Scrubbers Will Only Get More Expensive, Not Cheaper, As 2020 Draws Closer

Monday February 13, 2017

From a cost perspective, the time is never going to be as good as it is right now to buy scrubbers, Nick Confuorto, President and COO of CR Ocean Engineering (CROE), has told Ship & Bunker.

The comments come in contrast to a recent survey by UBS Limited (UBS) indicating that, once the 0.50% global sulfur cap comes into play in 2020, around 19 percent of shipowners are planning to use scrubbers and carry on using HFO, rather than switching to use more expensive low sulfur fuels.

Of those planning to install scrubbers, the survey found "most" owners expect that both their cost and install time will decline as 2020 draws closer, suggesting there was value in waiting before investing in the technology.

"Today the price of scrubbers is the lowest you will see. From now on the pricing will only be going up due to higher material pricing and the higher demand. We are already seeing that effect on our costs from the suppliers," Confuorto told Ship & Bunker.

"The change that is now taking place in the cost structure due to the higher demand is also visible in the schedule.  What used to take us four weeks to get now is extended to more than 10 weeks in many cases.  Therefore, the companies that decide to wait in order to get lower pricing will be surprised to find the total opposite when they eventually buy the systems.  Costs are going up and schedules are extending.  It is a normal supply and demand effect."

There has also been some argument that scrubber technology will improve in the coming years, which again suggests value in waiting to invest, but Confuorto says this is also not the case.

"Several years ago when the marine technologies were first developed the costs were quite high because of the development costs.  That is not the case now.  The technologies are mature and the designs have been optimized," he said.

As for the total number of shipowners looking to install scrubbers, Confuorto says while UBS' finding of 19 percent is inline with other reports, he personally believes that, ultimately, many more shipowners than this will want to install scrubbers.

"I believe that 30-40% will want scrubbers but only the first ones who stop studying the issue and decide to move quickly to implementation will get the scrubbers installed before 2020," he warned.

"The scrubbing system suppliers can easily cover the first 20%, but all others will need to use the more expensive fuel until their scrubber project can be implemented."

While cost is relative, and ROI perhaps the more important metric, last December industry veteran Rudy Kassinger told Ship & Bunker the economics "are a slam dunk for scrubbers," with even the most conservative estimates indicating a typical scrubber installation would pay for itself within a year.