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SCRUBBER PAYBACK PERIOD EXTENDED BY FUEL PRICE COLLAPSE AND COVID-19

Tuesday, May 5, 2020 

Information provider S&P Global Platts has calculated that the current payback time for new scrubber installations is likely to be around the four year mark for open-loop scrubber installations, or up to six years for closed-loop scrubbers, thanks to the coronavirus pandemic and the collapsing price differential between high- and low-sulphur content marine fuels.

In an interview with S&P Global Platts, DNV GL Head of Maritime Environmental Certification Dr Fabian Kock said: "Some shipowners decided to install scrubbers on their whole fleet ... I've heard from those owners that they're also thoroughly investigating whether all planned installations will actually take place." He added, however, that he had seen no evidence of cancellations of already agreed conversions.

With a price differential between HFO and LSFO averaging US$58/t in Rotterdam during April, a drop of 75% from January's figures, the advantage enjoyed earlier in the year for scrubber-equipped ships has reduced considerably.

Platts Analytics previously predicted 3,500 scrubber installations globally by the start of 2021, but this will likely not be met following disruptions from coronavirus and cancellations due to the narrowing price spread. Wallenius Wilhelmsen is reported to have cancelled four scrubber installations in preparation for tough market conditions.

Analysts are undecided about whether the narrow marine fuel price spread is here to stay, but Kock said, in the interview with S&P Global Platts, that a fuel price difference in the order of US$200/t presents a "reasonable", i.e. one to two years, payback time for scrubber installations.

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