Say No to Scrubbers for Now, Bunker Broker Advises

Tuesday April 17, 2018

As industry stakeholders continue to evaluate their IMO 2020 compliance options, BunkerEx today has added its voice to the debate by advising shipowners to "say no to scrubbers", at least for now.

As discussed at length in these pages, when the global 0.50% sulfur cap comes into force from January 1, 2020, vessels will either need to buy more expensive compliant fuel or fit a scrubber that will allow them to continue burning the same (otherwise non-compliant) HSFO bunkers they do today.

Key to BunkerEx's assessment as to why shipowners should hold off on scrubber technology is that the broker foresees an increase in the availability of max 0.50% sulfur blends and reduced availability of HSFO.

"Due to the large gulf between HSFO and MGO prices (currently about $230/mt), there is a strong economic incentive for refiners and blenders to produce a stable <0.5% sulphur fuel oil. This increases as the difference in the forward curves gets wider after 2020," says BunkerEx, adding that it has already spoken to several companies looking to create such products.

"Suppliers that are able to offer compliant fuel at a discount to MGO can gain considerably. Therefore, shipowners shouldn't completely resign themselves to paying MGO prices, but instead recognise the strong market incentives for the supply of <0.5% sulphur fuel."

While the savings provided by these future LSFO products is currently unclear, CEPSA last month went on record as saying pricing for its product could be as little as $120/mt above HSFO.

The fall in demand for HSFO bunkers, meanwhile, will mean that spot availability in many ports, particularly outside of the major hubs, could dry up.

"This would render having a scrubber disastrous: The shipper would have to pay a premium for a compliant fuel plus the capital cost of a scrubber," says BunkerEx.

"However, in the case where a shipper can secure HSFO supply in all their ports, installing a scrubber could be a clear winner. This would only work with long term supply contracts and a reliable supply chain. It is likely to only apply to liner services or long term COA's that can predict their lifting pattern well past 2020."

You can read BunkerEx’s full assessment on scrubbers here: https://bunker-ex.com/blog/2018/04/17/bunkerex-view-2020-hint-say-no-scrubbers-now