Scrubber orders continue to flow
Following the recent trend for using financial reporting to outline owners’ 2020 compliance strategies a number of shipowners have confirmed that scrubbers will feature strongly.
US-based container carrier Matson is planning to equip three of its fleet operating on its China-Long Beach Express (CLX) service with scrubbers. One of these retrofits had already been announced but two more were mentioned in the Q3 report. The three scrubbers will be fitted in 2019 at a cost of $9m per vessel. Three ships operating on Matson’s Alaska services are already fitted with scrubbers. “The implementation of scrubbers on three of our five vessels on CLX allows us to continue to burn less expensive fuel,” Matt Cox, Chairman and CEO of Matson, said, adding that this puts the company in a good competitive position, regardless of the market conditions. “We are making no predictions, but at the next drydock period on those vessels, we will be taking a hard look at whether or not to install over time scrubbers on the remainder of our fleet,” Cox said.
Another US-based operator, Eagle Bulk, at its Q3 reporting has also confirmed its commitment to scrubbers. Back in September, the company announced a series of agreements for the purchase of up to 37 scrubbers to be retrofitted on vessels within its fleet. The agreements comprised firm orders for 19 scrubbers and up to an additional 18 units, at the company’s option. At the time Eagle Bulk said the projected cost, including installation, was approximately $2million per scrubber system.
Earlier this week the company was able to announce that a majority of investors had voted to approve amendments to its bond terms to finance more scrubber retrofits. The amendment to the bond terms would allow for the use of proceeds from the sale of security vessels, up to a proposed $25 million for the partial financing of scrubbers. This would finance four exhaust gas cleaning systems to be retrofitted to the company’s fleet of vessels and options to purchase 18 additional scrubbers, the company said.
Another US-based operator, International Seaways, confirmed earlier announced plans to install scrubbers on seven of its VLCCs along with three more options. ”During the third quarter, we maintained a lean and scalable model, total liquidity of $173.9 million and took steps to enhance our earnings power ahead of a market recovery, as we operated through a low point in the tanker cycle,” said Lois K Zabrocky, International Seaways’ president and CEO. “Following a comprehensive analysis, we signed agreements to install Clean Marine scrubbers, a leading provider with systems well suited to tankers, on our modern VLCC fleet with engineering and installation to be provided by Hyundai Global System. We believe the decision to install scrubbers on our largest ships is consistent with our commitment to the environment and will provide the Company with an economic advantage”.
The VLCCs were the highest consumers of bunker fuels in the International Seaways fleet, amounting to 40% of total consumption. Its 10 VLCCs intended for scrubber installation are all ECO-ships. The first seven scrubbers will be installed prior to 2020 with the remaining three in the first quarter of 2020. The scrubbers are open loop types but can be converted to hybrid systems if required.
However, not all shipowners are convinced about scrubbers. Euronav’s objections have already been reported and this week Irish product and chemical tanker operator Ardmore also came out as opponents.
According S&P Global Platts the company doubled down on its decision against installing scrubbers on its fleet of 28 medium range and chemical tankers.
The recent uptake in scrubber orders will be restricted by "installation complexity and rigid docking schedules," said CEO Anthony Gurnee, adding that "less than 4% of the global fleet will be fitted with scrubbers" by the January 1, 2020, regulation implementation date. With the estimated costs of installing scrubbers on Ardmore's fleet, the company would rather invest in buying ships rather than installing the scrubbers, he added.
On the availability of different fuel grades after the IMO 2020 implementation, Gurnee stated that 3.5% HSFO would likely be available at all main ports with VLSFO, though likely not at less-trafficked out ports. The lack of available HSFO at discharge ports could limit MR trade routes, should the MR run on a scrubber. "We often have no idea where our MR ship is going because we give the oil trader such a huge number of discharge options," he said. "The way we trade our ships, scrubbers are interesting, but not compelling."