Platts sees two-tier market for VLCCs as scrubbers prove profitable

Analyst S&P Global Platts is reporting that a two-tier market is developing in the VLCC sector where tankers with scrubbers are showing daily earnings while non-scrubber equipped vessels are running into losses.

The narrow discount that HSFO enjoyed over LSFO for a part of last year, left many owners with second thoughts of installing scrubbers, while others were concerned they would not be able to recover the installation cost which ran into millions of dollars. However, with LSFO prices in Singapore rising above the key psychological mark of $500/mt, this is changing and in many tanker segments, particularly VLCCs, only those with scrubbers installed are making money on key routes.

Relatively older VLCCs, which are fitted with scrubbers, are likely to earn $10,000/day more than the younger ones without scrubbers on the key Ras Tanura-Ningbo route, a senior shipping executive in Athens told S&P Global Platts. This is because of the wide discount that HSFO enjoys over very low sulphur fuel oil, which is estimated at around $120/mt in Singapore. The discount had slipped to just around $60-$70 in early April last year, Platts data showed.

Sources quoted in the Platts article say VLCCs using VLSFO have been losing anywhere between $2,400-$3,200/day when chartered out for spot voyages on the Persian Gulf-North Asia routes during the last two weeks. However, those with scrubbers can use the cheaper HSFO and earn close to $5,000/day, the estimates showed. For scrubber fitted VLCCs that opt for shorter voyages such as the PG-West Coast India route, daily earnings are even higher at around $14,000 compared with $6,200 for ships using LSFO, brokers said.

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