A shift in scrubber economics is providing some relief to tanker owners mired in very weak markets at the start of 2021.

Before the pandemic struck last spring, owners of scrubber-fitted tonnage enjoyed an attractive discount for high-sulphur fuel oil (HSFO) compared with very low-sulphur fuel (VLSFO).

This averaged between $250 and $300 per tonne in key bunkering hubs during December 2019 and January 2020.

But when the oil price collapsed, this spread sank to just $40 to $60 between April and November.

For scrubber-fitted tonnage, this meant that the cost savings for burning HSFO plunged from $16,000 per day in January 2020 to between $3,000 and $4,000 for most of 2020, according to Gibson Shipbrokers.

"Despite such a dramatic decline, the scope for scrubber cancellations has been limited due to contractual obligations with shipyards and scrubber manufacturers," the broker said.

On the up

But the latest upward trend in oil prices has pushed the spread out again to about $80 to $100 per tonne, and scrubber savings have climbed above $5,000 per day for VLCCs.

Installation of exhaust gas cleaners is highest among VLCCs, then suezmaxes. Penetration is considerably lower for smaller size groups, Gibson said.

The company added that scrubbers have been installed on 31% of the VLCC fleet with another 7% yet to be retrofitted.

In numbers

$16,000

Daily cost savings for a VLCC burning HSFO in January 2020

$3,000 to $4,000

Daily cost savings for using HSFO for much of the rest of 2020

$5,000

Daily cost savings for using HSFO in a VLCC in January 2021

In addition, 32% of the VLCC orderbook is expected to be fitted with the systems. This means that close to 40% of the fleet could be scrubber-fitted by the end of the year.

The actual figure for the spot market is expected to be even higher when excluded tonnage is accounted for, the broker said. This means sanctioned vessels and those being used for oil storage.

More vessels without scrubbers are expected to be scrapped this year.

"Although the scrubber uptake is significant for larger crude carriers, we are unlikely to see further exponential growth," Gibson said. "Major scrubber manufacturers reported a sizeable slowdown in new scrubber orders last year."

Regulatory scrutiny is also expected to intensify.

Open-loop systems are banned in many ports, while the European Union wants to see a gradual phase out of the technology, and Canada has proposed an outright ban.

"It seems inevitable that the list of scrubber restrictions is only going to increase. For now, however, while tanker supply/demand conditions remain severely unbalanced, even a modest scrubber premium could mean staying afloat and earnings above opex [operating expenses]," Gibson said.

Turning negative

TradeWinds reported on Friday that spot earnings of crude tankers fell sharply over the past week, with some fixtures equating to negative returns for shipowners.

The suezmax and aframax markets remain plagued by low crude demand in Europe, where many countries have introduced renewed Covid-19 lockdown measures.

Average suezmax earnings fell to -$1,759 per day on Friday from -$1,181 on 8 January, data from the Baltic Exchange showed. Average aframax earnings dropped to -$1,668 per day from -$408.

Both assessments are near their all-time lows.

VLCCs finished Friday at just $3,200 per day from the Middle East to South Korea, down nearly 16% from the previous day and 78% compared with the previous month.