The advice comes as the IMO is set to enforce the use of 0.5% sulphur content fuel from 2020, prompting some owners to install scrubbers in order to continue using the cheaper 3.5% sulphur fuel, as opposed to the more costly low sulphur distillates.
Platts quoted a Goldman Sachs report as saying that with bunker fuel prices expected to drop sharply towards the end of this year as the bulk of marine demand shifts to cleaner alternatives, those with scrubbers should avoid hedging for the first year.
“For shipowners installing scrubbers, we recommend leaving 2020 high sulphur fuel oil (HSFO) exposure unhedged to be able to monetise any price weakness during early adoption,” analysts at the bank said.
The initial drop in bunker fuel prices, however, could be short-lived as refiners continue to upgrade their facilities to cut residual fuel production.
“Given our view that the change in bunker fuel is likely to be relatively efficient in coming years, we (…) recommend locking in still discounted 2021-2023 prices,” the bank analysts said.
While it could still be early days to accurately predict the price spread between HSFO and low sulphur fuel oil (LSFO), data drawn from Platts and Taiwan’s refiner CPC Corp have assessed the spread at $40-104 per metric tonne (pmt).
“While everyone may want to know the spread between HSFO and 0.5% (fuel), I would argue this is the most difficult to predict,” commented Adrian Tolson, senior partner at consultancy firm 20|20 Marine Energy.