BIMCO: Scrubber Retrofits Dropped but Continue in Newbuilds
The number of ship owners electing to retrofit existing ships with scrubbers may have peaked as the financial case for the conversion to continue to use heavy fuel may not have materialized according to new data from BIMCO. The trade group however highlights that the overall number of ships outfitted with scrubbers is increasing as newbuilds are delivered with installed scrubbers.
BIMCO’s analysis reports that a total of 399 vessels had scrubbers installed in 2022, representing a 24 percent year-over-year decline. They also point out that in the long term, the use of scrubbers to cut sulfur emissions may be further reduced as decarbonization efforts increase the use of alternative fuels that are sulfur compliant.
The IMO introduced the fuel regulations requiring on January 1, 2020, giving ships the option of switching to ultra or low sulfur fuels to comply with the limits for emissions. Operators wanting to continue to use heavy fuel are required to install devices to clean their emissions reducing the level of sulfur emitted.
In the twenty-plus years since the rules went into effect, BIMCO reports several interesting trends developed. They calculate that larger vessels were more likely to install scrubbers. The analysis shows the average dry bulk, container, and tanker ship with a scrubber has a deadweight capacity of 140,845 tons whereas those without have an average of 51,743 deadweight tons. Therefore, the 13 percent of the dry bulk, container, and tanker ships with scrubbers represent 29 percent of the deadweight capacity. The crude tanker fleet has the highest installation rate with 32 percent of the ships and 38 percent of the deadweight capacity having scrubbers installed.
“The price premium for VLSFO (Very Low Sulfur Fuel Oil) has turned out to be less than initially estimated,” writes BIMCO’s Chief Shipping Analyst, Niels Rasmussen. His analysis shows that the price premium started at $347 per ton and has been as low as $50 and $149 per ton, although it also peaked at $400 a ton in the June/July 2022 timeframe.
The higher the VLSFO premium, the more attractive the investment in a scrubber is because the payback period is shorter. The lower-than-expected VLSFO premium has likely discouraged owners from installing scrubbers, particularly on smaller ships with lower bunker consumption and lower savings as a result.
The percentage of ships with scrubbers is set to increase in the coming years according to BIMCO as 17 percent of the dry bulk, container, and tanker ships in the shipyards’ orderbooks are expected to have scrubbers installed. However, BIMCO notes that those 17 percent only amount to 24 percent of the deadweight capacity in the orderbook, and the scrubber deadweight percentage could therefore decrease.
Several companies are developing new scrubber systems that would combine the traditional methods for reducing sulfur emissions with CO2 capture capabilities. Near term, cruise ships that have some of the highest emission levels and draw attention because they are often docked near the center of a city are building their new ships with hybrid exhaust systems addressing SOx and NOx emissions.