Star Bulk: We’ve covered half the cost of our scrubbers already

Star Bulk Carriers Corporation President Hamish Norton has called the company’s scrubber strategy ‘a good decision’, having already covered half the cost of installing the emission abatement technology.

Speaking during Capital Link’s Dry Bulk Sector Webinar earlier this week, Norton also said that the company expects to cover the rest of the cost of the scrubbers in 2021 – ‘and then it’s pure profit’.

As previously reported, in September 2018, Star Bulk boldly announced it was to equip its entire fleet with scrubbers, and that it expected the average cost per unit, including installation, to be below $2 million per vessel.

Indeed, this time last year, the economic case for scrubbers appeared to be strong, with fuel spreads between heavy fuel oil (HFO) and very low sulphur fuel oils (VLSFO) around the $300 per ton mark. But plummeting oil prices in early 2020 saw this spread narrow significantly, to below $100 per ton.

Despite the unfavourable market conditions for shipowners and operators with scrubber-equipped tonnage, Norton said that Star Bulk had hedged ‘a bunch of fuel spreads at the beginning of 2020, end of 2019.’

Currently, the price differential between low-sulphur and high-sulphur bunker fuel is around $100 a ton – and Norton expects this to become more favourable for scrubber-equipped vessels throughout the course of the year.

‘We think that the market will get better than that over 2021 as basically jet fuel and other low-sulphur transportation fuels increase in demand,’ he said, adding, ‘we think it was a good decision [to install scrubbers] and it has contributed a lot to our earnings in 2020.’

Prior to discussing Star Bulk’s scrubber strategy, Norton was asked to comment on the case for purchasing new vessels. He admitted the that the company, which recently acquired three 10-year-old capsize vessels, was ‘not brave enough right now to order a newbuilding in the face of environmental regulations that are clearly, let’s say, “unstable”.’

‘In the old days, when you ordered a newbuilding that was legal at the time you ordered it, it was grandfathered in for its entire useful life,’ said Norton. ‘We do not have faith that at this point if you order a newbuilding that’s legal today that it will be grandfathered in for its entire remaining useful life.’

Norton said the company would wait and see what the political and regulatory environment looks like before making a decision – a strategy shared by ‘maybe almost all’ shipowners.

Norton said: ‘They’re [shipowners] seeing what the regulations end up requiring; they’re seeing what sort of engine they’re going to need to use; they’re seeing what sort of fuel they’re going to need to use, and so I think, across all sectors of shipping – dry bulk, tankers containerships, you name it – there’s going to be less ordering than you would normally have while people figure out what kind of ship is the ship of the future – and that’s great.’

Rhys Berry

Rhys Berry

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