Scrubbers set to earn owners 'substantial' profits

Analyst predicts fuel price spread will reward owners that opted for scrubbers

Capesize bulkers fitted with scrubbers on average can look forward to cost savings in the region of $6,500 a day or more while VLCCs also employing exhaust gas cleaning systems could save upwards of $15,000 a day, according to analysis by Maritime Strategies International (MSI).

Just two days ahead of the enforcement of IMO 2020 on 1 January, the London-based analyst said that the fuel price spread is ready to offer substantial rewards for ships that opted for scrubbers.

Other analysts, including Deutsche Bank, have recently come to similar conclusions.

On an annual average basis, MSI cites a $200 per tonne difference between high-sulphur- fuel oil (HSFO) and IMO 2020-compliant very-low-sulphur fuel oil (VLSFO) while, on the same basis, the price difference between HSFO and marine gas oil (MGO) is $300 per tonne.

MSI managing director Adam Kent said the price spread has been caused by a fall in the price of HSFO, which is burned by ships with scrubbers.

Kent said: “So far price dynamics are adhering to our view that there won’t be a huge price spike in low-sulphur fuel, but rather the spread will be driven by falling HSFO prices.”

At a higher annual average price spread between HSFO and VLSFO of $300 per tonne capesizes could save $9,700 per day while for VLCCs the savings would be a whopping $23,000 a day, MSI estimates.

Increasing volatility

Kent said: “Our spread projections may appear conservative given the upheaval in the markets, but they reflect annual average prices. The first half of 2020 is likely to be more volatile and given the rapid decline in HSFO prices, MSI expects more exaggerated price differentials in the first quarter of 2020.”

According to analysis by Reuters, shipping companies appear to be showing a strong preference for VLSFO as the main compliance method rather than marine gas oil (MGO) which is another option.

Prices between MGO and VLSFO have been narrowing at all the major bunkering ports at around $600 to $650 per tonne as the price of low-sulphur fuel rises.

The Reuters report quoted Robert Campbell, head of oil products at consultancy Energy Aspects, who said: “Shipowners have shown a clear preference for VLSFO-type fuels over MGO, probably due to viscosity and other factors, so the rise in VLSFO relative to diesel effectively permits blending a wider range of heavy components into VLSFO blends.”