Narrow sulphur spread limits scrubber orders

New orders for marine-exhaust scrubbers have fallen sharply, as price spreads between high- and low-sulphur fuels have narrowed since peaking at the start of the year.

The world's largest scrubber manufacturer, Finland's Wartsila, said the value of its new orders fell by 40pc in the second quarter from a year ago, to €119mn ($136mn) from €198mn.

Lower scrubber sales contributed to weigh on the firm's profit, which fell from €62mn to €23mn over the same period. Wartsila said narrow sulphur spreads, as a result of falling oil prices during the Covid-19 pandemic, has prolonged payback times for scrubber investments and curbed demand for the exhaust-cleaning systems.

Installing a scrubber enables a ship to continue to burn 3.5pc sulphur fuel oil beyond the the International Maritime Organisation (IMO) 0.5pc sulphur cap that came into effect on 1 January.

Wartsila received more scrubber orders in the second quarter than it did in the first, but both periods were significantly weaker than a year earlier when several oil and shipping companies forecast spreads of $250-300/t between high- and low-sulphur fuels. The spread between 3.5pc fuel oil and the IMO-compliant 0.5pc fuel oil peaked during high bunker demand for compliant fuel at the start of the year.

In the world's biggest bunkering port, Singapore, the premium has narrowed by 83pc since its widest on 2 January, from $370.50/t to $61.50/t yesterday. In Fujairah, UAE, the premium has come down by 81pc since it peaked on 30 December, from $497.50/t to $97/t yesterday. The spread has narrowed the most in Rotterdam, where it has dropped by 85pc from a high of $309.50/t on 30 December to $46.50/t yesterday.

Wide sulphur spreads have been the main selling point to shipowners looking to save fuel costs by retrofitting scrubbers on ships to burn the cheaper 3.5pc fuel oil. Wartsila received substantially fewer orders for retrofitted scrubbers, and orders for scrubbers on newbuilds were also lower.

About 4,270 vessels will have scrubbers fitted or on order this year, according to shipping classification society DNV GL. Only around 150 have been ordered for 2021 and 2022, and 72pc of these are for retrofits. Wartsila has a market share of 13pc, with 560 scrubbers fitted or on order.

By Erik Hoffmann