EastGate: Record low bunker fuel spread and slide in scrubber premium in Q1

Athens-based shipbroking specialist EastGate Shipping on Friday (4 April) published an analysis on the premium enjoyed by vessels with scrubbers installed vis a vis roller coaster crude oil-bunker prices.  Bunker prices have had quite a ride over the first quarter of the IMO 2020 implementation and alongside them, the premium for scrubber-fitted bulk carriers. Crude oil and bunker prices literally collapsed over the last weeks as a result of the Saudi Arabia-Russia oil supply war. Added to that, supply logistics for the compliant fuel improved while the incoming scrubber retrofitted vessels pressured the HSFO price further. This matrix led the bunker price differential to end the quarter at $79/mt (Rotterdam prices on March 31st). Since the scrubber premium is essentially tied to the VLSFO/HSFO spread, scrubber economics followed suit with the premium declining sharply over the course of the first 3 months of the year and ending the quarter at $2,699 for capesizes and $1,319 for panamaxes. Albeit scrubber-fitted vessels have enjoyed little benefit thus far, the investment is still generating some much needed profit. Especially so for capesizes which have been running below OPEX for the better part of Q1. Having said that, the scrubber installation has been a considerable investment and due to this diminished premium, its ROI (Return on Investment) is now pushed further away. Estimates point to about 1,000 scrubber installations (referring to all types of vessels) planned for the balance of 2020, which will increase the total number of scrubber ships to about 3,500 by the end of the year. However, a few owners are already seen postponing or even, when possible, cancelling scheduled installations. This comes on the back of the shrunken bunker spread as well as the coronavirus outbreak which had shipyards shut. Therefore, that estimate can very well change as the year progresses. Photo credit: EastGate Shipping Published: 6 April, 2020