Prior to 2020, everyone talked about the scrubber – a self-purifying system able to burn, reduce and eliminate sulfur in HSFO (sulfur max 3.5%).
Many scrubbers were installed on the basis that the initial cost of instalment would be quickly recovered by the projected difference on the lower price of VLSFO (max 0.5% sulfur) and HSFO (max 3.5% sulfur).
In January 2020, there were significant differences in the price amounting to up to 200$ pmt. This meant that every bunkering, a scrubber equipped vessel was saving up to 200$ per ton. However, the current price gap has reduced to 50$ pmt, and the yearly average of the price gap is 93.65$. reference article at Ship&Bunker
As a broker, we did supply scrubber equipped vessels this year and we have been closely tracking the impact of these changes. We have found a significant factor to be whether the vessel is going to a major port, given that it is often hard to find HSFO at smaller ports.
Current position – was it worth it?
As our main customers operate bulk and tankers, it didn’t make sense to instal scrubbers, especially when it was unclear exactly where the vessel would bunker. We advised instead to take a contract in a larger port where the vessel frequently bunkered, particularly in Singapore for many of our customers. There, the prices were calculated based on MGO (Marine Gas Oil) minus xyz$.
As anticipated by some studies at the end of 2019 (reference article think.ing.com) , the price differential between VLSFO and MGO would initially be small.
Today, we see that the gap between MGO and VLSFO is still minimal. Some ports barely have any difference (as low as 10$)k, and in some cases VLSFO can be higher than MGO. Singapore today will show VLSFO around 20-30$ below MGO, meaning that a forward pricing contract with MGO minus 40$ will currently always be lower than the spot price and therefore the most recommended approach to follow. We’ll continue to track this and can provide further updates to you in future blogs.
For more information or if you have any queries, please contact copemer@copemer.com (picture from DNV website)