EnvironmentOperations

Owners cancel planned scrubber installations

Reports are emerging of owners cancelling planned scrubber installations in China on account of the narrowing fuel price spread and the grim trade outlook brought about by the spread of coronavirus.

Alphatanker, part of AXS Marine, noted in its latest weekly report: “Installations due to be carried out in Chinese yards were already being delayed in the wake of Covid-19 and now following stellar returns for tankers, some owners are reportedly delaying or even, where possible, cancelling installations.”

Furthermore, reports suggest that owners of bulkers or liners struggling amid the global downturn are also cancelling scrubbers as they strive to cut costs.

“We fear that this is just the tip of the iceberg and as the global recession intensifies during the second quarter, this drip of cancellations could turn into a flood,” Alphatanker predicted.

Analysts at the tanker specialists have run the maths on the current price spread suggesting it would now take four years for a VLCC owner to pay off a scrubber investment if the price gap, known as the Hi5, remains at roughly today’s levels.

Putting a brave face on the current oil price picture, Ian Adams, executive director of the pro-scrubber lobby group, Clean Shipping Alliance 2020, maintained earlier this week that there was still a clear economic case to be made for the exhaust gas cleaning technology.

“Given the unprecedented circumstances we all find ourselves, we should not dwell too much on the narrowing fuel price spread. Bunker prices will undoubtedly be distorted due to the difficult and challenging post-coronavirus market, exacerbated by the spat between Russia and Saudi Arabia which is culminating in an oil surplus in a market where demand has reached a nadir,” Adams said in a release, adding: “Certainly, media reports concerning the narrowing of fuel prices should not be a deterrent to the wider take-up of marine exhaust gas cleaning systems as the technology remains the optimal, most effective means of meeting MARPOL Annex VI requirements. The use of EGCS also avoids the uncertainty surrounding the quality and availability of very low sulphur fuel oil (VLSFO).”

Commenting on the the Alphatanker report, fuel expert Adrian Tolson, a director at consultancy BLUE Insight, told Splash today, “I think the big thing is that with the cost of VLSFO cheap and with shipowners’ propensity to live day-to-day in ship operations, it is not difficult for a shipowner to dump an investment that had returns in the future when they are looking at short-term survival.”

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Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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