Low-sulphur fuel price spread favours scrubbers

Current spreads show an increasing premium for low-sulphur fuel over heavy fuel oil. Owners with scrubbers will stand to benefit from lower fuel costs.

News ID: 80427

Date: 28 August 2019 - 14:44

Early moves towards scrubber adoption may pay off for owners as price spread widens for low-sulphur alternatives to bunker fuel.

SHIPOWNERS who have chosen to implement scrubber technology may have taken the correct approach if the early indications of the price premium being placed on low-sulphur fuel are anything to go by.

The initial price premium for low-sulphur fuel ranged between $100-$150 per tonne in July, when compared with IFO380 heavy fuel oil, according to data compiled by Alphaliner from the key bunker ports of Rotterdam and Singapore.

This spread has increased to over $200 per tonne this month, as recent price declines in for HFO were not matched by similar falls for low-sulphur fuel oil.

Alphaliner noted that there was a wide variance in the price spread due to the low volumes of LFSO being traded, as demand for clean fuel would only pick up ahead of the International Maritime Organization sulphur cap’s implementation next January.

This week, for example, the price premium stands at $150 per tonne in Singapore and $210 per tonne in Rotterdam.

Owners that have acquired newbuildings with scrubbers installed, or have had scrubbers retrofitted, would benefit from the lower cost of HFO, Alphaliner added.

“Current price spreads, if they can be sustained, vindicate some owners’ decisions to install scrubbers on their vessels and thus allow ships fitted with such exhaust cleaning systems to continue using cheaper HFO after January 2020.”

According to Alphaliner data, 57 containerships have already been retrofitted with SOx scrubbers and a further 38 units are currently undergoing retrofitting at shipyards. On top of this, 44 containership newbuildings have been delivered with scrubbers already installed.

Ships undergoing scrubber refits were continuing to push down the available idle fleet, it added, particularly in the larger ship segment. Alphaliner identified 27 vessels comprising 282,850 teu being out of service for scrubber installation.

Data from Lloyd’s List Intelligence show five vessels of more than 18,000 teu, which combined comprise more than 96,000 teu, currently idle and located at ship yards for scrubber installations.

Alphaliner noted that the large number of inactive ships at retrofit yards was creating demand for replacement tonnage, which in turn was pushing up charter rates for larger containerships