Carriers invest in scrubbers as IMO 2020 approaches

Maersk container ship

December 17, 2018 - As of Dec. 11, 2018, 266 ships representing 2.2 million TEUs have been fitted with scrubbers, Drewry Maritime Consultants wrote in their Container Insight Weekly analysis.

Additional scrubbers have been ordered too, suggesting that the current 5% of ships covered will grow in the run-up to the new International Maritime Organization (IMO) standard for sulfur emissions that will go into effect on Jan. 1, 2020.

According to Drewry, the proportion of ships being fitted with scrubbers is much smaller than the proportion of TEUs covered, suggesting that carriers are choosing to outfit larger vessels.

Ocean carriers already know what's at the top of their agenda for 2019: 2020 IMO compliance. But choosing between installing a scrubber and investing in more expensive low-sulfur fuel is not a simple decision.

A major issue complicating these plans around fleet hardware is the price of fuel. High-sulfur and low-sulfur fuel prices will be determined in part by market demand, which will be determined by how many carriers choose scrubbers over changing fuel sources.

"With time running out, it may have dawned on owners that they can no longer sit on the fence and need to demonstrate that there will be a sufficiently large customer base for HSFO [high-sulfur fuel oil], or else risk losing it as an option altogether," said Drewry consultants in the note.

Analysts said that based on the order book, the number of scrubbers is likely to rise as the deadline nears, pointing out that retrofitting a scrubber can take up to six weeks, which is long enough to affect availability. In fact, on top of new fees to pay for the upgrades, Drewry predicts scrubber installations may interrupt vessel supply enough to affect pricing for shippers.

In addition to installing scrubbers, carriers have also begun scrapping smaller ships since the cost of a new small vessel is very close to that of a scrubber. Scrapping is likely to pick up further in 2019, said Drewry.

Source: Supply Chain Dive