Scrubber retrofits see repair yards hike prices

Brokers Intermodal are reporting ship repair prices are set to rise on the back of limited berth availability in the run up to the introduction of the global sulphur cap.

The months from July till October have been almost fully booked for many shipyards around the globe. Yards, especially in the competitive regions of Asia and the Black Sea, speculated this increasing demand from the beginning of the year and most of them enforced an increase in prices, by as much as 15%.

The Exhaust Gas Cleaning System Association (EGCSA) recently reported that about 3,800 scrubber units are expected to be installed before the sulphur cap goes into effect in January 2020, with 63% of installations to be retrofits and more than 70% scheduled to take place in Asian and Middle East shipyards.

“With a realistic maximum capacity of 50 scrubber retrofits per year for an average sized shipyard, and by combining the above figures all together, shipyards’ capacity appears limited to cover this demand,” Intermodal posited.

Intermodal is also reporting that the best scrubber makers have already filled their orderbook for 2019 and second-class makers are now entering the market as a result.

Concluding its latest weekly report, Intermodal stated: “[T]he expected rock bottom prices era of the last two years on the ship repairs sector is soon coming to an end.”

Vijay Gupta, deputy COO at shipmanagement giant Anglo-Eastern concurred with Intermodal, adding that repair yards were also filling up fast to meet ballast water regulations too.

“Ship repair prices are slowly going up and are expected to further go up as the coming years – 2019 and 2020 – will see a lot of vessels have to fit ballast water treatment systems as the US Coast Guard will no longer will give any extension. This will be compounded by some shipowners who are going to fit scrubbers, hence this would eventually effect availability of dock space resulting in higher cost,” Gupta told Splash.

Not everyone agreed with the Intermodal report however. Michael Birley, who heads up Hong Kong shipmanagement company Langton, told Splash that he had not seen any appreciable change in ship repair costs in the yards Langton uses in China.

“Given the under utilised capacity I would not yet foresee any appreciable change,” Birley said.

Chinese yards do continue to offer steady prices agreed Amitabh Gupta, a fleet manager at shipmanager Wallem.

“The majority of our dry dockings are done in China, where costs are mostly steady,” Gupta said, while adding that he felt there is a strong possibility of a rise in costs next year due to increased demand.

In 2015, many owners advanced their vessels dry dockings in order to defer installation of ballast water treatment systems. Those ships, Gupta pointed out, will then need to do a special survey in the latter part of 2019 or 2020 so the increase in demand may push the costs up.

Commenting on the belated rush for scrubbers, Peter Sand, chief shipping analyst at shipowning body BIMCO told Splash: “Ideally, owners would have made deals with the scrubber manufacturers one or two years ago to make sure that they get the latest and best version of the manufacturers’ scrubber system installed at the latest possible point in time. That would have been the well prepared way of doing things.”

Sand maintained it is still not too late for owners to choose scrubbers, but the window may be closing sooner than most of them expect. Either due to manufacturers having full orderbooks for the coming years or because of problems finding the yard space to carry out the work in time for 2020.

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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