Strong rates have cut the payback time for scrubber installation to just 156 days for some VLCCs, an analyst has calculated.
Cleaves Securities said a 2010-built non-eco tanker can expect to make back the $3.2m cost of retrofitting over five months as earnings for these ships outstrip their more modern sisterships without exhaust gas cleaners by $11,000 per day thanks to the cheaper high-sulphur fuels they can still burn post-IMO 2020.
Head of research Joakim Hannisdahl puts rates for eco-ships that do have scrubbers fitted at $117,000 per day. Non-scrubber sisters are banking $101,000 per day.
A similar 2010-built capesize will earn back its retrofitting costs in 269 days. Previous industry assumptions had foreseen scrubbers making their costs back over anything from less than a year to up to two years.
More retrofitting coming?
"As earnings seasonally retract during the first half of 2020, owners might be highly incentivised to retrofit scrubbers," Hannisdahl said.
"As we enter the post-IMO 2020 era, all shipping stakeholders must cope with a myriad of new variables relating to vessel earnings."
The price differential between low and high sulphur bunkers is differing widely from port to port, with Fujairah quoting a $458 per tonne spread, while Rotterdam is at $278.
"Thus the variations in realised earnings for comparable vessels could vary even more going forward based on geographic positioning," he said.
Fearnley Securities quotes the average spread widening to between $300 and $350 last week, implying a scrubber saving of about $20,000 per day for VLCCs.
"Overall, we estimate a $50,000 per day time-charter equivalent (TCE) difference between ‘old’ and ‘new’," the firm said, referring to the difference between eco-ship with a scrubber and a 15-year-old vessel burning compliant fuel.
The company has lifted its forecast of the premium for a scrubber/eco-ship to $10,000 per day across 2020.
About 150 VLCCs are now fitted with scrubbers.
Investors can expect big payouts
"We expect significant cash distributions to investors in 2020 (19% on average), but are also becoming increasingly optimistic on 2021 due to a complete halt in newbuilding activity," Fearnley Securities said.
Its analysts see about 60% fewer deliveries this year than in 2019.
The company is forecasting average VLCC rates of $75,000 per day in the first quarter, "given the strong rate levels seen since mid-December".
Cleaves said an ample tonnage list of VLCCs in the Middle East Gulf pushed spot rates down last week.
"The positive is a tight tonnage list in the Atlantic, thus average earnings are close to unchanged week-on-week," it added.
It is preparing to increase its asset prices as a result of continued strong earnings.
