Scrubber sentiment continues upward trend

Malcolm Latarche
Malcolm Latarche
ShipInsight

26 October 2018


As the IMO at MEPC 73 continues to hold the line against what some see as attempts to delay the 2020 introduction of the sulphur cap, scrubber suppliers, installers and proponents continue to ride the growing wave of sentiment around exhaust gas cleaning systems.

At the start of the week, Wärtsilä reported its Q3 figures with scrubbers helping to boost income for the Marine Solutions business by 55% compared with Q3 last year. Year on year the figures are a 21% increase but the surge in scrubber orders has been more recent and looks to continue for the rest of the year and through into 2019.

Installers and engineering concerns are also benefitting as in a separate development, Roy Strand, COO of Goltens said that he believes scrubbers will be the clear choice for many, “When emissions regulations are applied globally, the investment in exhaust cleaning will make more sense to many operators. There will be more customers who choose to invest in scrubber technologies due to the clear payback.”

“Prior to 2018, Goltens Green Technologies had been involved in many emissions control projects evaluating the retrofit of scrubbers, but most of these projects involved cruise and ferry operators and other vessels that spend large amounts of time in the ECAs,” Strand said. “For other operators, the retrofit projects involved lower cost piping system modifications and fuel oil cooler installations to allow vessels to periodically operate on LSGO as required.”

However, he has observed a major uptick in interest since the beginning of 2018, with a much broader range of companies actually pushing to retrofit with scrubbers. “This has resulted in longer lead times for scrubber delivery and increasing competition for the attention of some of the leading scrubber manufacturers. That said, it still does not appear to be the decision most owners are making.”

In Skandinaviska Enskilda Banken AB’s (SEB) IMO 2020 Report, they estimate that fewer than 2,000 vessels will have been fitted with scrubbers by the implementation date, and further project a significant price delta between LSGO and HFO providing the scrubber installed vessels with a significant short-term advantage post 2020.

The SEB report highlights that this “wait and see” approach is compounded by the fact that owners pay for scrubbers (CAPEX) and charterers pay for fuel (OPEX), and that if most vessels are operating without scrubbers, the market prices will largely be set by those vessels factoring in higher fuel costs without a competitive disadvantage.

The analysis further highlights that those moving to install scrubbers now will be at a competitive advantage compared to their non-scrubber counterparts in the first few years after the implementation. These first movers will likely be able to charge significant “freight rate premiums” to account for the savings on fuel associated with operating the vessel. These premiums are projected to allow for a quick payback on the initial investment as others move more gradually to scrubbers.

At that point, SEB contends that “it will be too profitable and too tempting not to install a scrubber in 2020”. Roy Strand concurs, but adds that the likely question for late adopters will be: “How long is the wait?”

The cost advantage of installing scrubbers was further underline when Greek operator Costamare presented its Q3 report. As well as securing funding for newbuilds, the company said that it will be retrofitting five Post Panamax container vessels. Following the installation of the scrubbers, the existing charter rates will be increased and the original charter expiry, ranging from 2023 to 2024, will be extended for a period of 3 years.

Danish shipowner Norden, revealed plans earlier in the summer for up to 31 retrofits including eight on time chartered in vessels. This week it was revealed that some of the contracts will be carried out by the Besiktas shipyard in Turkey.