Shipping lines and scrubber manufacturers are looking ahead to assess whether with the price differential between low- and high-sulfur fuel oil, which has returned to triple digits in Singapore, the world’s largest bunkering hub, will widen or remain at levels reached in January.
The differential has continued to widen so that it now stands at $92 per tonne in Rotterdam and $112.5 per tonne in Singapore since the beginning of November.
“Current marine bunker prices imply that this differential should remain relatively close to current levels for the next two years in both hubs,” Alphatanker said in its most recent weekly report.
Peter Sand, economist and chief marine economist at BIMCO, announced that the price differential between the two main marine bunker fuels would remain around $100 per tonne within a band of $20 per tonne.
According to the latest Ship & Bunker data, the global price differential currently stands at $75.
Alphatanker noted that a major factor in widening differentials has been the market for low-sulfur middle distillates, which has tightened recently. Seasonal heating demand has meant that some major markets, such as the Northeast U.S., North Asia and Central Europe, continue to have a significant portion of their residential heating demand in the form of heating oil (U.S. and Europe) or kerosene (North Asia).
In turn, rising middle distillate prices have translated into higher VLSFO prices, as low-sulfur middle distillates are blended with many, but not all, grades of VLSO.
“Overall, while we consider spreads of $150/tonne possible this year, we consider a spread of $200/tonne highly unlikely unless crude oil prices approach $70/tonne,” Alphatanker announced.
Analysts at bunker marketplace MABUX said this week that the forecast price for Brent in 2021 is $60 to $65/barrel, meaning that the bunker fuel price differential will grow moderately this year, reaching $120 to $130 in the medium outlook.
Alphatanker said the economic outlook for scrubbers is now much brighter than it was four months ago. However, these economics are still well below what many vessel owners were considering when deciding to install scrubbers on their vessels.
Prior to the global sulfur cap coming into effect in early 2020, a price difference of $150 was considered the absolute limit for shipowners to get a quick return on their scrubber investments.
Alphatanker’s calculations suggest that the payback on a scrubber installed on a tanker leaving drydock would take between three and four years, depending on the type of tanker and the number of days at sea, compared to pre-IMO 2020 expectations that such an investment would pay back in two years.
DNV GL statistics show that 7.5% of the commercial fleet has ordered or already installed a scrubber.
