The Offen Group has tied up charters for more of its largest containerships and is turning its attention to fitting scrubbers on smaller boxships destined for the spot market.
The German owner has secured charter extensions with Mediterranean Shipping Co (MSC) on another four of its 14,000-teu “Italy-class” boxships. The charters are set to run from 2023 to 2029.
Last week, Offen Group chartered out five other ships in the same category fixed on similar terms.
Retrofitting in mind
With these deals in the bag, the Hamburg-based owner is looking to retrofit scrubbers on smaller spot-market vessels.
But that depends on the premium that boxships fitted with scrubbers are likely to obtain compared to those without.
“That is hard to work out,” Offen Group managing owner Claus-Peter Offen said. “It’s a pure commercial issue.”
Braemar ACM analyst Jonathan Roach estimates that containerships using exhaust gas scrubbers to comply with the IMO 2020 sulphur cap will command a 20% to 30% charter premium from next year onwards.
Hybrid scrubbers on the “Italy-class” vessels are likely to generate fuel-cost savings of about $25,000 per day, based on a cost of about $7m per retrofit, according to Offen’s calculations.
Scrubbers fitted to smaller charter market ships of 3,000 teu to 5,000 teu might cost half as much, but still generate fuel savings of about $10,000 per day.
It might take between three and six years to make such an investment worthwhile, Offen said.
Finding a balance
Offen added that it remains unclear how much of the fuel-cost savings for spot market vessels will be paid by the charterer in the form of a higher rate.
Does that higher rate justify the investment in a scrubber? It’s a gamble. It’s an economic decision, based on expectations
“The big question is, where will the market find a balance?" he asked. "Does that higher rate justify the investment in a scrubber? It’s a gamble. It’s an economic decision, based on expectations.”
Last week, TradeWinds reported that six-year extensions had been agreed on the first five sisterships with MSC from 2022 to 2028, with the last four ships taking that to all nine vessels in the “Italy-class”.
All of these will be fitted with hybrid scrubbers, but Offen added that the intention is to equip up to another 18 of the largest post-panamax vessels with similar scrubbers.
The final decision will be taken in 2019 and the total investment for the scrubbers is estimated to be just short of $200m.
Offen believes it is likely that the attraction of scrubbers will increase in the short term, when the spread between the price of high-sulphur and low-sulphur fuel oil is likely to increase.
