Late July Scorpio Bulker’s COO Cameron Mackey described the story for installing scrubbers as not being “compelling” although did say that might change. This change apparently took place very rapidly, or Scorpio could have been bluffing as it got its ducks in a row in market that was already seeing a serious surge in demand for scrubbers.
This week Scorpio detailed order for 90 scrubber units for its Scorpio Tankers owned and leased fleet, and 57 for its Scorpio Bulkers owned and leased fleet. The units were priced at $1.5m to $2.2m, although it’s not clear if these numbers also include lost earnings from offhire.
At the ongoing Shipping Insight Conference in Stamford (US) this week, Francesco Bellusci, Managing Director of Scorpio Group, serving as the moderator on a panel dealing with all things 2020, described Scorpio’s decision to join the scrubber bandwagon as “a commercial decision” and “a commercial opportunity to burn cheap fuel”.
He conceded some uncertainty regarding fuel prices, with most analysts linking a better return on scrubber investment to a greater discount, or “spread” for buying high sulfur fuel relative to low sulphur offerings. When talking about this price “spread”, he said: “There is a financial advantage for those who have installed scrubbers” but he acknowledged that: “we are betting that things will go that way.”
Scorpio’s circa $294m bet is not without risks. Another panel member, Alex Panagopulos, the Founder and CEO of Forward Ships (tied to Greek owner Arista Shipping)- and a proponent of LNG fueling for drybulk vessels, cautioned that increased demand for high sulphur fuel, burned by vessels which then clean the exhaust in scrubbers, would drive up the price of the high sulphur fuel, and”reduce the commercial viability” underlying the business case for Scorpio, and for other owners betting on sufficiently wide “spreads”.
Last week DNV GL said in a webinar on scrubbers that a $100 price spread between low and high sulphur would lead to a payback period of less than two years for a scrubber unit. However, at $40 per tonne price difference there would be no business case for scrubbers.