The dilemma of fitting scrubbers

As shipowners are normally able to pass on the additional cost of bunkers to charterers the actual price of fuel is often not their main concern. The expectation is that the price of High Sulphur Fuel Oil (HSFO) will decline after the implementation of IMO regulations, as most existing demand will shift to Low Sulphur Fuel Oil (LSFO). At the same time, the tight availability of LSFO will ensure high premiums for LSFO and MGO. The dilemma for tanker owners is therefore about the price differential between LSFO and HSFO, as it will decide the attractiveness of fitting a scrubber to comply with forthcoming IMO regulations which limits the amount of sulphur in bunkers.

In addition to the premium of LSFO over HSO, the age of the ship will also be crucial factor, as younger vessels will have more time to recover the investment in a scrubber. Newbuild ships will also have an advantage, as they will not only have a longer trading life to recover the cost of the scrubber, but also the cost of fitting a scrubber to a newbuild will be less than an existing ship, as customisation is required to retrofit a scrubber in existing deck space.

For VLCCs, the cost of fitting an open loop scrubber in a newbuild ship is around $2.5-$3.0 million (say $2.7 million), whereas the cost of retrofitting a scrubber on an existing VLCC will be $4-$4.5 million (say $4.3 million).