Tanker owner and operator ADS Crude Carriers said it has saved an estimated US$3.6M from scrubber retrofits less than 60 days after the onset of IMO’s cap on sulphur in fuels
The Norway-based firm undertook scrubber retrofits on its three VLCC vessels in 2019 and completed the retrofits in Q4 2019.
Although ADS reported a 3% decrease in net revenue from Q4 2018, the company said the drop was due to fewer available vessel days. They also said higher day rates in Q4 2019 – US$30,886, representing an increase of 25% from the day rates ADS vessels were earning in the same quarter in 2018 – helped to offset the days its vessels were not working.
The shipping market had long anticipated that the onset of IMO’s 2020 regulations requiring shipowners to use lower-sulphur fuel oils (LSFOs) or to mitigate sulphur emissions through approved technology, including scrubber systems, would act as a lever to create a pricing spread, dropping prices of high-sulphur fuel oil (HSFO) and increasing prices of LSFOs.
Although no fuel pricing data was included, ADS’ quarterly report indicated the pricing spread had materialised enough to allow the company to recoup nearly a third of what it had invested in installing scrubbers on its three VLCCs within the first two months of 2020.
“During Q4, the company completed its vessel upgrades ahead of implementation of IMO 2020 and the installation of exhaust emissions cleaning systems on our vessels has already resulted in savings from reduced bunker costs of approximately US$3.6M in 2020, equivalent to 30% of the total investment cost," the ADS statement said.
According to market analysis, the price spread between low- and high-sulphur fuels stood at around US$150/mt at the beginning of Q4 2019. It jumped markedly from mid-November 2019 to mid-January 2020 in line with a drop in the price of high-sulphur bunker fuel, after which the spread began to narrow rapidly.
ADS attributed its dividend payout to shareholders to strong day rates, saying it had a backlog of approximately 70% of vessel days in Q1 2020 at an estimated TCE per day of US$85,000.
"The past months have reminded us that the tanker market is unpredictable and volatile, as we have seen huge movements in reported market rates," the statement said.
ADS’ vessels are sister ships, built in Japan in 2002 and operationally managed by Frontline.