Industry Insight: Scrubber Sales Flop - Is Brussels to Blame?

With the low sulphur fuel deadline almost upon us, it is fair to say that sales of scrubbers have flopped. The true number of units sold is impossible to ascertain with precision given widespread use of confidentiality clauses, though according to one industry association estimate it stands today at around 200.

With thousands up ships trading regularly in the sulphur emissions control areas of the North Sea, English Channel and Baltic Sea, this means that only a tiny fraction - perhaps little more than 5% - will be relying on scrubbers to comply with the 0.1% requirement when it becomes legally binding in January.

There have been a few large orders - notably Danish operator DFDS and cruise giant Carnival - but shipowners have by and large held back from investing amid continuing uncertainty. Top of their list of concerns is reliability; many owners do not believe scrubbers actually work.

Even those willing to take the plunge have done so in some cases on a trial basis. One large owner told the Maritime Watch that his deal would not require him to pay a single euro unless tests proved units provided total compliance. The much publicised Carnival order includes units that are both leased and owned.

While continuing to insist scrubbers can do the job, equipment manufacturers admit off the record that they have struggled with the technology. Problems including weight, reduced carrying capacity and waste disposal will no doubt be resolved in time, but for the moment this remains a technology that is still in need of perfecting.

Low Sales

Brussels regulators, including both the European Commission and the European Maritime Safety Agency, have in the past suggested reports of low sales were merely a ploy by those arguing for implementation delays or exemptions. The evidence, however, would suggest otherwise.

A Germany-based scrubber manufacturer filed for insolvency in December after selling just two units in five years. That company put the blame in part at the door of Brussels. The European Commission should have funded a trial, company management said, so that owners could see the system in operation. "There was no support from the EU for tests, for providing samples for the market, and no support from harbours either," said the head of the sales force.

Liquefied natural gas-powered ships are hardly taking off either. Representatives of the Commission, European Parliament and Council of Ministers were due to meet on March 5 to thrash out a deal on the EU's so-called "clean fuel strategy". Much to the frustration of the Commission, governments don't want to make any guarantee that LNG bunkering will be available by 2020. When launching this legislation, the Commission claimed funding for LNG fuelling would not be difficult to find; this has turned out to be optimistic, to say the least.

It is easy to apportion blame with hindsight. Owners and equipment manufacturers could have approached regulators with a joint plan to promote scrubbers rather than simply arguing with each other as the legislation took shape. They didn't, and both have now lost out.

Inefficient ships trading in the SECAs are in trouble given that fuel in some cases represents a huge proportion of their total costs. As operators are forced to purchase more expensive marine gasoil, these ships could well be forced out of the market next.

This is in turn perhaps good news for operators of more modern fleets, who could win market share. Modal backshift, meanwhile, could occur on specific routes.

The EU sulphur Directive looks set to trigger fundamental change in the SECAs as competition becomes essentially a question of fuel efficiency. Brussels was hoping this change would give a boost to both scrubber sales and alternative fuels. But at present, this policy cannot be called a success.

Industry is not prepared for the 2015 deadline. To judge by the rate of progress, the 2020 deadline is also in doubt.