Shipping markets are responding to the anti-pollution agenda and beginning to connect "going green" as being positive for profits as well as the planet.

Vessel operators that are preparing for the 2020 sulphur cap are being rewarded with positive feedback from investors.

Fearnley Securities sent tanker stocks such as Frontline and DHT Holdings surging after saying the fuel regulations could be a “real catalyst” for a new cycle of better earnings.

Arctic Securities said a decision by major dry bulk operator Golden Ocean Group to fit scrubbers “will increase the competitive advantage for [its] fuel-efficient vessels considerably”.

Meanwhile, there has been a rush of new announcements on the fitting of exhaust cleaning equipment by leading companies such as Brazil's Vale and Denmark's Norden.

Finnish equipment provider Wartsila has reported a sevenfold rise in scrubber sales year-on-year in the second quarter.

Off the fence

After months of dithering, many shipowners seem to be climbing off the fence of indecision and fitting exhaust cleaning equipment.

Indeed, there is a gathering momentum behind the view that the introduction of the IMO’s sulphur cap is an opportunity, not just a threat of higher costs to be passed onto shippers.

No one really knows whether there will be shortages of the new low-sulphur fuels or whether there will be enough supplies of the old, high-sulphur bunkers post-2020. Or conversely, whether there will be such a surfeit of the old fuel that prices collapse.

There is a gathering momentum behind the view that the introduction of the IMO’s sulphur cap is an opportunity, not just a threat of higher costs to be passed onto shippers

Under the new rules, ship operators must only use bunkers that contain 0.5% sulphur, rather than 3.5% as now, or fit onboard scrubbers to ensure that engine emissions are cut.

Clearly, another way is to build ships that use a different kind of fuel altogether, such as LNG or even no-carbon electricity, but that costs much more serious money.

A significant number of owners are just hedging their bets.

If you fit a scrubber, it will cost you money upfront but you can still just opt to take on low-sulphur fuel if it proves to be cheap and readily available. But you are protected if there is not enough low-sulphur fuel available, as some fear.

Golden Ocean, the owner of nearly 80 bulkers, has just placed orders or secured options to fit scrubbers on one-third of its fleet over the next two years.

The move alongside an expected uptick in the freight market and a past financial restructuring will leave the John Fredriksen-majority owned company an “almost daily dividend paying vehicle”, according to some excited analysts.

Vale, the mining giant with 67 bulkers on the water and a massive new orderbook, has also just announced plans for scrubbers.

Retrofitting scrubbers

All 48 new third-generation bulkers will have scrubbers fitted — and be LNG-ready — while the company considers whether to retrofit scrubbers on its existing fleet.

“Vale’s action is to progressively install scrubbers in order to progressively depend less on the low-sulphur oil, because we don’t know how fast the refineries will react to this new demand,” the company said.

Even AP Moller-Maersk, the world’s largest liner operator, which has been steadfastly against scrubbers, has admitted that they may be placed “on a few” vessels.

The Danish group had held the view for a long time that it was up to the fuel suppliers to remove sulphur in the refinery stage.

Vacation ship operators, such as Norwegian Cruise Line, are also retrofitting scrubbers while increasingly ordering LNG-fuelled newbuildings.

Green might be good but there are other more basic factors, such as the supply/demand balance, signalling better prospects for depressed shipping markets.

Clarksons has just reported the global new orderbook has slumped to its lowest for 14 years.

Still, up until now, most analysts have been convinced that only a minority of the 90,000 relevant ships would opt for scrubbers.

Investment bank Goldman Sachs estimated 3,500 vessels, oil cartel Opec predicted the number would be lower than 2,500, and Swedish bank SEB thought fewer than 2,000.

But the recent rush by industry leaders is likely to encourage others to follow suit and mean these estimates were far too conservative.