Investment Company: The Capital Of Scrubber Investment Can Be Returned Within One Year

- Dec 10, 2019-

According to the latest tanker analysis report of cleaves securities, the Oslo investment fund, from the perspective of the price difference between high sulfur oil and low sulfur oil, it is expected that the cost of installation of washing tower for large ships will be recovered by the end of 2020. If a super large crude oil transport ship uses desulfurization technology, it will save 3.3 million US dollars in fuel cost a year, which is almost equivalent to the installation cost of a washing tower.


This is based on an analysis of the fuel price difference of $193 / ton. However, the price difference used here is nearly $100 lower than the actual price difference level of the current futures market, which shows that the economic benefit of the investment in the scrubber is more considerable than predicted, and the cost recovery speed will be faster.


Cleaves securities analyzed the cost recovery time of washing tower investment when the fuel price difference was $100, $200 and $300 per ton respectively. When the price difference between high and low sulfur oil is 200 US dollars / ton, a VLCC equipped with a scrubber can return the cost in one year. Suezmax takes 1.4 years and aframax nearly 2 years.


According to the report data, under the same price difference level, the return time of washing tower of bulk carrier is relatively longer. It takes 1.6 years for the Cape of good hope bulk carrier to return the capital, 3.2 years for the karlsam bulk carrier and 3.8 years for the super handy bulk carrier.


If the fuel price difference reaches US $300 / T (more close to the current actual level), VLCC, suezmax and aframax tankers equipped with scrubbers can all pay back within 13 months. But for bulk carriers, the data is less exciting. When the fuel price difference reaches US $300 / ton, it will take one year for the Capesize ship to invest in the scrubber, and nearly two years for the karlsam bulk carrier to return its capital.


"The main reason that shipowners are able to see peak earnings now is because of strong fundamentals, which we think will be more prominent in the next few years," cleaves Securities said in the report The report also predicted that shipowners' earnings would be higher in the future, thanks to the positive impact of IMO 2020 sulfur limit regulations and the small number of tanker orders.


The sulfur restriction order will be implemented in less than 30 days. Many owners who have not installed scrubbers have started to clean oil tanks and prepare to use marine light diesel or ultra-low sulfur fuel oil.


Last week Braemar ACM, a shipping broker, predicted how rising fuel costs would curb earnings for ships without scrubbers. On the Middle East Gulf China benchmark route, the daily revenue of economic VLCC will decrease by $10200, while that of non economic VLCC will decrease by $14200. The "economic" here refers to the tanker with younger age and higher energy efficiency.


According to Braemar ACM's analysis, the daily earnings of suezmax tankers on the West Africa northwest Europe route will drop by about $7200 to $9400. On the Middle East Gulf Japan route, the daily earnings of economy LR2 tankers will drop by $9400, while the earnings of non economy ships will drop by $11800.


The economic benefits of the scrubber add more uncertainty to the tanker market outlook. About 2500 to 3000 VLCC, bulk and container ships will install scrubbers by January next year, and the rest will choose the more expensive ultra-low sulfur oil or marine light diesel oil. However, given the untested demand, supply and compatibility of these alternative fuels, it is difficult to predict how the fuel spread will evolve in the coming months.


According to ice futures trading, the current price difference between 3.5% and 0.5% sulfur fuel is $292 / ton. The liquidity of these futures is not very strong. The short volume of ultra-low sulfur oil in December was 106000 tons, compared with 217000 tons in January. Given Rotterdam's fuel throughput of around 10 million tons, this represents only a small part of the physical market.