Scrubber Spread Dips Below $100/MT for First Time Since January 2021

The spread has mostly remained above $100/mt over the past four years. Image Credit: Ship & Bunker

The global average price spread between VLSFO and HSFO -- a key measure of the profitability of scrubbers -- has dipped below the psychologically important level of $100/mt for the first time in almost two and a half years.

The spread between Ship & Bunker's G20-VLSFO and G20-HSFO indices of average prices across 20 leading bunkering ports narrowed by $8.50/mt to $97/mt on Monday. That marked the first time it has dropped below $100/mt since January 14, 2021.

The spread has averaged at about $170.50/mt since the G20-VLSFO Index launched in July 2019. Over that period its record low was $67.50/mt, in November 2020, and its record high was $420.50/mt in May 2022.

The price spread between the two fuel grades indicates how much money a scrubber-equipped ship can save by using HSFO versus the more expensive VLSFO. Scrubbers strip the sulfur emissions from a vessel's exhaust, allowing it to use HSFO while still complying with sulfur emission regulations that would otherwise make it illegal.

Scrubber industry representatives have previously talked of the $100/mt spread level as a rough indicator of where installing the systems starts to look profitable. Higher price spreads will mean a shorter payback time for the capital expenditure on installing the equipment.

The spread tends to narrow in times of sharp declines in the crude market, with the middle distillate element in VLSFO pricing tending to drop more quickly than residual fuel oil when the overall oil complex is falling. Conversely, sharp rises in crude tend to be accompanied by a widening of the spread.