Majority of Scrubber Investments have Already Reached Break Even: New Study

Part of a marine scrubber system. File Image. Image Credit: Ship & Bunker. 

A new study published today in Nature has found that the majority of shipowners who installed scrubbers have already reached the break even point on their investments, and the technolgy provided strong economic incentives for shipowners. 

The study by Anna Lunde Hermansson et al looked at a total of 3,818 unique ships and used bunker price data from Ship & Bunker as part of its economic calculations.

It found that within five years after installation, more than 95% of the ships with the most common scrubber systems reach break even.

Moreover, those that had chosen to install scrubbers and burn less expensive HSFO had made significant savings.

Calculating the collective cost for all vessels that installed scrubbers between 2014 and 2022 put the group as a whole at a surplus of €4.7 billion  ($5 billion), as indexed to currency values in 2019.

The study also found over 51% of scrubber equipped ships had reached break even by the end of 2022.

The news follows an assessment in February by Sea-Intelligence that total scrubber savings by the container segment from installing scrubbers had reached $13 billion.

The news will presumably be welcomed by the many advocates of the technology that, despite in 2016 being considered by some as an economic slam dunk', at times has seemed anything but.

The installation and use of scrubbers was a core part of IMO's compliance strategy for the 0.50% sulfur cap that came into force on January 1, 2020.

Despite being a relatively mature technology, having been in use on ocean going vessels since 2006, uptake of scrubbers to comply with IMO2020 was initially slow - much to the bemusement of industry analysts.

However, June 2018 marked the start of a dramatic rise in scrubber interest. Those that were able to get units on ships in time for the January 1, 2020 start to the new cap were rewarded handsomely, with the initial spread between HSFO and VLSFO in early January 2020 hitting a high of $315/mt. This represented a premium for VLSFO vs HSFO of over 80%.

But critics of scrubbers, including some notable owners who had opted not to invest in the technology, raised concerns over potential for negative environmental impacts from scrubbers. A number of ports including major bunkering hubs Singapore and Fujairah put scrubber washwater discharge bans in place.

Adding to the woes of scrubber owners, soon after the introduction of IMO2020, COVID-19 measures were introduced and took their toll on the global economy and scrubber economics. 

By March 2020 the scrubber spread had fallen under $100/mt. In Q2 2020 it averaged just $62/mt, and $56/mt in Q3. In percentage terms, VLSFO in H2 2020 averaged a premium of 20% over HSFO.

But by the end of 2020 the rollercoaster ride for owners of scrubber-equipped tonnage had taken a positive turn, and by January 2021 there was already talk of a 'second wave of scrubber uptake'.

While that second wave of orders has failed to materialize, today VLSFO in key bunkering ports remains at a premium of around $100 over HSFO, meaning there are still healthy savings to be had for owners of scrubber-equipped tonnage.

Still, the debate over the environmental credentials of srubbers seems everpresent. This despite some of the most outspoken industry critics of scrubbers having eventually taken on scrubber equipped tonnage, and the likes of government officials in Japan finding that burning HFO with a scrubber is a better for the environment than simply burning 0.50%S fuels alone.

Indeed, Denmark only last month announced a ban on the discharge of washwater from scrubbers in its waters from next year.

Such concerns were evidently also top of mind for Anna Lunde Hermansson et al, who concluded from their study that the strong economic incentives of ship scrubbers were 'promoting pollution'.