Despite being affected by extended off-hire periods due to installations, the benefit to Scorpio Tankers has far exceeded expectations the company said when presenting its Q4 2019 results this week.
Emanuele Lauro, CEO and Director of Scorpio Tankers said, “Operationally, the fourth quarter was affected by the scrubber retrofits. Across the industry, off hire periods were undoubtedly extended as repair yards struggled with the volume of work. We were not immune from this. Against that backdrop, was the decision taken to delay some yard visits to benefit short-term from the higher rate environment. Here in mid-February, we sit with over 50 vessels already retrofitted, including a substantial amount of our LR2 fleets. We can already say at this stage that we envisage paybacks in our base case look to have been far exceeded. We expect that spreads between low-sulphur blends and traditional fuel oil to remain wide. So that as more of our fleet become scrubber equipped, we will benefit from enhanced time charter equivalents”.
In response to audience questions, Scorpio’s Commercial Director Lars Dencker Nielsen said in January 2020 scrubber equipped LR1 tankers enjoyed a premium of $5,400 per day, LR 2 tankers $5,300 per day and MR tankers $2,800 per day.
Cameron Mackey, Scorpio’s Chief Operating Officer in discussing the price difference between 2020 compliant fuels and HFO said “A lot of people have talked about what they expect to happen in terms of VLSFO pricing, but not a lot of people are talking about where all the HFO is meant to go. So obviously, the spread is highly correlated to the price of the barrel. Over the longer term we expect a healthy wider for longer spread, well north of $200”.