LAST WORD

SCRUBBERS:

SETTING THE SCENE

Perhaps a pointer towards the success of exhaust gas abatement technology, was BIMCO’s recent comments on the level of high sulphur fuel oil (HSFO) sales in Singapore during the first quarter of this year.

Sales actually increased and it was the only bunker fuel to register a year-on-year growth pattern in the world’s largest bunkering hub.

“After the quick adjustment to the global sulphur cap, the decline in HSFO’s share of total bunker sales has stopped,” says Peter Sand, BIMCO’s Chief Shipping Analyst. “Although its share is much lower than any time prior to 4Q19, the steadily rise in scrubber-fitted ships has supported demand for HSFO and will remain until new solutions and future fuels are widely introduced on the industry’s path to de-carbonisation

“In addition to changing the share of fuel types being sold, the global sulphur cap has also resulted in larger bunkering hubs gaining an even larger market share, and recording growth in 2020 despite a drop in total bunker sales.

“This development was due to owners and charterers seeking to minimise risks by choosing the biggest bunker hubs in the face of uncertainty surrounding the new fuel types,” Sand adds.

FITTINGS DOUBLED

BIMCO’s research showed that the number of scrubber-fitted ships doubled in the 13 months after the global sulphur cap came into force, fuelling a rise in highsulphur fuel sales. There were 4,006 scrubber-fitted ships at the end of 1Q21, up from 2,010 ships in January 2020.

Across the four major shipping segments, this averaged 24.1% of the total fleet, when measured in deadweight tonnes (and TEU for containers) terms.

Crude oil tankers had the highest share, at 30.5%, while the oil products tanker fleet had the lowest at 13.8%. At the start of 2020, the average share across these four fleets stood at just 12.9%.

However, scrubber fittings have slowed since their peak in January, 2020, during which 259 ships either had a scrubber retrofitted or were delivered with a system on board. In the first three months of this year, 228 ships were fitted per month.

Of the 228 ships fitted with scrubbers thus far this year, some 153 were newbuildings, with only 75 ships being retrofitted. This is almost the exact opposite of the split in 2020, when out of 1,768 ships fitted, only 479 were newbuildings, while 1,289 were retrofits.

Although the pace of scrubber installations has slowed, the economic case for a scrubber is still strong. After the ups and downs of 2020, the price spread between HSFO and LSFO has stabilised at an average of $100 per tonne in the major bunkering hubs.

Sand says: “With the spread now stabilising at a more normal level, a scrubber investment still represents a solid economic decision for owners, as higher earning — thanks to lower voyage costs — are enough to cover the initial cost as well as the running costs of the scrubber within a reasonable period.

“Low demand for certain oil products as a result of mobility restrictions has helped lower the price of LSFO. However, as demand for products such as jet fuel starts to recover, the HSFO/LSFO spread may well increase, solidifying the economic case for scrubbers.

“A return to the high levels of scrubber installations that we saw at the end of 2019 and start of 2020 is, however, unlikely as the majority of owners who wanted to retrofit their ships have now done so and the majority of scrubbers being added to the fleet now come from newbuilds,” Sand concludes.