak of Covid-19 and the oil price war between the Saudi Arabia and Russia seems to have cut the prices of compliant fuels, narrowing down the spread between HSFO and 0.50% VLSFO, much quicker than many expected.
Based on the latest figures from Sea Intelligence, the low-sulphur premium dropped from a peak around 300 USD/ton at the start of the year down to 60 USD/ton, undermining the investment case for scrubbers. DNV GL said that some stakeholders are anticipating an accelerated uptake of scrubbers again as the payback for larger ships, in particular, should still be attractive. According to the Clean Shipping Alliance 2020 (CSA 2020), which represents companies from the commercial and passenger shipping industries that have invested in scrubbers, the market should not dwell too much on the narrowing fuel price spread given the unprecedented circumstances on the market right now.
The alliance claims that bunker prices are bound to be distorted due to the difficult and challenging post-coronavirus market, exacerbated by the spat between Russia and Saudi Arabia which is culminating in an oil surplus in a market where demand has reached a nadir. “Certainly, media reports concerning the narrowing of fuel prices should not be a deterrent to the wider take-up of marine exhaust gas cleaning systems (EGCS) as the technology remains the optimal, most effective means of meeting MARPOL Annex VI requirements. The use of EGCS also avoids the uncertainty surrounding the quality and availability of VLSFO,” Ian Adams, Executive Director, Clean Shipping Alliance 2020, said. “Existing and new users of EGCS have invested in the technology first and foremost to reduce the impact of sulphur emissions on human health. Indeed, with members of the Alliance reporting that their installations are reducing sulphur emissions down to less than 0.10%, well below the mandatory 0.50%, then their investments can be considered not only sensible but successful.”