IMO2020: Shipowners Should Stop Worrying About Long Term Viability of Scrubbers, Says Kassinger

Monday May 21, 2018

An ongoing lack of enthusiasm for marine scrubbing technology is continuing to baffle experts, who say the industry should stop worrying about the technology's long term viability.

As already discussed at length in these pages, scrubbers will allow ships to continue burning the cheaper HSFO bunkers they do today after a global 0.50% sulfur cap on marine fuel comes into force from January 1, 2020.

Everyone else will be buying more expensive MGO.

The differential between the two fuels is obviously key to a scrubber's ROI, and with the IMO 2020 rule now less than 20 months away, Morgan Stanley last week predicted that continued pressure on middle distillate demand would likely mean $90/bbl Brent in 2020.

In the current market that would translate to HSFO at around $500/mt and MGO around $800/mt, a differential of around $300/mt.

But as most owners/operators are expected to be buying MGO for compliance come 2020, demand for HSFO will be significantly lower and MGO significantly higher, a dynamic veteran industry expert Rudy Kassinger believes will widen the differential to $400/mt or more.

"I don't think these numbers are far fetched, rather I think they're a best case scenario," he told Ship & bunker.

"At 5,000 mt/yr consumption that's more than $2 million per year in reduced fuel cost. A scrubber would be justified even if only used for a few years, so I fail to see why there's a reluctance to scrubbers."

A key concern of shipowners is the risk of scrubbers being rendered obsolete by future regulations. Indeed, a high proportion of respondents to a recent survey by Drewry said they believed it likely that within the next decade further environmental legislation will be introduced that could limit or completely outlaw their use.

But Kassinger says fears that scrubbers are just a "stop-gap solution" are unwarranted, and certainly should not be holding anyone back from buying the technology.

"I believe the industry should look at scrubbers as an investment of about 5 years. One advantage is that no preplanning is needed, whereas a planned switch to 0.5% fuels from high sulfur probably needs a 3-6 month switchover. There is also no need to change lube oil, and it avoids the growing pain of new technology on both ends of the delivery," he said.

"Owners can then reassess their options after 5 years, and stay with scrubber for longer term if it makes sense.

"My gut feel is scrubbers need not be the ultimate solution and a short term commitment avoids tons of complications associated with multiple 0.5% recipes. And I think an exploding IFO/MGO delta will make this route look good."