Houston — The marine sector's interest in exhaust gas scrubber systems in order to comply with stricter emissions regulations has hit a snag with the global crude oil price collapse and added financial uncertainty.
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With effect from January 1, ships operating within 200 nautical miles of shore in North America and Northwest Europe must use fuel with a maximum sulfur content of 0.1% or find an alternative means of compliance, which typically means buying a scrubber system.
Scrubbers allow a shipowner to continue to use high-sulfur bunker fuel, which is less expensive than lower-sulfur fuels, by, in effect, stripping sulfur out of the emissions and allowing the ship to meet the stricter sulfur cap.
For years, scrubber manufacturers have marketed the systems as a way to save money by avoiding the costs of expensive, ultra-low sulfur marine fuels.
But those ultra-low sulfur marine fuels are not so expensive anymore.
Emission Control Area-compliant MGO in Houston has averaged $603/mt in 2015, roughly 40% less than prices over the same period in 2014, Platts data show.
"The short-term scrubber market will be very much affected by the high-sulfur versus low-sulfur fuel differential in price," said Garrett Billemeyer, global technology development manager at scrubber manufacturer DuPont.
As long as bunker fuel prices remain low relative to recent history, shipowners are likely to turn to ultra-low sulfur fuels for ECA compliance rather than alternative measures.
SALES PICTURE UNCLEAR BUT OIL PRICE IMPACT SUGGESTED
"The global oil price drop seems to be impacting the scrubber adoption negatively," consulting firm MEC Intelligence said in a February report. "Orders nearly doubled for the six-month period of April-September 2014 while in the last four months growth has been about 19%."
A total of 160 vessels had scrubbers installed by the end of January, compared with 135 by September 2014, MEC Intelligence said.
Scrubber manufacturers differ on their willingness to reveal sales figures.
Wartsila's exhaust gas cleaning systems orders in 2014 were flat to orders in the previous year at 41, though the number of ships that bought scrubbers rose by about 50% to 26 ships, the Finnish company said this week.
Wartsila's sales were unaffected by tumbling oil prices in 2014, however, now "many customers are in wait-and-see mode and hesitant to invest, due to challenging times financially," Wartsila spokeswoman Marit Holmlund-Sund said.
Alfa Laval declined to elaborate on its sales numbers beyond what it said in a recent news release: the Swedish company has received 70 orders for 65 vessels over an undisclosed period of time.
DuPont declined to provide annual sales figures while Norway's Yara Marine Technologies -- formerly Green Tech Marine -- did not respond to a request for comment.
DEMAND BOOST COULD COME LATER
Following this most-recent drop in the marine fuel sulfur content, there is a larger, global cap of 0.5%S coming in 2020 or 2025, pending an International Maritime Organization vote in 2018.
"Recent lower fuel prices are affecting short-term interest," said DuPont's Billemeyer, "but with the International Chamber of Shipping coming out with a statement last week indicating that the global ECA will most likely be adopted in 2020 [it] means shippers with a long-term view will focus on marine scrubbers as an advantageous solution."
A US fuel oil trader agrees the long-term potential remains, saying that in "2020 everyone is going to have to have them."
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