Dry shipowners see scrubber, secondhand benefit

Dry bulk shipowners who focus on investing in sulfur-scrubbing technology for their vessels and purchasing secondhand instead of queuing for a newbuilding are better poised for profitability, according to shipowners speaking at a Capital Link panel in New York.

A tonnage surplus forced non-scrubber-fitted Capesize owners in the Atlantic basin to consider laying up their vessels as opposed to operating at a loss as daily rates dipped below average operating expense levels. Companies like Star Bulk, with a fleet of scrubber-equipped Capesizes, were still profitable however.

"The scrubber allows us to burn relatively inexpensive high sulfur fuel while ships without scrubbers burn more expensive low sulfur fuel," said Star Bulk President Hamish Norton. "We are earning substantially more than $200mn a year from our scrubbers, and there have been days where, for Capesizes, the scrubbers have been earning more than our ships."

The high and low sulfur fuel oil spread has recently been about $280/t, according to Norton, who pointed out that this difference goes directly to the company's bottom line.

Since Russia's invasion of Ukraine in late February, ship operators fixing their scrubber-fitted Capesizes on the Brazil to China iron ore route earned an average of $12,000/d more than those with non-scrubber-fitted Capesizes, per Argus data.

Purchasing secondhand vessels and outfitting them with scrubbers may be a better investment than purchasing a newbuilding at this point, according to Eagle Bulk Chief Executive Gary Vogel.

"2025 is a long time to wait for a ship," Vogel said. "Secondhand assets are just a better investment in terms of a return standpoint. You'll generate significant capital over the next two years instead of waiting for that ship, to the tune we think the parity is about $5m on that acquisition compared to ordering a newbuilding today."

"We're not going to order any ships unless we know what to order," Norton added. "We don't want a stranded asset, we're pretty sure it won't be the ship we want in 2030."

The reticence of dry bulk shipowners to potentially invest in a vessel technology that may soon be abandoned by the market is keeping the dry bulker orderbook at historic lows. But a later panel of analysts pointed out that if a new technology, such as ammonia based fuels, is unanimously agreed upon by the industry, the positive supply side of the current dry bulk industry may erode as dry bulk shipowners rush to place orders for vessels capable of better navigating the stricter upcoming International Maritime Organization emission guidelines beginning in 2023.

By Ross Griffith