- the chief shipping analyst at BIMCO, says that the current $200 per tonne price spread between very low sulfur fuel oil (VLSFO) and high-sulfur fuel oil (HSFO) is increasing the advantage of ships fitted with exhaust gas scrubbers.
- The price gap between VLSFO and HFSO has widened following Russia’s invasion of Ukraine.
- The entry into force of the IMO 2020 fuel sulfur cap reduced the allowed sulfur content in bunker fuel used outside Emissions Control Areas (ECA) from 3.50% m/m to 0.50% m/m.
Analysts predict an increase in HFSO prices which might follow the hike right behind VLSFO. As stated in a recent publish by Marine Log.
Increasing fuel prices
Niels Rasmussen, the chief shipping analyst at BIMCO, says that the current $200 per tonne price spread between very low sulfur fuel oil (VLSFO) and high-sulfur fuel oil (HSFO) is increasing the advantage of ships fitted with exhaust gas scrubbers.
The price gap between VLSFO and HFSO has widened following Russia’s invasion of Ukraine, although the price of HSFO could rise should the volumes of Russian HSFO coming into the market start declining due to sanctions.
Ships with scrubbers
The entry into force of the IMO 2020 fuel sulfur cap reduced the allowed sulfur content in bunker fuel used outside Emissions Control Areas (ECA) from 3.50% m/m to 0.50% m/m. Ships that still use HSFO must install a scrubber (exhaust gascleaning system) to achieve an equivalent reduction in SOx emissions and thereby comply with the regulation.
“Currently, 12% of the combined bulk, container, and tanker fleet has a scrubber installed. The majority of ships are therefore still dependent on low-sulfur fuels and their cost competitiveness is influenced by the cost spread between VLSFO and HSFO,” says Rasmussen.
Crude tankers and container ships have the highest scrubber installation rate at 29% and 17% respectively, with bulk carriers at 12% and only 5% for product tankers.
After bottoming out in late October 2020 at $40/tonne the cost premium for VLSFO has since increased, settling at around $150-160/tonne in late 2021.
“Since Russia’s invasion of Ukraine, the spread has again increased and now appears to have settled around $200/tonne,” says Rasmussen “In percentage terms the VLSFO premium is still around 30%, however, in absolute terms it translates into a saving for ships with a scrubber installed of $2,000/day for every 10 tonnes of bunker fuel consumed.”
“If this premium continues,” adds Rasmussen, “charterers’ willingness to pay a premium for ships with a scrubber installed will surely increase accordingly.”
Predicting prices of HSFO
Meantime, some analysts are predicting that HSFO may soon follow VLSFO upwards if the volumes of Russian HSFO coming to market reduce through sanctioning (whether self-sanctioning by companies not wanting the repetitional damage of dealing with Russia, or government sanctions).
Did you subscribe to our daily Newsletter?
It’s Free! Click here to Subscribe
Source: Marine Log
