With the average fuel spread topping $400 per ton — in some ports, $500 per ton, scrubbers pay for themselves and start to generate revenue
Gregg Miller, writing on American Shipper, builds a strong case for exhaust scrubbers showing with hard data that ships that scrub their emissions earn twice as money than those that don’t. The reason, he says, it’s the spread between High Sulfur Oil and Very Low Sulfur Fuel:
“Since the [IMO] regulation’s enforcement date on Jan. 1, 2020, ships have had to use more expensive fuel with 0.5% sulfur content known as very low sulfur fuel oil (VLSFO), or fuels with even lower sulfur content.
“The exception: Ships can install exhaust gas scrubbers at a cost of around $2 million-$3 million per ship. Scrubber-equipped vessels can continue to burn the cheaper fuel used pre-2020 that has 3.5% sulfur content, known as high sulfur fuel oil (HSFO).
“If the spread between HSFO and VLSFO is wide enough, the fuel-cost savings cover the cost of the scrubber installations and generate profits thereafter.
“Shipowners have bought a lot of scrubbers. And the VLSFO-HSFO spread is now gapingly wide.
“Scrubbers are “paying off in record amounts,” said Jefferies shipping analyst Omar Nokta in a client note Wednesday. “Several shipowners have disclosed a full payback already of their initial investment.”
“Stifel shipping analyst Ben Nolan said this week: “The spreads between high- and low-sulfur fuel have widened dramatically.”
Spreads hit record high in July
The spread initially widened when IMO 2020 was first enforced, as expected. Then it unexpectedly evaporated after COVID lockdowns hit. It rose back up as the price of crude increased after the lockdowns ended, then surged in the wake of the Ukraine-Russia war, surpassing spreads in early 2020.
The average price of VLSFO at the world’s top 20 bunkering ports was $369.50 per ton higher than the average price of HSFO on Wednesday, according to data from Ship & Bunker. It reached an all-time high of $420.50 on July 5.
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…. The same ship, with a scrubber, burning HSFO, was paying $22,000 less per day for fuel, equating to a net day rate of $38,400 per day.
