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Argus Media: Wärtsilä reports scrubber demand down as fuel spread narrows

22 Apr 2020

George Collard of the global energy and commodity price reporting agency Argus Media on Tuesday (21 April) published an report on the implications of the recent oil market crash on scrubber demand based on Wärtsilä’s recent financial report:

Demand for the vessel exhaust cleaning equipment known as scrubbers has fallen because of a narrowing spread between high- and low-sulphur fuel, Finland-based marine technology firm Wärtsilä said today.

Installing scrubbers allow vessels to burn high-sulphur fuel oil (HSFO) beyond the International Maritime Organisation (IMO) 0.5% sulphur cap that began on 1 January.

But the price of HSFO has found support recently from limited storage and delivery barge tank allocation, and by demand for use as feedstock in the US. Several European suppliers stopped offering HSFO ahead of the International Maritime Organisation (IMO) 0.5% sulphur cap that began on 1 January, and others are only using a small part of storage and barge tank space for HSFO.

The spread between HSFO and the IMO-compatible low-sulphur (LSFO) hit an all-time low of $47/t last week, and late yesterday it was $48.50/t. The spread was above $300/t at the start of the year. This narrowing means the payback time from installing a scrubber has significantly lengthened, making shipowners reluctant to invest.

Wärtsilä’s marine orders fell by 15% year on year to €715mn ($775mn) in the first quarter. Its overall sales rose by 2% to €1.17bn in the quarter, but profit halved to €29mn. Its chief executive Jaakko Eskola said the fall was because of weaker fixed-cost absorption, the service sales mix and cost overruns. Eskola said the Covid-19 pandemic is hitting demand, and this will have a “material” effect on the firm’s finances in 2020. As a result, Wärtsilä will cut costs by around €100mn, and it withdrew guidance for the year at the end of March.

Argus Media
Published: 22 April, 2020

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