Finnish technology group Wartsila is busy with scrubber retrofits despite coronavirus disruption — and it still sees plenty of scope for work involving existing vessels.
The company has identified weakness in future orders as the price spread between low-sulphur and high-sulphur fuels narrows, reducing the incentive for owners to book ships in for the work.
But Tamara de Gruyter, Wartsila's marine systems president, told TradeWinds the company is "doing a lot of retrofitting" as Chinese yards ramp up activity again following lockdown delays earlier this year.
She said: "It has been impressive how the Asian yards have caught up on the delays, so we're very busy now delivering our scrubber orderbook for this year, and if all goes well and there is not a second wave, then we would really deliver the orderbook we have."
But de Gruyter added: "The worry is more the order intake."
She acknowledged that fuel price spreads right now may be too thin to justify new retrofit projects.
"For newbuild ships, you still get scrubber orders, but the price difference is simply not enough to build a good business case for retrofits," she said.
And de Gruyter said even when there is a good economic case, owners are being more careful with their cash in the downturn.
Plenty of potential
The executive also said the future direction of the fuel spread cannot be known.
She added: "But the delivery times of scrubbers can be relatively soon, so if even by the end of the year it gets better, we have enough possibility still to be delivering."
Looking longer term, de Gruyter said: "In the far, far, far future it will only be a newbuild market, either they have decided to retrofit or not to retrofit, but when you look at the installed base globally that has been retrofitted, it's peanuts. There are still a lot of ships out there that have the possibility to retrofit."
Regarding the group's general prospects, she said the company is hopeful.
"So, I see some light at the end of the tunnel. But at the same time when you see what's happening with Covid in America, Africa and again in Australia, no one really knows," she said.
She added: "It will be very dependent on how the pandemic travels the world. In general, we are a bit more optimistic than a few months ago."
Wartsila's net profit was cut to €23m ($26.2m) from €62m in the second quarter. Its order intake decreased by 27% to €1.01bn, with revenue stable at €1.22bn.
Need ships to be operating
Roger Holm, Wartsila's president of marine power, told TradeWinds the biggest impact of the pandemic had been on the service side, with cruiseships not operating.
"In all segments our newbuild deliveries have been holding up fairly well, most projects are proceeding. There have been some delays here and there. I'm sure we will see delays on the cruise deliveries going forward," he said.
"We need equipment operating. If it's not operating, it will not help the business."
Looking ahead, Holm said the group still sees challenges in the second half, not least with the level of ship operations.
"One of the key issues is that the vessels need to run. I don't think we will see cruiseships back to normal pre-Covid operations, for example, over the next six months. That will take longer."
As for newbuildings, he said: "Let's see how that goes. We need new vessel orders to sell new equipment."
