Fathom Spotlight: The Scrubber Market - Reflection On Uptake & Growth

by Fathom
Tuesday June 30, 2015

Following the limits for sulphur content in marine fuel dropping from 1.0% to 0.10% in Emission Control Areas (ECAs) as of 1 January 2015 the attention of ship owners has turned sharply to scrubber systems as a means of compliance, largely due to the ability for operators to continue using heavy fuel oil (HFO) over distillates such as Marine Gas Oil (MGO).

In this week's spotlight Fathom takes a look at the developing scrubber market and the challenges of ECA compliance options which have driven demand for scrubbers further.

Fuel switching, an alternative method where low-sulphur fuel is used in ECAs and HFO is used outside of ECAs, has been subjected to some scrutiny in light of the compatibility issues which occur when switching. Some of these issues have resulted in loss of propulsion, and even onboard fire. The scrubbing technology market has been able to exploit such technical issues as scrubbers provide a compliance option which, once installed, is both relatively safe and maintenance free, with the added benefit of continuing HFO use.  On the downside, the selection of scrubber options used to be relatively limited and those available did not display the same flexibility they do today to suit the varying needs of ship owners and operators. Their high costs and large spatial design has led to stability and operational concerns, making them a complex piece of equipment to consider.  However, the technologies are adapting to address such issues and market uptake is increasing.

The History: From Land To Sea

The 1930s saw the adoption of scrubbing technology to remove SOx and particulate matter (PM) from gaseous emissions in landbased industries. During the 1960s, the scrubber technology was developed for the maritime industry and introduced as a method for scrubbing exhaust gas emissions from the tanker's boiler plant. The technology was initially not used for emission control but as an inexpensive way to produce inert gas for reducing the fire hazard in the cargo tanks of tankers during unloading.

In 1991, the first prototype scrubber for controlling exhaust gas emissions was installed onboard a ship and by 1998, the seawater (open-loop) scrubber had advanced enough to enable a comprehensive field trial. The Canadian ice breaker Louis S. St-Laurent was subjected to 22-days of testing during a 6-week transatlantic voyage.  Since 2008, scrubbers have been accepted by the International Maritime Organization (IMO) as an acceptable alternative method for complying with SOx emission reduction regulations.  In October 2013, it was reported that an increasing number of commercial ships with scrubbers were entering operation. The Jolly Diamante, a 45,000DWT Ro-Ro ship owned by Ignazio Messina was fitted with four open-loop Wärtsilä scrubbers for the auxiliary engine and a fifth one for the auxiliary boiler. This ship, along with three others, was the first to gain RINA's Green Plus notation.

A Highly Dynamic Market

The scrubber market is highly dynamic due to the recent enforcement of ECAs combined with the current fluctuating oil prices and the uncertainty lying within future prices. From March to September 2014, the scrubber uptake doubled from previous years, however, a 19% growth in uptake has occurred in the recent four months up to January 2015, indicating a drop in light of the changing oil prices.

As of 31 January 2015, The Exhaust Gas System Cleaning Association (EGCSA) estimates there are a total of 160 scrubbers installed with 300 units in total installed or on order. This compares to 135 installations in September 2014, indicating the sharp increase of marine scrubbers in the market prior to the 0.1% sulphur limit. EGSCA incorporates a number of members to help create sustainable operating conditions within the marine environment. According to the association, members, installations and EGCS orders have doubled in the year to July 2014.

Market Drivers And Growth

But what about the drivers behind the expanding scrubber industry? It is clear that the ECA sulphur regulations have been at the forefront of driving technological innovation within the industry. However, it is also apparent that scrubber manufacturers have taken onboard the concerns ship owners and operators previously had regarding scrubbers and their practicality in real operational environments. For instance, manufacturers have gone one step further in their development of intelligent technology to develop scrubber systems which are not only smaller than previous ones, but also more lightweight and therefore put much less pressure on the cargo carrying capacity.

The market is also seeing an upgrade of scrubbing technology to incorporate silencers which means they can replace the existing silencers, instead of contributing to the space taken up by the scrubber. For example, both Green Tech Marine and AEC Maritime were two of the first companies to enable a double up of the silencer to minimise total weight and space and therefore to reduce costs. The clear cut improvements scrubber technology companies have made ensure they are meeting the strenuous demands of ship owners and operators and the regulations they face with as much simplicity as possible. 

Furthermore, the cost of scrubber investment, which can lie anywhere in-between US $4 million and $11 million, has been reduced by the addition of financial schemes to permit installation without the initial upfront costs. In April 2015, DeltaLangh announced their collaboration with the Finnish Export Credit Agency (Finnvera), which offers guarantees to help its customers. A price of US $1.03 million for 12 fixed months is offered, which permits purchasers of the scrubber to upgrade from the hybrid-ready to the fully functioning hybrid system without further cost.

Future Of Scrubbers And Market Projection

An increase in the uptake of scrubber systems is expected for the future and investment is predicted to reach US $25 billion over the next 15 years. This of course depends on regulatory and market developments and the technical progress in alternative methods.  Future uptake will also depend on the price differentials between MGO and HFO, which has previously been as much as US $350 per tonne fuel. If scrubbers continue to prove cost effective for cleaning exhaust gases, in terms of initial cost and ease of operation, and low-sulphur fuel is potentially at a risk of shortage with increased demand for compliance, then the market uptake of scrubbers can be predicted to continue increasing as it has done for the past few years.