Finnish marine systems group Wartsila has revealed a growing trend for container lines to keep vessels out of yards to make the most of booming rates.
The company has seen lower levels of activity in its scrubber retrofit business in the third quarter, even though activity is beginning to pick up again.
Tamara de Gruyter, president of marine systems at Wartsila, told TradeWinds that scrubbers have been a "tricky" market due to the narrowing spreads between high-sulphur and low-sulphur fuel oil.
"Now we have a new phenomenon: the container lines are making a lot of money and not all of them want to take the vessels out of service to install a scrubber," De Gruyter said.
"Some are saying, 'can we wait a bit longer? We still want to do it, but maybe not now because the rates are so good'.
"It's good that they're making money but it's not so good [for us] because the delivery times are pushed out."
The same thing was seen earlier in the year when tankers swerved yards as rates hit huge highs.
Wartsila has seen slower business both for retrofits and newbuildings.
As for the price spread, De Gruyter said there has been a bit of a positive development of late.
Moving in the right direction
"Since the middle of September, [the spread] went up to $65 to $70 per tonne — not really where we want it to be to kickstart retrofits again, but at least it's on the positive side," she said.
"There's definitely hope that when the economy starts to be in a better shape again and demand for fuel goes up, then the fuel spread goes up as well."
De Gruyter still sees the scrubber market as being a positive one in the future, but visibility is rather limited due to the Covid-19 pandemic.
"It's actually picking up again a bit," she said. "In the last one and a half, two, three weeks, there is interest. It's not that there's a queue, so we still have enough capacity."
Rates in some containership sectors have been at record highs thanks to a rebound in demand since pandemic lockdown restrictions were ended in Asia.
The boxship industry is now approaching its annual contract renewal season, starting with the trades from Asia to Europe.
No incentive to sign deals
Norwegian investment bank Fearnley Securities said: "For shippers, there is however limited incentives to start these discussions early considering that Asia-Europe spot rates are 85% higher year on year."
Freight benchmarking company Xeneta has said contract rates are being talked about at 20% higher than before.
"The demand outlook is also blurred by a second wave of the Covid-19 outbreak and, as we near the end of the Christmas shipping season, there could be some downward pressure on rates regardless," Fearnley said.
The investment bank said contract volumes represent about 50% of a trade lane for most carriers.
Fearnley said this implies that 25% higher contract box rates could boost AP Moller-Maersk's average freight rates by 3%. A 50% boost in contract rates would lift Maersk's average freight rates by 6%.
