Wärtsilä: A Lot of Customers Are Planning to Use Scrubbers to Meet Global 0.5% Sulfur Cap

President and CEO Bjorn Rosengren says the market is not as strong as he expected.

Wärtsilä President and CEO Bjorn Rosengren says he believes that many ship operators will choose to use scrubbers to meet a 0.5 percent global sulfur cap for marine fuel when it comes into force in 2020 or 2025.

"This is only a new build market today, but as soon as the legislations will come this is a huge market," Rosengren said during the company's recent earnings call as quoted by SeekingAlpha.

"I met a lot of customers that are now planning for preparing using scrubbers to reach 0.5 percent sulfur index."

Rosengren says Wärtsilä currently has "a good product" and "good market share" for scrubbers, and booked five orders during the second quarter.

However market activity for scrubbers is much more subdued than he expected, as operators currently seem content with using low-sulfur fuel for compliance thanks to a significant drop in bunker prices over the last year.

Data from Ship & Bunker shows that in Rotterdam on Wednesday, 0.10 percent maximum sulfur Emissions Control Area (ECA) compliant MGO had fallen 54.6 percent, or $391.50 per metric tonne (pmt) over the last year to $471.00 pmt, having hit a high of $869.00 pmt on August 1, 2014 and a low of $462.50 pmt on January 21, 2015 in that time - a spread of $406.50 over the 12 month period.

The ferry and cruise industries are the sectors currently most active in adopting the technology, Rosengren said, but the merchant segment was now showing an increasing level of interest.

"We are optimistic, still, but as you know, we have tuned it down a little bit from the beginning of course we thought it would be an explosion within this area," he said.

"It hasn't been, and many ship owners are using low sulfur fuel today, especially now when the oil price is lower."

However in the long term, Rosengren says scrubbers have a bright future.

"This is going to be a market," he said.

China

One area in particular where Rosengren sees growth is China, which as reported by Ship & Bunker has in recent months moved closer to establishing its own ECA.

"We made a license agreement with the Chinese on scrubbers, so we're preparing ourselves for that legislation to come," he noted.

A global sulfur cap of 0.5 percent for marine fuel, down from the current level of 3.5 percent, will come into force in 2020 or 2025 pending the outcome of an International Maritime Organisation (IMO) fuel availability study scheduled for 2018.

Last month Hong Kong's under-secretary for the environment Christine Loh said a potential low-sulfur zone to be established in the Pearl River Delta (PRD) has a high chance of success following China's growing interest in improving the country's air quality.