IMO 2020: Deutsche Bank Bullish on Star Bulk's Scrubber Investment

Tuesday June 26, 2018

Deutsche Bank is the latest financial institution to be bullish on the prospects of shippers opting for scrubbers to comply with the upcoming global 0.50% sulfur cap on marine fuel that will come into force from January 1, 2020.

As Ship & Bunker reported earlier this month, dry bulk shipping operator Star Bulk has ordered 22 scrubbers for its ships.

"In voyage chartering, the charterer pays the vessel owner on a per-ton or lump-sum basis, while the owner pays the port, fuel and crew costs (vs. time charter where charterers pay the fuel)," Deutsche Bank analyst Amit Mehrotra was quoted as saying by StreetInsider.

"The implication is that shipowners with scrubbers should be able to charge a freight rate reflective of the broader fleet that is burning more expensive ultra-low sulfur fuel oil (due to lack of wide-spread scrubber adoption), but have significantly lower costs, given its ability to continue burning less expensive high sulfur fuel via scrubber technology."

Deutsche Bank had already pegged Star Bulk to have strong cash generation potential thanks to its recent acquisitions inline with an overall recovery of the dry bulk market.

But according to the bank's projections, it's scrubber investment gives it an opportunity to double or even triple current cash flow projections.

The comments are the latest example of how banks paying attention to the implications of IMO 2020, with DVB Bank earlier this month saying scrubbers will be advantageous come 2020, particularly when it comes to securing financing.